Friday, September 29

Portillo's: Buying the (Beef) Dip

We are deep in the cyclical Q3 dip that tends to hit our market right at the end of September. And right now, investors are having a hard time determining where the market is headed in the next few months, and therefore fear is winning out and thus driving markets down. 

So, our job right now is to find long-term winners who are toward 'the end' of being oversold.

This brings us back to the strategic shifts we're seeing in the food space. After years of supply-side inflation wreaking havoc on most food names, we're excited to see some price stability hit as strong companies adjust their strategy to get as much revenue out of each individual location as possible.

Our years-long position in Chipotle, the logistical breakout happening at privately held Chik Fil-A, and the astonishing launch of CAVA a few months ago, have all demonstrated the winning formula that restaurants need to establish in order to keep winning in this harsh environment. 

In short, food providers need to become logistical powerhouses that squeeze as many customers into their locations as possible. The more people you move through your restaurant at the same time, the more you win.  

Scaling the amount of food that can leave your restaurants every minute is critical, as that scale makes higher margins much easier. 

So, despite a really rough post-IPO life, we got really excited when Portillo's ($PTLO) announced a new path forward during their investor day earlier this month. 

For the coastal elites in our audience, Portillo's is an iconic chain from the Chicago area, serving up Chicago-style hot dogs and Italian Beef sandwiches. 

Since being bought out in 2014 and an ill-timed IPO in 2021, Portillo's has been trying to expand their operations since effectively hitting saturation in the Chicagoland area. Their Q4, Q1, and Q2 numbers all disappointed a really hard-to-please market. But now their investor day has shown us a solid path for future growth, and the stock has fallen to a level where we want to jump on and initiate a long-term position as they accelerate their transition into being a dominant fast casual player in the Sunbelt. 

In short, Portillo's has built a new framework that will help them scale into more profitable geographies much faster, and their new style of restaurant will allow them to boost margins while they move toward a new goal of 900 locations nationwide.

Let's find out how they can bring that beef to the likes of Texas, California, Florida, and beyond.👇

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