L. Allen white, CFA

Quickly skim through the "Trade Sheet", "Calcs sample" and "Targets" files. No need to spend more than a few minutes on this. Everything will be explained in detail later. The goal is to get a very quick initial sense of Allen's investment process before watching the videos in this lesson.

We will now be going over a case study for a trade Allen did in 2019: long DPZ / short YUM.

You can refer to the "trade chart".

The trade proceeded to go against Allen by almost 10% over the following month which allowed him to build the position. It was back to flat in another week, up 30% overall in 4 months, up 70% from inception just pre-Covid and then went up a parabolic 250% by the end of March 2020. He only captured a fraction of that return as he was out well before Covid hit, but it does highlight a lot of lessons (luck being one). The inflection point for DPZ actually came on a day that they missed estimates and lowered their 2-3 year outlook (stock was down 6% premarket and finished up 5% on the day).

In the next several lessons, we will explore in depth all aspects of the trade. The only thing you should keep in mind at this point is that the impact of the so called delivery aggregators (Door Dash, Uber Eats, Postmates, Grubhub) will be critical for the thesis of the trade.

After you finish watching the videos in this lesson, please save the "trade timeline" chart and use for reference for the next several lessons.

In this lesson, we will go over some of the fundamental key aspects of the business models of DPZ and YUM.

If you are unfamiliar with the concept of same-store sales or comps, you will benefit from reading the explanation of comps and the levers of comps in our post here before watching the videos in this lesson. You should also read this post on the best ways to handle comps and growth rates, along with some useful shortcuts and formulas.

You can refer to the "DPZ SSS" pdf file for some of the videos.

Watch this lesson before proceeding to the next.

Watch this lesson before proceeding to the next.

Watch this lesson before proceeding to the next.

Please refer to the "trade position management" chart for the position management - 1 video.

Main topics covered:

• risk/reward of the trade and how it changes
• position management
• sizing up the trade as it was going down
• catalyst
• quantifying the bet
• stock inflection vs SSS inflection.

Watch this lesson before proceeding to the next.

Watch this lesson before proceeding to the next.

Main topics covered:

• estimating risk/reward for the trade: just assuming parity would make the trade profitable
• risk/reward dynamics during a trade down - it it trades down, better R/R, maintaining risk parity you get to higher upside
• stabilization of the aggregators' impact
• comps - using 2yr, 3yr trajectory to estimate forward quarter 1yr
• levers to engineer better results - G&A and Capex - DPZ
• S&P 500 inclusion.

Watch this lesson before proceeding to the next.

Main topics covered:

• What has happened to DPZ and YUM stocks since the trade?
• DPZ stock movements explained (2019-2024)
• Buffet's Berkshire position in DPZ
• How has the aggregators space evolved and its impact on DPZ and YUM?
• Unit growth, SSS and margins.

It might be worthwhile reading the "DPZ-YUM Summary" xlsx file after finishing the videos in this lesson.

The case study should have already In the next several lessons, starting with this one, we will dive deeper into Allen's investment process by exploring a trade idea with the most recent data.

Please refer to the "New Trade Template" xlsb file for the next several lessons. Note that the excel file isn't fully dynamic as the data is pulled from Fact Set, and the data had to be copy pasted as values.
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Also note the next set of lessons were recorded on December 4th, 2024 and is for educational purposes only. It is NOT an investment advice.

Please refer to the "sizing 2" sheet in the "New Trade Template" xlsb file or to the "Sizing" pdf file.

Watch this lesson before proceeding to the next.

Note this was recorded on December 4th, 2024 and is for educational purposes only. It is NOT an investment advice.

Watch this lesson before proceeding to the next.

Note this was recorded on December 4th, 2024. SBUX proceeded to follow by more than 10% in the following weeks.

Watch this lesson before proceeding to the next.

Watch this lesson before proceeding to the next.

This is the final lesson!