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Chart Breakout Part 5 – Plenty of Stocks to Buy

February 23, 2024

Russell 1,000 Breaks Higher

I like these ultra-long-term charts (each candlestick equals a year) because they throw into such vivid relief what is happening. We had a spectacular bull run in the late 1980s and 1990s, then a massive two-bear-markets consolidation, followed by a new bull market surge, another bear market/ correction in 2022, and a new chart breakout.

I have to be provisional about this because it is early days in that last 2024 candlestick, which could still stay green and push higher or even turn red and go into reverse. However, shorter-term charts using three and six-month moving averages are bullish and Coppock has turned higher.

The Russell 1,000 index contains the top 1000 shares in the Russell 3000. These are shares in companies suitable for investment by institutions. It accounts for 93pc of the value of all the shares in the Russell 3000. It is encouraging that the chart looks bullish.

Below I look at the charts of some shares I like for both charts and fundamentals. Incidentally, if you notice fewer adjectives and adverbs and a generally leaner and meaner writing style this is because I am using Grammarly, which does not approve of my transports of enthusiasm.

This chart combines a strong secular uptrend with the beginnings of a new move higher. Iqvia sounds like an exciting business.

IQVIA is a leading global provider of advanced analytics, technology solutions, and clinical research services to the life sciences industry. IQVIA creates intelligent connections across all aspects of healthcare through its analytics, transformative technology, big data resources and extensive domain expertise. IQVIA Connected Intelligence™ delivers powerful insights with speed and agility — enabling customers to accelerate the clinical development and commercialization of innovative medical treatments that improve healthcare outcomes for patients. With approximately 87,000 employees, IQVIA conducts operations in more than 100 countries.

Iqvia, website

It also looks made for the world of AI

The business is growing strongly.

Q4 was another strong quarter. R&DS delivered the second largest booking quarter in IQVIA history at over $2.8bn, along with another quarter of double-digit RFC growth. For the full year of 2023, revenue grew 9pc at constant currency, excluding COVID-related work. Our EBITDA margin expanded by 60 basis points and adjusted diluted EPS was up 12pc you exclude the year-over-year impact of interest rates and the increase in the UK tax rate.

Free cash flow was strong in the quarter at $568m, representing 109pc of adjusted net income. IQVIA was named to Fortune’s 2023 list of the World’s most Admired Companies for the seventh consecutive year and earned the first place ranking within our industry group for the third consecutive year.

And lastly, we issued full year 2024 guidance with underlying revenue growth of 5pc to 7pc, continued margin expansion and a resumption of EPS growth with adjusted diluted earnings per share expected to be up 7pc to 10pc.

Ronald Bruehlman, CFO, Iqvia, Q3 2024, 14 February 2024

Medpace is a share in the same contract health care research sector with a decidedly stronger chart.

Medpace is a scientifically-driven, global, full-service clinical contract research organization (CRO) providing Phase I-IV clinical development services to the biotechnology, pharmaceutical and medical device industries. Medpace’s mission is to accelerate the global development of safe and effective medical therapeutics through its high-science and disciplined operating approach that leverages regulatory and therapeutic expertise across all major areas including oncology, cardiology, metabolic disease, endocrinology, central nervous system and anti-viral and anti-infective. Headquartered in Cincinnati, Ohio, Medpace employs approximately 5,900 people across 42 countries as of December 31, 2023.

Medpath website

As is apparent from the chart above Medpath is an impressively growing business. This is a classy operation.

We’re growing organically at multiples of the average of the rest of the industry. We’re clearly doing a good job in terms of taking share. Where it’s coming from, I don’t know but we’re growing at a rate considerably above the peers, and this will continue. And this may be a low growth year of 15pc but long term, we’ve grown well above the industry.

August Troendle, CEO, Medpace, Q4 2023, 12 February 2024

Credit Card Giants Hit New Peaks

Charts for the two global credit card giants look both strong and amazingly similar. If I had put the smileys on the Visa chart they would be in exactly the same place as on the Mastercard chart. There is one important difference though. Since 2008 Visa has risen some 28 times while Mastercard has risen more like 47 times so straight away Mastercard looks a better bet.

American Growth Shares a Wonder of the World

These American growth shares with their ability to deliver year after year are one of the wonders of the world.

