July 13, 2012
Written By Paul Goodwin
“As a growth investor, I’m usually looking for stocks that are in strong price uptrends. But I’m making an exception for Arcos Dorados Holdings, Inc. (ARCO), the largest restaurant chain in Latin America and the largest franchisee of McDonald’s in the world by both revenue and number of locations. Arcos Dorados (the name means ‘golden arches’ in Spanish) operates more than 1,800 McDonald’s-branded restaurants across Central and South America and the Caribbean, serving an average of more than 4.3 million customers a day.
“The secondary story for Arcos Dorados is that it is profitable, growing well (although management is being conservative in its roll-out of new locations) and pays a nice dividend (annual yield is 1.6%). It will trade ex-dividend on July 28. The primary story is that ARCO, which traded at a high of 29 in September 2011, fell to 12 in May 2012 during a one-month market meltdown. The stock was also hit by an earnings report that didn’t come up to analysts’ expectations. ARCO has since recovered to 15, but there is a tremendous amount of potential left for this very solid, well-run company (Arcos Dorados is headed by the man who ran McDonald’s Latin American operations before it was spun off). I recommended ARCO when it was a growth stock, and I like it just as much now that it’s trading at a discount. I think it’s a great conservative play.”
Paul Goodwin, Cabot China & Emerging Markets Report, July 2012