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Jack in the Box Inc. Message Board

  • john.heil2 john.heil2 Apr 13, 2010 9:29 PM Flag

    Big J weighs in

    Haven't posted in a while, figuring JACK can speak for himself. And boy has he! Go for it you smiling fellow because you da man!!!

    The on-balance volume for JACK is now such that a lot of stock is being put away for higher prices. This is partly due to the CKR situation which indicates real value in the space. My friends, investing is a game of patience. No one can predict what the price of a stock will be tomorrow or next month. But you can anticipate longer term moves with a high degree of reliability based on such things as PE, PEG and price to sales ratios, discounted cash flow-dividend models, relative value profiles and growth in the economy. I need not reiterate my bullish case for JACK, but will mention one point that continues to mystify most if not all the sell side analysts. And it is this: THEY DON'T UNDERSTAND THAT JACK'S REFRANCHISING PROGRAM WILL GENERATE CASH AND ENHANCE THE BALANCE SHEET TO THE EXTENT OF ONGOING MAJOR BUYBACKS OF SHARES. Let's assume the company holds at a debt to equity ratio of about 40 percent from now on. As the equity continues to build and capital expendures taper off to the $100-$110 million range annually, what do you think the company is going to do with all that cash flow and leveraging capacity?
    Any decline in income from refranchising will be more than made up in the future by those proceeds allocated to the buyback of shares. Boy, at $18 bucks when I started positioning the stock by selling puts for an incredible premium, I did not hear one word about the long term effect by share buybacks. Seems a bewildering concept to this young herd of today's security analysts. No one gets it! And to prove they don't get it, they continue to assign JACK the lowest PE in the whole restaurant sector (of those company's with strong balance sheets). They think refranchising is a negative, when it is a positive with many benefits longer term. On any weakness you can buy these shares with impunity for the value they represent.
    Big J in L.A.

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