On balance, we remain fairly positive about the growth outlook, but we are monitoring the environment closely, and we’ll manage the business accordingly. Looking at our switch trends this quarter, domestic volume growth remains healthy, and cross-border spending remains strong, up 18pc globally in the fourth quarter on a local-currency basis.

With that as a backdrop, we remain focused on our strategic priorities which fuel our growth algorithm across payments and services and new networks. In payments, our growth algorithm consists of five key areas. One, being in the flow to capture the natural growth of economies. Two, accelerating the secular shift to electronic payments across both spend and transactions.

Three, further penetrating the addressable market in new flows. And four, growing market share. And five, optimising our customer portfolios for performance. Economies are growing, and that’s not in our control.

However, we are executing on the rest. Building on that, the runway for the secular shift is substantial. We are accelerating it by scaling acceptance, enhancing the user experience for digital transactions, and driving adoption in new sectors and new use cases. In 2023, we added millions of new acceptance locations worldwide.

Michael Miebach, CEO, Mastercard, Q4 2023, 31 January 2024

Visa is also excited about prospects.

We have updated our sizing of the new flows opportunity using the latest market data available. Excluding Russia and China, we see $200 trillion of opportunity annually across B2B, B2C, P2P and G2C*, certainly an enormous number. We are working with our clients to deliver Visa’s commercial and money movement solutions to help digitize these flows on our network of networks.

Ryan McInerney, CEO, Visa, Q1 2024, 27 January 2024

*Business to business, business to customer, peer to peer and government to citizen.

Obesity Giants Go Head to Head (Tummy to Tummy)

As you might imagine from the stunning chart Novo Nordisk is an amazing business.

We continue making progress on purpose and sustainability. On carbon emissions — our carbon emissions decreased by 34pc compared to pre-pandemic levels in 2019. And in 2023, we reached more than 40m patients with our diabetes and obesity treatments. To uphold our commitment to being a sustainable employer, we expanded the number of women in senior leadership positions to 41pc compared to 39pc at the end of ’22.

In the past year, we have developed and expanded our pipeline across all our therapy areas. In diabetes and obesity, we have seen several exciting trial readouts, and we have advanced novel assets into phase 3. We have also expanded our footprint in cardiovascular disease and strengthened our late-stage pipeline in rare blood disorders.

In 2023, we have achieved two major milestones within commercial execution. We have reached our obesity sales operation of more than 25bn Danish kroner [US$1 = DKK6.89] and our aspiration for diabetes, which was to achieve one-third of the global diabetes value market. Going forward, we continue to aim for treating more patients with our innovative treatments. Lastly, we’re very pleased with a strong sales growth of 36pc and operating profit growth of 44pc in 2023, both measured at constant exchange rates.

Lars Fruergaard Jorgensen, CEO, Novo-Nordisk, Q4 2023, 31 January 2024

Novo-Nordisk is a business in incredibly healthy shape to coin a phrase.

In 2023, our total sales increased by 36pc. The sales growth was driven by both operating units with North America operations growing 54pc and international operations growing 16pc. Our GLP-1 sales in diabetes increased 52pc, driven by North America growing 52pc and international operations growing 53pc.

Insulin sales decreased by 6pc, driven by declining sales in the U.S. and region China. Obesity care sales grew 154pc. Sales in international operations grew 47pc, driven by both Saxenda and Wegovy.

Sales of Saxenda increased by 14pc and sales of Wegovy reached around 2bn Danish kroner. Going forward, we continue to roll out Wegovy in a sustainable manner by volume cap launches to balance supply and demand. In North America operations, obesity care sales grew 212pc. Total rare disease sales decreased by 15pc, which was driven by a 24pc decrease in international operations and by a 1pc decrease in North America operations, following a reduction in supply of Norditropin.

With 29pc sales growth in diabetes care, we are growing faster than the total diabetes market. As a result, our global diabetes value market share increased to 33.8pc, which is above our strategic aspiration of reaching one-third of the global diabetes value market. This increase reflects market share gains in both North America operations and international operations.

In international operations, total diabetes cases increased by 20pc in 2023, which was primarily driven by GLP-1 sales growing 53pc. Novo Nordisk is the market leader in international operations with a GLP-1 value market share over 70pc. Ozempic continues its GLP-1 market leadership with 47.5pc market share.

