In subsequent months after my earlier story, BKC shares slipped quite a bit, below $17 amid general market weakness. Still, BKC was weaker than peers, and Wall Street wisdom was that BKC had suffered from missteps like alienating franchisees, putting too many items on the $1 menu, having a message that was appealing to a demographic (young males) that is suffering more than other groups in this recession. Fortune ran an article the day of, or a day after, the 3G announcement outlining a "theory of the malaise" that provided a perfect explanation, in hindsight, of the weakness of BKC shares. Now we know?
In contrast, I would say that 3G has the same view that led to my earlier recommendation. BKC was undervalued, and when it got to an extreme, they called the market on its nearsightedness. The events mesh well with the original thesis.
Burger King may do well once it is private again, or maybe not. I figure that they will eventually recover business, perhaps 12 months to 24 months hence, and post some profits that are double the current level or more. It all depends on timing.
But that isn't what you need to know. Here: BKC shares are worth $24. At today's (9/16/10) price, there isn't much profit left. If you have nothing better to do with the capital, wait until your shares are called away. The annual ROR of holding is better than money market funds at the moment. If you do have a need to redeploy the capital, then certainly take the profit at your convenience, provided that is in the relatively near future. I don't see much chance of a counteroffer nor of any shareholder activism that would cause a price increase. The situation is too quiet. After all, that's how the shares got to $17, right?
Should you redeploy to YUM or MCD? I really don't like those odds at those companies' current valuations. There was clear value in BKC at $17 to $19, but YUM near $50 is a little rich. I saying this from partial ignorance, without a recent deep analysis of YUM to back it up. And YUM's future is very much driven by events in China and elsewhere, so your research will either be third-hand, remotely observed, guesswork, requiring extensive travel, or impossible. At current prices, this kind of play lacks certainty.
