Leo Fasciocco specializes in finding stocks breaking out of basing patterns; in his The Ticker Tape Digest he sees a potential breakout with Buffalo Wild Wings (NASDAQ: BWLD).
"Based in Minneapolis, Buffalo Wild Wings runs and franchises New York-style chicken wings spun in some 14 signature sauces. The company owns 161 restaurants and franchises 332 and has annual revenues of $422 million.
"The company has continued to expand its restaurants. It is projecting a 25% increase in revenues. It has benefited from an ability to raise menu prices without losing customers.
"BWLD's long-term chart shows the stock climbing from 10 in 2003 when it went public to a peak at 47 in 2007. It has shown choppy action since then weathering the bear market very well.
"The stock is pushing over its recent peak with expanding volume. That indicates good technical action. A key breakpoint would occur at $43.60.
"The stock's momentum indicator is strongly bullish. The accumulation - distribution line is in an up trend and has already broken out to the upside. That could well be a lead signal that the price of the stock will do the same.
"This year, analysts forecast a 22% increase in BWLD's earnings to $1.72 a share from $1.41 a year ago. Looking out to 2010, the Street sees earnings climbing 21% to $2.09 a share.
"Technically, BWLD is one of the best performing restaurant stocks. The stock is now in a five week flat base and most importantly an 18-week, cup-and-handle base. A breakout would send it closer to its all-time at $47.75.
"Institutional sponsorship is above average. The largest fund holder is 4-star rated Fidelity Growth Company Fund with a big 10.5% stake. It was a recent buyer of 10,000 shares.
"The largest buyer lately was Franklin Small-Mid Cap Growth Fund which picked up 500,000 shares. BWLD has 17 million shares outstanding.
"We are very bullish on BWLD. A big quarter could be the key to the stock doing well. We suggests accumulation of a partial position in BWLD.
"Further buying can be done on a breakout over $43.60. A protective stop can then be placed at 41. We are targeting BWLD for a move to 52 after a breakout."