Lars Fruergaard Jorgensen, CEO, Novo-Nordisk, Q4 2023, 31 January 2024

About the medicines:

GLP-1 agonists are medicines used to treat type 2 diabetes. They mimic (copy) the action of a hormone (chemical substance) called GLP-1. Your stomach naturally releases this hormone when you eat food.

The medicines work in different ways. They:

  • help your body to make more insulin (the hormone that controls the amount of sugar in your blood) when needed
  • reduce the amount of sugar (glucose) that your liver makes
  • slow down the digestion of food, so that it takes longer for your body to absorb (take in) the sugar from meals
  • can reduce your appetite

Saxenda® (liraglutide) injection 3 mg is an injectable prescription medicine used for adults with excess weight (BMI ≥27) who also have weight-related medical problems or obesity (BMI ≥30), and children aged 12-17 years with body weight above 132 pounds (60 kg) and obesity to help them lose weight and keep the weight off. Saxenda® should be used with a reduced-calorie diet and increased physical activity. 

  • Wegovy is the brand name for semaglutide, which is licensed and approved for managing overweight and obesity. It is manufactured by Novo Nordisk and is recommended by the National Institute for Health and Care Excellence (NICE) for managing overweight and obesity in some patients on the NHS.
  • Clinical trials indicate that when used alongside diet, physical activity, and behavioural support, Wegovy users can achieve up to a 15pc reduction in body weight after one year.
  • Ozempic is another brand name for semaglutide, which can be used for treating type 2 diabetes. Current guidance is clear that Ozempic should only be prescribed for the treatment of type 2 diabetes to protect the supply for diabetes patients. It should not be prescribed solely for weight loss.

The future holds more of the same remarkable growth.

We are very pleased with the strong performance in 2023, which reflects that more than 40m people are now benefiting from our innovative diabetes and obesity treatments. We continue to make progress on our strategic aspirations.

In 2024, our focus will be on the continued significant expansion of our production capacity, reaching more patients and progressing the expanding pipeline.

Lars Fruergaard Jorgensen, CEO, Novo-Nordisk, Q4 2023, 31 January 2024

Eli Lilley is another special company with a blisteringly strong chart.

2023 was a year of advancement across our company. We grew our top line, we progressed our pipeline, advanced our external innovation agenda through partnerships and collaborations.

We continue to invest in quality, the reliability and the resilience of our company’s manufacturing infrastructure, and most importantly, delivered new lifesaving and life-changing medicines to more patients. In 2023, revenue grew 20pc for the full year and 28pc for the most recent quarter as our newly launched portfolio continued to gain momentum. This past year, we announced positive phase 3s for donanemab, tirzepatide, mirikizumab, and pirtobrutinib. We also announced a positive phase 2 result for orforglipron, as well as for retatrutide, and moved these two important molecules into phase 3.

In terms of external innovation, in 2023, we continued to complement our pipeline through acquisitions and collaborations. These transactions included the acquisition of DICE Therapeutics, POINT Biopharma, Versanis Bio, Emergence Therapeutics, Mablink Biosciences, Immunitrack, as well as Sigilon Therapeutics. We announced several significant investments in manufacturing, including plans to expand capacity at the company’s Research Triangle Park facility and the two manufacturing sites within the LEAP Innovation Park in Boone County, Indiana. Most recently, we announced plans to construct a new high-tech manufacturing site in Germany.

This facility will further expand the company’s global injectable product and device manufacturing network, including for our diabetes and obesity portfolio. Most importantly, this past year, we brought innovative new medicines to patients. In 2023, we received regulatory approvals for Zepbound, Jaypirca, Omvoh, and Ebglyss in the U.S. and in the EU, rather, and an expanded label for Verzenio, and two new indications for Jardiance.

This progress will serve as a foundation to drive top-tier revenue growth and margin expansion over time. As you can see on Slide 4, we continue to make progress against our strategic deliverables in Q4. Revenue grew 28pc, with our new products growing by over $2bn. 

Dave Ricks, CEO, Eli Lilley, Q4 2023, 6 February 2024

Both Eli Lilley and Novo Nordisk have strong support in the investment community.

Morgan Stanley is not worried about Eli Lilly’s (NYSE:LLY) potential to generate further upside even after its recent rally, as the investment bank asked in a research note on Friday whether the weight-loss drugmaker could be the first pharma company to join the $1T club.

