Legendary Days: Adventures In San Diego
After getting up early Thursday morning and doing my morning routine of reading, writing and market related work, I headed out at 8:00am for a 30-minute walk on the beach which was an excellent start to the day. Shortly after returning I headed over the the nearby Night And Day Cafe for a breakfast sandwich before heading up to Oceanside in the northern part of San Diego. I had two items on my agenda in Oceanside. First, I wanted to get a drink at Dutch Bros (BROS), an up and coming coffee chain. Second, I wanted to play poker at Ocean’s 11 Casino.
There was quite the line for the drive thru at Dutch Bros but I went to the window and ordered a small Annihilator. A young lady came shortly after me and I asked her about Dutch Bros. She had made an almost 30-minute drive from downtown and said she much preferred it to Starbucks. I asked her if it a lot of younger people felt that way and she said they did. She said that they also loved it in Sacramento where she’s from.
BROS went public about three years ago as you can see in the chart above. Comps – the most important metric for a early stage, fast growing retailer – started out strong but hit a rough patch, possibly due to overexpansion in the markets they decided to enter. But they rebounded in 1Q24 to 10.0% which they reported last Tuesday and the stock has rallied taken off since then. In conjunction with that report, BROS guided full year Adjusted EBITDA to $195-$205 million. With a current market cap of $6.7 billion that’s 33.5x multiple – not bad at all for an early stage fast grower with a lot of potential like BROS. With BROS being so popular among Millenials, it could very well be the next Starbucks. I intend to pick up and hold a big position for the long term when the moment is right.
After getting my Annihilator at BROS, I headed over to the nearby Ocean’s 11 Casino to play some poker. They have a $2/$3 no limit game with a buy-in of $100-$400 which was perfect for today. I sat down a little before 11am and went to work using my new tricks against a table of solid, easy to read players. While I stole a lot of pots by raising widely and continuation betting when checked to as well as 3-betting light with hands like A10off, K8off, K7off, etc… and continuation betting the flop, it wasn’t my day when I had a real hand and all the money went in. I lost with pocket Queens vs J8cc all in on J10Xssc when an 8 hit the turn. Then I chopped when I got it all in with A5hh versus pocket 5s on 432ddh and a 6 miraculously appeared on the river.
On my last hand I picked up pocket 10s and raised to $15 under the gun. The button and big blind called and we saw a flop of 1075ccx. Yahtzee! The big blind led out for $15 into a $42 pot, I called and the button raised to $115. The big blind folded and I re-raised to $245. The button went all in and I snapped. She turned over pocket Aces including the Ace of clubs and was drawing to one of the remaining two Aces in the deck or runner runner clubs for a flush. The pot was over $800 which is how much I was in for so I thought I was about to walk away from a tough session with a small profit. However, it was not to be as the Ace of spades appeared on the turn. I couldn’t believe it but that’s poker!
By that time it was 1:30pm and I was ready to head down to La Jolla to try an up and coming Mediteranean cuisine, fast casual restaurant called CAVA (CAVA). I had never heard of CAVA as there are none in the Bay Area until I read an article in Barron’s this past weekend titled “3 Restaurant Stocks That Are Vying To Be The Next Chipotle” [SUBSCRIPTION REQUIRED] by Evie Liu. The other two were Shake Shak (SHAK) and Sweetgreen (SG). CAVA was the most intriguing to me and I was delighted to find out that there was one right next to my alma mater UC – San Diego since I was heading to Coronado for a vacation on Tuesday.
I got off the 5 freeway at La Jolla Village Drive which was familiar to me from my years at UC San Diego (1995-2000). I hadn’t been back to La Jolla since graduating and it felt great to be back since I have so many fond memories of college where I discovered Philosophy and the intellectual life and the whole course of my life changed dramatically. I wouldn’t be doing what I am now or be the person I am if not for a few fortuitous occurences that turned me from an intellectually apathetic, washed up former athlete unsure of what direction to take next into someone with a burning desire to understand everything.
I was a little tired by the time I got to CAVA and traffic was starting to build up so I got it to go and headed back to the Hotel Del Coronado, arriving a little after 3pm. By then I was starving and I scarfed down my delicious Harissa Honey Chicken Bowl. In my opinion, the food is better than Chipotle as well as lighter and healthier. I’m now a believer that CAVA is the next Chipotle and intend not to miss it the way I missed Chipotle which had a restaurant right near where I lived in Roseville – a suburb of Sacramento – that I frequented regularly when it went public in January 2006.
CAVA went public about a year ago and the stock has performed quite well as you can see in the chart above. It has a $9 billion market cap and trades for about 100x the Adjusted EBITDA guidance it gave in conjunction with its 4Q23 earnings report about three months ago. 2023 comps were 17.9%! CAVA reports 1Q24 earnings on Tuesday May 28. I intend to accumulate a significant position when the time is right and hold for the long term.
