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Cosi Inc. Message Board

  • an_intellectual_jarhead an_intellectual_jarhead Jun 21, 2006 3:11 PM Flag

    Back in

    Bought 50,000 shares today in the $6.23-25 range.

    Cosi is down from the $10 level since the market went sour in May. Stock has collapsed to a 52-week intra-day low of $6.09 yesterday.

    Now, Cosi may not participate during any initial bounce in the market (it's not in the 'hot' high-beta industries that bounce back), but the long-term prospects are still intact.

    Read my last post and you'll my concerns regarding Cosi -- that is management has too methodical and slow in store rollouts and franchising, almost to a fault. Management has done a terrific job in transforming the company since the two founders left after the muffed-up IPO years ago. Now, the company is poised for growth.

    What management needs to understand that with its lolly-gagging store roll-out, COSI stock has become a show-me stock, absent of momentum. Management ain't stupid here, and I think they understand this dynamic. But now that they have turned the company around (kudos), investors are currently growing a little impatient in store rollout. They need to see demonstrable store openings.

    And so the stock is down due three things: (1) the overall market decline, (2) Cosi becoming a show-me stock and investors looking for new net store openings and (3) some concerns with high food costs and the possibilty of a high minium wage. Aside from these legitimate concerns, if management online with its goals, Cosi is SEVERELY undervalued.

    We got a little confirmation today that the downward trend might be ending, and that's of course welcome. Tech, high-beta stocks will go bonkers -- hey, a good trade. But if you're outlook is more than a silly month out, Cosi is darn steel.


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    • an_intellectual_jarhead an_intellectual_jarhead Jun 24, 2006 12:01 PM Flag

      Thanks, and I agree with you on the technical side. But given the overall market volatility, I can't put much credence in that assessment yet.

      To use an example, last night on Mad Money, Cramer said that one of most difficult transisitions for a stock is switching from high growth perception to consistent growth. I wholly agree with that and have seen it many times -- that a stock's profit that were growing at, say, 30%, has a natural decline to 25%, 20%, then to 15%, etc. As that happens the P/E can compresses and the stock moves nowhere even though the decelerating earnigns growth are still a good clip.

      The tansition from the a turnaround story, in which things are improving, to growth mode, goes through the same volatile period, in which investors can't really quite tell what valuation to assign. Is that growth going to be what management guided? Is that growth going to worse or better? Is it going to be choppy or consistent and predictability?

      Without knowing these answers, the stock, which was assessing the success of the turnaround, cannot assess the rate of growth yet. In other words, it becomes a show-me stock.

      The A/D line has flattened, and I agree that, at this level, COSI would risky to short, and those who are short, if any, have only one thing to bank on, that results are less than expected (and even that might be incorporated into the stock's current price).

      Indeed, Cosi has been slow in its store rollout. I've sensed for sometime that management has been too methodical, almost to a fault. The franchise operation has been in place for a year and a half now. The economics of the stores are pretty attractive.

      This year is pretty backend loaded as well. Management has guided for what, 25 new store openings (don't recall the exact number from the last conference call). The first half of the year is essentially closed...and how many did Cosi open? So, like I said, moving to growth mode and becoming a show-me stock, without any demonstrable growth, it should be surprising that the stock has fallend this much this fast in this type of market (sold shares @ 10.06; back in @ $6.24).

      If Cosi provides good growth, some bottom fisher, like I'm doing, will find the stock attractive. But without a growth track record to guage, don't expect the stock to participate with any market run-up UNTIL management demonstrates growth.

      And that's the Cosi story.


    • Yes....COSI is a much better Company.
      In all seriousness though. Cosi "DOES" imho habe much better food, selection and quality wise that Panera. Coffe, imo is better than Starbucks as well. If the expansion stays on track this is going to be a $20.00 within a year or two imho.

    • You bought 50,000 shares ($300K+) of a fundamentally weak company. Risky? So did I. I bought on Technicals supporting way oversold conditions, today.

      Now I bought far less than you and I am currently "in the money" and expect COSI to appreciate "slowly" from here. I also expect to keep this longer term 8 -12 months as I believe COSI to report a "profit" in that time period.

      Could'nt help notice you are from my hometown.
      I hope we do well.

      • 1 Reply to nyrphmortle1
      • 50,000 shares is correct.

        But I disagree with you: I don't see Cosi as a fundamentally weak company today. Consider that since the poorly debuted IPO, the very first quarter miss and the removal of the two founders from the company, it has taken 2 and half years to turn Cosi around. Under Forrest and Armstrong, the company was successfully turned out -- costs rationalized, new store desing, a smooth HQ move to Chicago, decent same-store sales, a solid menu and improved consistency of quarterly results.

        Over the past two years, the company closed stores with poor performance and/or locations. Management did take a risk in piloted cafes within Macy stores, which, in hindsight, was one of the few sources of store financing available at that time. It wasn't a success, but the risk was acceptable.

        Key to Cosi is its franchise operations, which, granted, has had a slow start. Admittedly, this had dragged new store openings at a slower pace than management has guided. Yet, that operation is just kicking of, and despite a slow start, there is much interest among franchisess.

        So, Cosi is well positioned to grow. Again, key to that is franchisee interest, consistent store rollout, meeting goals and communicating those developments consistently with the Street.


    • Did you notice the SEC filing by Vardon Capital? I guess buying millions of shares means they're ignorant too? I'll go with the big money and buy more too.

    • ok - good luck

    • You bought 50,000 of this turkey??? You really are a jarhead. Rgds, gman

    • wouldn't touch it here - will look at next support around 4.75.

0.47-0.02(-4.28%)Jun 24 4:00 PMEDT