Fueled by strong demand for its diabetes and weight loss drugs, Mounjaro and Zepbound, Indianapolis, Indiana-based Eli Lilly (LLY) has more than doubled in value over the past 12 months, with its market capitalization exceeding $719B, ahead of Tesla (TSLA).

“Could Lilly be the first $1 trillion biopharma stock?” Morgan Stanley analyst Terence Flynn and the team questioned, adding, “We continue to see a path for further upside.”

With an Overweight rating (no pun intended) on LLY, Morgan Stanley increased its price target on the stock from $805 to $950, which, according to Bloomberg, is the highest on Wall Street and implies about a $900B market cap.

LLY is currently the most valuable healthcare company in the U.S. and the ninth most valuable S&P 500 component, trailing tech giants such as Microsoft (MSFT) and Apple (AAPL), which have already surpassed the $1T milestone.

Its Danish rival Novo Nordisk (NVO), the maker of GLP-1s, Ozempic, and Wegovy, has become Europe’s most valuable company after an over 72pc rise last year, as both capitalise on the surging popularity of the new GLP-1 class of drugs for diabetes and obesity.

Healthcare, 16 February 2024

The analysts project further upside for LLY in 2025 and beyond, citing its oral GLP-1 agonists, and make the case for why the stock deserves a premium multiple for its outer-year forecasts compared to historical multiples for pharma stocks.

Last month, Norges Bank Investment Management, the world’s largest sovereign wealth fund, projected that Eli Lilly (LLY) and Novo (NVO) could be the first healthcare stocks to achieve the $1T mark in market cap.

Healthcare, 16 February 2024

How Super is Super Micro Computing

No question Super Micro Computing has been an amazing performer, rising almost vertically in recent weeks. The company is growing at an incredible pace and this has come almost out of nowhere. Part of the explanation is that the shares were far too low in earlier years. Investors are trying to discover what is the right price for this share but it is a great deal higher than it was two years ago.

Try to resist the temptation to lock in profits. Let us see what the future holds. The company sees a clear route to $25bn in sales, probably sooner rather than later, which puts a $56bn valuation into perspective.

This is a slide from the latest presentation. It is the very definition of a company on fire. One might also imagine looking at the guidance for Q3 2024 that the full year 2024 guidance might be conservative and also that the next full year to 30 June 2025 could be an exciting one.

Going back in time just a little I took this quote from the 2023 annual report.

There was definitely a lot to celebrate in fiscal year 2023, and none of this would happen without our focus on technology innovation and product time-to-market. Our founding DNA of utilising a building block architecture – from sheet metal to complete systems – rack plug and play (PnP) allows us to support new opportunities globally rapidly. With more than 50pc of our staff consisting of engineers, we succeeded in outgrowing the industry and taking market share consistently. We see business opportunities across AI, Enterprise, Cloud, Storage, and 5G/Telco. Our strong partnerships with the leading-edge CPU, GPU, and storage providers gives Supermicro a distinct advantage, especially as demand for our highly integrated rack-scale solutions grows. In addition, we continue to leverage our business automation platform, giving customers online accessibility and purchasing capabilities
that broaden our opportunity to extend our time-to-market heritage.
The continuing demand for our leading AI plug-and-play rack-scale solutions drove Supermicro’s growth breakthrough. Our investment in over 4,000 racks per-month state-of-the-art validation and global production facilities is a significant factor in delivering high-performance AI racks quickly. A world-class
engineering staff and many years of collaboration with key customers and partners have enabled us to deliver optimised, first-to-market AI products and solutions. I believe this ongoing AI revolution will impact all industries, and the world, and be possibly much more impactful than the Industrial Revolution
over 200 years ago.

As a green computing leader, Supermicro has been delivering systems with optimized power efficiency and free-air and liquid cooling capabilities for many years. To continue this trend, we have made major investments across various technologies to drive the adoption of direct liquid cooling in data centres
to address the thermal challenges found in the recent AI boom. We are now shipping up to 80KW rack solutions, with 100KW just around the corner, for accelerated and compute-intensive datacentres, CSP, and other industries. In addition to increasing computing density and reducing TCO [total cost of ownership], liquid cooling dramatically reduces data centres’ environmental impact. If the IT industry broadly adopted our Green Computing solutions, it could save nearly $10bn annually in electricity costs. This would equate to eliminating 30 fossil-fueled power plants and preserving close to 8bn trees for our planet. We are also focused on environmental, social, and governance (ESG) initiatives. We believe our concentration on these programs has improved our impact on the world and strengthened our green computing reputation and relationships with our stakeholders.
I am optimistic about Supermicro’s future and focused on driving long-term growth and shareholder value. Our position as a leading supplier of rack-scale PnP Total AI and IT Solutions has just begun. Our growth will accelerate as we deliver more optimized AI infrastructure to existing and emerging markets,
along with our growing software and services value. Our technological strengths, time-to-market advantage, collaboration with customers, and key CPU/ GPU partners allow Supermicro to achieve even much higher revenues. With AI applications booming, I expect the $20bn annual revenue target to be
just a few years away.

