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ISpy With My Little Eye A Good Holding

imgres-2.jpgOver spring break my family and I went on a road trip to Montana. It was a total of 30 hours round trip, that meant many long hours of road trip games, we played all the classics, like license plate bingo, 20 questions, I’m going on a picnic, etc. When we play them we like to add our own little twist, for example, instead of license plate bingo we call it holdings bingo. 20 questions is played with a focus on stocks. And for I’m going on a picnic instead of what you are going to bring on a picnic it's what your requirements are for a stock. I know, we are a nerdy family.


My favorite variation is ISpy, to my excitement we played that for many hours during this trip. How we play is plain and simple. The goal is to spot one of our holdings. It was quite difficult at times when we were driving through plains of barren land, aka North Dakota with nothing but hay and cows around. Don’t worry, we still made it fun by yelling, “HAY THERE” every time we spotted cut fields and trucks loaded with hay. Which, I might add, was about every thirty seconds.


By the end of the 30 hours, we ISpied a total of eight companies that we owned. That doesn’t sound like a lot (have you driven through North Dakota?) but we were all happy to see each company pop up multiple times. In this post, I’m going to give a small insight into each company, share a few stories and talk about one of our top holdings, Cracker Barrel (CBRL).



From the beginning till the end of the trip there was one company that was always there for us. It was either driving along side us or just one right turn away from giving us a treat. Thank you, Berkshire Hathaway (BRK.B), for always being there for us whether we need something besides hay to look at or pleasing our stomaches. We spotted two of their holdings, Dairy Queen and BNSF Railway.


5-2-13-tmf-jmag-berkshire-pic_large.jpgBNSF Railway has 400 different railroads that have been built over 160 years. BNSF always had a bright orange first car with a large black company title written across it which was easy to spot against the light brown colors of North Dakota. I always enjoyed watching the endless train cars drive by us, looking closely to see what was that train was carrying and yelling at our mother to go faster and faster until we beat it.


The other Berkshire Hathaway holding we spotted was, Dairy Queen. Dairy Queen has been around since 1940. They sell treats and food as a fan/fast food chain. In 1941 there were less than 10 DQ’s by 1947 they had 100 stores and now in 2017, they are one of the largest fast food chains with over 6,000 stores in 20 countries. We, as a family, can agree that the best part of the trip was watching the DQ employees flip our blizzard, waiting to see if we got a free one or not.


Another top fast food chain is McDonald's (MCD). McDonald’s was founded in 1955 and by 1958 they had sold one million hamburgers. McDonald's used to be in our portfolio but has been sold. But while we were in McDonald’s we had a win. When we were waiting for our shamrock shakes and fries we looked around and found that they had hot wheels and mini barbie dolls in their happy meal. Both of those brands are owned by Mattel (MAT). Mattel is a toy company they own brands like Hot Wheels, Barbie, Fisher-Price, American Girl Doll and more.


Before I get to my favorite finding I’ll quickly talk about the three other holdings we found, Polaris, Exxon Mobil and Fastenal. Polaris is a vehicle manufacturing company, I'm not a huge fan of cars so I didn't look too hard for that company, although they are successful. Exxon Mobil is oil and gas company, whenever my mother told us to keep our eyes peeled for gas because we were running low we all kept our mouths shut until we saw Exxon Mobil. We can't be giving our money to another gas company, now can we? And lastly, is Fastenal. Fastenal is a distribution company.


Not only did these companies play an essential role in our ISpy game, it was also a lot of fun to watch these businesses hard at work. There was one holding that kept popping up time and again in our conversation, although we only saw a few. When it came around everyone would jump up and down, or as much jumping as one could do in their seats. More to our excitement, we noticed that each parking lot was stuffed. This company was Cracker Barrel. The worst part about this company was trying to find a parking spot, I think we spent more time in Cracker Barrel’s parking lot then driving home.


Recently I was going over the statistics for Cracker Barrel, when I thought back to my trip there I realized that I could’ve predicted most of it. It was founded in 1969, they have 642 locations throughout 43 different states. In one Cracker Barrel, about 950 people are served in one day. They are open 114 hours a week and 364 days a year and four out of ten adults visit a Cracker Barrel in a year. This shows that not only are they committed but successful too. A fun fact about Cracker Barrel that makes me love the company, even more, is their executives are mostly women.


Before even opening the door we knew we picked right, we all had huge smiles on our faces and were ready to see the hard work being done. Not only were the parking lots crowded so was the store/restaurant. You could barely find space to walk and when I listened in on conversations I heard them in awe of this chain. The most common thing I heard was, “We had these when I was a kid.” That was the vibe I was getting from the brand and I was glad that carried out to us, the customers.


Looking at the table below you can see that the numbers definitely confirm what we saw in the store. Cracker Barrel is a good buy right now because all the numbers meet or exceed the requirements, but it wouldn’t hurt to wait for it to get a little lower. Looking at the other companies the only one I would avoid is Mattel, but that wouldn’t hurt to keep an eye on.


Companies
Price to Earnings Ratio
20 or lower
Dividend Between 2-5%
Gross Margin
25% or higher
Return on Equity (ROE)
15% or higher
Debt
1.0 or lower
Cracker Barrel (CBRL)
19.1
2.85%
69.0%
35.4%
0.7
Berkshire Hathaway (BRK.B)
---
---
---
8.9%
0.4
McDonalds (MCD)
23.8
2.83%
41.4%
191.9%
---
Exxon Mobil (XOM)
44.5
3.58%
30.5%
4.6%
0.2
Polaris
(PII)
25.6
2.67%
24.5%
23.0%
1.3
Mattel
(MAT)
27.6
5.98%
46.8%
12.6%
0.9
Fastenal
(FAST)
29.6
2.38%
49.6%
26.8%
0.2

If you are ever looking for something to do on a long road trip don’t forget ISpy. We all found a few stocks to follow for the future and some holdings that we are very proud of.

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