Should you invest in RCI Hospitality Holdings Inc. (RICK)?
Capital of Greenhaven Road, an investment management firm, has released its letter to investors for the first quarter of 2021 – a copy of which can be downloaded here. A commendable net return of 14% was recorded by the fund for the first quarter of 2021, outperforming the S&P 500 Index which produced a return of 6.17% for the same period. You can take a look at the top 5 holdings of the fund to get an overview of their top bets for 2021.
Greenhaven Road Capital, in its letter to investors for the first quarter of 2021, mentioned RCI Hospitality Holdings, Inc. (NASDAQ: GRIND), and shared their views on the company. RCI Hospitality Holdings, Inc. is a Houston, Texas-based nightclub company that currently has a market capitalization of $ 646 million. Year-to-date, RICK has returned 81.66%, impressively extending its 12-month earnings to 538.57%. As of April 30, 2021, the stock closed at $ 72.81 per share.
Here’s what Greenhaven Road Capital has to say about RCI Hospitality Holdings, Inc. in its Q1 2021 letter to investors:
“RCI Hospitality (RICK) – Last year, in some of my bravest moments, I bought a basket of companies that I thought would survive the pandemic and that were rewarding us for taking a risk. One of those businesses was RCI Hospitality, which operates a brand of upscale restaurants and gentlemen’s clubs. In August 2020, when we bought the shares, you couldn’t have paid me to enter a closed club, let alone have me pay a cover fee to enter a closed club. Add to that the fact that pandemic restrictions have resulted in most clubs closing or operating with severe capacity and hours restrictions, and the financial outlook looks bleak. It is this thinking that has prompted many investors to bypass RCI, as well as cruise ships, cinemas and other businesses plagued by the pandemic. In my opinion, bypassing RCI Hospitality was a short-term “lazy” because RCI owns all of its real estate, is qualified for PPP loans, and has a resourceful management team that has weathered the pandemic very well. However, it was also a popular short with over 15 days of trading volume sold short.
As the world reopens, they are ready to generate several dollars per share in free cash flow and begin to franchise their restaurant concept. We bought our shares with the belief that they would survive the pandemic and we were buying at a low single-digit multiple of normalized free cash flow. As many shorts have covered and we have gone from maximum fear to moderate optimism, the price is up over 4X from our initial purchases. What started out as a basket has grown into the top five. At the time of our purchases from RICK, only Adam Wyden of ADW Capital beat the table. “
Our calculations show that RCI Hospitality Holdings, Inc. (NASDAQ: GRIND) does not belong to our list of 30 most popular stocks among hedge funds. At the end of the fourth quarter of 2020, RCI Hospitality Holdings, Inc. was in 7 hedge fund portfolios, compared to 5 funds in the third quarter. RICK has generated a return of 84.08% in the past 3 months.
The top 10 stocks among hedge funds returned 231.2% between 2015 and 2020 and outperformed S&P 500 index ETFs by more than 126 percentage points. We know it sounds amazing. You rejected our articles on major hedge fund stocks, mainly because you were fed biased information from other media about poor performance of hedge funds. You could have doubled the size of your nest egg by investing in the best hedge fund stocks instead of stupid S&P 500 ETFs. Here you can watch our video on the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.
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Disclosure: None. This article was originally published on Monkey Insider.