Charles Liang, CEO and founder, Super Micro Computing, annual report 2023

As I wrote the profit-takers are out in force for SMCI with the price peaking around $1060 and plunging to almost $860 in active trading (it subsequently fell to a low of $692). This is normal. There is nothing wrong with the business. Some profit-taking is healthy.

You could argue that the analyst’s report (see below) which triggered the profit-taking was decidedly bullish.

Wells Fargo begins coverage on the sidelines, saying that AI-driven earnings potential is already baked into stock price

Super Micro Computer Inc.’s monster run was stalling Friday, as its stock looked to snap its longest winning streak in over seven years.

Shares of the server maker had run up nearly 200pc in a month, through Thursday’s close, and had catapulted some 900pc on a 12-month basis as well. Wall Street seems excited about Super Micro’s (SMCI) potential to capitalise on the artificial-intelligence frenzy, but Wells Fargo’s Aaron Rakers suggested that this enthusiasm may already be baked into the stock price.

He initiated coverage of Super Micro shares with an equal-weight rating and $960 target price Friday, writing that the stock was already discounting a pathway to upwards of $40 a share in earnings by 2025.

Super Micro’s stock was falling about 12pc in midday action and on pace to break a nine-session winning streak. That streak was its longest since another nine-session run of gains that ended Aug. 1, 2016, according to Dow Jones Market Data.

Rakers cheered the stock’s “AI-fueled fundamental momentum,” which “has been nothing less than remarkable,” in his view. He attributed the company’s traction in part to its “engineering-first differentiation,” as the company historically has allocated 40pc to 50pc of its headcount to research and development roles.

Super Micro’s “engineering-first culture appears sustainable, as we see silicon diversity and overall data-center complexity as poised to only increase looking forward,” he wrote.

The company’s liquid-cooling offerings are proving more critcial given the heavier power requirements for AI workloads. The company’s “integration of liquid cooling with its own power supply development is a competitive advantage,” Rakers said.

“While liquid cooling deployments today are a very small contribution, [Super Micro] has noted that it sees about 205 of data centre customers expressing interesting in the evolution/need for liquid cooling deployments,” he wrote, and the company could see a 10pc to 20pc boost to average selling prices for liquid-cooled versus air-cooled systems.

MarketWatch, 16 February 2024

Endless Growth for Stryker’s Medical Devices

Stryker is a medical device company, a very successful one as you can see by the share price performance.

As we begin 2024, I am very excited about our future. We are in a strong position with robust demand across both procedures and capital, easing macro constraints and a strong pipeline of innovation.

Kevin Lobo, CEO, Stryker Corp., Q4` 2023, 30 January 2024

The trends remain positive.

We’ve delivered terrific sales growth of over 11pc in Q4 and the full year despite strong comparatives from the prior year. Our commercial execution, including many successful product introductions was excellent across our businesses and regions. Globally, for both Q4 and the full year, we had double-digit organic sales growth in instruments, endoscopy, medical, neuro cranial, hips, knees and trauma and extremities. For the full year, we also had double-digit organic sales growth both in the U.S. and internationally. Spine and neurovascular also demonstrated good performances while making notable advancements in future innovations and acquisitions. It was a comprehensive performance across our businesses, and we have built significant momentum entering 2024.

Kevin Lobo, CEO, Stryker Corp., Q4` 2023, 30 January 2024

The company is positive on 2024 prospects.

We feel very good going into 2024. At some point, you think the comps will start to catch up a little bit. And so we think 7.5pc to 9pc is a strong guide. I can tell that coming off all of the domestic sales meetings, there is tremendous energy and excitement among our teams. The procedure volumes are strong. The capital markets are very strong. Hospitals are spending. We have we exited the year with more backlog than we began the year, which means, obviously, our orders are continuing to be strong for capital equipment.

We have a number of new launches, again, planned in 2024. Obviously, 2023 was a great year of capitalising on product launches, whether it’s System 9, whether it was Neptune S, whether it was the 1788. We have other launches coming again. So our pipeline of innovation is very strong. And so I expect us to continue to grow at the high end of MedTech, in a MedTech market that is quite healthy.

Kevin Lobo, CEO, Stryker Corp., Q4` 2023, 30 January 2024

Uber Uber Alles

Uber seems finally to be delivering on the early promise.

Q4 was a standout quarter to cap off a standout year. Trip growth of 24pc year-on-year outpaced gross bookings growth for the fourth quarter in a row, powered by strong audience trends and record engagement as consumer activity remained healthy all-around the world. At the same time adjusted EBITDA of $1.3bn exceeded our Q4 outlook with GAAP operating income of $652m.

Looking back, 2023 was an inflection point for Uber providing — proving that we can continue to generate strong profitable growth at scale. These results in our Q1 outlook demonstrate that we’re starting 2024 with tremendous momentum and reliable execution. I’m energized by the pace of innovation I’m seeing across the company and I’m looking forward to another exciting year ahead.

Dara Khosrowshahi, CEO, Uber Technologies, Q4 2023, 7 February 2024

The company feels it still has multiple opportunities.

A Mountain of Rubbish Keeps WCN Growing

Waste Connections is an integrated solid waste services company that provides non-hazardous waste collection, transfer and disposal services, including by rail, along with resource recovery primarily through recycling and renewable fuels generation. The Company serves more than eight million residential, commercial and industrial customers in mostly exclusive and secondary markets across 44 states in the U.S. and six provinces in Canada. Waste Connections also provides non-hazardous oilfield waste treatment, recovery and disposal services in several basins across the U.S., as well as intermodal services for the movement of cargo and solid waste containers in the Pacific Northwest. 

Waste Connections, web site

“Adjusted EBITDA [ earnings before interest, tax, depreciation and amortisation] margin expansion of 200 basis points in Q4 capped off a remarkable year for Waste Connections, driven by solid execution and continued improvement in operating trends.  Solid waste organic growth led by 8.7pc core pricing was bolstered by improvements in commodity-driven revenues during the quarter, providing momentum for 2024.  Acquisition activity also accelerated into year-end, as we announced the acquisition of the $225m revenue E&P [exploration and production] waste disposal-oriented assets of Secure Energy in Western Canada, which closed 1 February, bringing expected 2024 acquisition revenue contribution to approximately $325m, with dialogue ongoing.

Looking at our differentiated results during the full year 2023, we delivered 70 basis points adjusted EBITDA  margin expansion after overcoming 60 basis points in headwinds from recovered commodity values to report industry-leading margin of 31.5pc.  Double-digit growth in both revenue and adjusted EBITDA from price-led organic solid waste growth and outsized acquisition contribution, along with disciplined execution and focus on quality of revenue, drove adjusted free cash flow of $1.224bn, or 15.3pc of revenue.  Moreover, both employee turnover and safety incident rates exited 2023 at multi-year lows, setting up 2024 for continued improvement in trends, along with the opportunity for outsized margin expansion. 

We are extremely pleased by our 2023 results and our positioning for outsized growth in 2024.

Ron Mittelstaedt, CEO, Waste Connections, Q4 2023, 13 February 2024

Tasty Chicken Wings Make Wingstop a Tasty Stock

We’re not in the wing business. We’re in the flavor business. It’s been our mission to serve the world flavor since we first opened shop in ’94, and we’re just getting started.

1997 saw the opening of our first franchised Wingstop location, and by 2002 we had served the world one billion wings. It’s flavor that defines us and has made Wingstop one of the fastest growing brands in the restaurant industry.

Wingstop is the destination for made-to-crave wings and flavorful chicken sandwich, hand-cut seasoned fries and any of our famous sides. For people who demand flavor in everything they do, there’s only Wingstop – because it’s more than a meal, it’s a flavor experience.

Wingstop, Investor relations website

Our AUVs now average $1.8m and we are on track for our 20th consecutive year of same-store sales growth. Wingstop continues to see double-digit transaction growth, a true sign of the underlying health and momentum of our brand. In fact, we exited the quarter with more momentum than when we started. This growth we are seeing is consistent across all vintages of restaurants and our new restaurants are opening even stronger. We are achieving record levels of new guest acquisition across all channels. Our core guests continue to engage with us and we are seeing an increase in our average frequency.

Wingstop is at an exciting inflection point as a brand. Our strategies are working and have staying power, positioning us well on our path to grow AUVs in excess of $2m. We are achieving record levels in brand health metrics. Our advertising fund is four times the size it was in 2018, our first year as a National Advertiser, giving us the fuel to continue acquiring new guests and drive top-of-mind consideration. While we are making great progress on building awareness, our opportunity remains significant to reach the awareness levels of other scaled National Restaurant brands. Our media strategy is proving highly effective, along with new breakthrough creative launched in September. Many consumers are experiencing our flavors for the first time, and they’re returning for more.

We continue to see growth in average weekly transactions with DoorDash. And since the launch of Uber Eats, we have sustained Uber Eats delivery transactions at a level that’s double the initial launch last year. We see the delivery channel as another opportunity to build awareness for Wingstop and we are nowhere close to a point of maturity. 

During the third quarter our digital sales mix achieved a new record at 67pc and we remain focused on our aspirational goal to digitize every transaction. We took a step three years ago to begin investing $50m to build our proprietary tech platform. This investment serves two purposes: protect our digital business that has quickly scaled to $2bn in system-wide sales and unlock new capabilities that tap into our digital database of more than 35m users to enable further AUV growth. Our proprietary tech stack will deploy an increased level of hyper-personalization that we believe will improve conversion retention rates and ultimately drive frequency. We built a platform with the most modern technology within our tech stack. I’m thrilled to share that we are now in a pilot phase testing our platform in restaurants which positions us for our anticipated launch in Q2 of 2024.

We are just scratching the surface on personalization and we see this as a key part of our strategy for sustaining same-store sales growth. The strength of our AUVs and unit economics are translating into accelerated growth in our development pipeline. The visibility we have into our construction pipeline at this time positions us to deliver on our 2023 guidance of 240 to 250 net new units which would be a record year for Wingstop.

We’ve set a target for over 7,000 global restaurants, more than three times our current footprint. And the big part of our growth story is our international business. Not dissimilar from the US, our international markets are experiencing double-digit comps driven by transaction growth. They’re executing a similar playbook to the US. In our UK market, our first restaurant that opened five years ago is hitting record sales volume. New restaurants are opening stronger including in new markets such as Canada and Korea that are building an awareness.

We expect our newly signed markets Netherlands and Puerto Rico to open within the next two quarters and our business development pipeline of potential new brand partners is strong. I continue to believe our international business is supercharged for growth.

This past quarter, we announced our inaugural $250m share repurchase program which we believe further demonstrates our commitment to enhancing shareholder returns.

Michael Skipworth, CEO, Wingstop, Q3 2023, 2 November 2023

Strategy – Add the Names (listed below) to Your Portfolio

At Quentinvest I have strategies ranging from borderline insane (Kamikaze Plus) which are high risk but can build capital at an incredible rate to traditional portfolio building. My idea of a portfolio is that it consists entirely of top-of-the-range 3G (great growth, great chart, great story) stocks and is maintained in such a way that it only consists of such stocks.

These Chart Breakout-style alerts are intended to provide candidates for a high-quality portfolio. These portfolios can be as large as you like – 100 shares is by no means an unreasonable goal. Portfolio investing makes sense if you already have a sizeable chunk of investible capital. Smaller sums can then be allocated to the more aggressive strategies.

Share Recommendations

Iqvia Holdings IQV Buy @ $246.50

Medpace MEDP. Buy @ $400

Mastercard. MA. Buy @ $473

Visa V Buy @ $283.50

Novo Nordisk. NOVO_B. Buy @ DKK849

Eli Lilley LLY Buy @ $765

Super Micro Computing SMCI Buy @ $862 (SMCI is one of my favourite shares, suitable for aggressive strategies if you can cope with the volatility but it is also a good portfolio choice – by all means do both)

Stryker Corp. SYK Buy @ $355.50

Uber Technologies UBER Buy @ $78.50

Waste Connections WCN. Buy @ $170

Wingstop. WING. Buy @ $341

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