The Most Controversial Pick I’ve Made In A Long Time…
I hope everyone had a wonderful holiday season. As I mentioned to my colleague Brad Briggs in a recent interview, one of the things I’m most thankful for is enjoying some time with friends and family during the holidays.
Another thing I’m grateful for is the opportunity to do what I do for a living. You see, in my line of work, you get to learn about all sorts of companies. One day I may be researching shipping rates for an obscure tanker stock. Another day I might be diving into the latest cutting-edge tech trends. The next, I may find myself learning about a biotech company’s drug development pipeline.
You get the idea. On any given day, there’s no telling what you might find on my desk. That’s especially true over at my premium service, Maximum Profit, which is based around a system we’ve developed over the years.
This system is agnostic — meaning it could spit out just about anything as a pick.
But I have to say, I wasn’t prepared for a pick we came across a couple of months ago.
This trade we made is on… let’s say, an interesting company.
This Might Be A Little Controversial…
The name RCI Hospitality Holdings (Nasdaq: RICK) sounds innocuous enough. And that’s probably the point. This company owns and operates upscale gentlemen’s clubs and restaurants. You’ll find one of its 40-plus establishments all across America, from New York City to Chicago to Miami to Denver to Houston.
It owns brands such as Rick’s Cabaret, Club Onyx, Tootsie’s Cabaret, as well as the restaurant chain Bombshells.
Here’s a fun little fact I came across on the company’s investor relations page. Anna Nicole Smith “met her oil billionaire husband while dancing at Rick’s Cabaret.” Who knew?
Perhaps, that could be a nice trivia nugget to share around the dinner table next Thanksgiving…
On a more serious note, I was shocked (although maybe I shouldn’t have been) to learn that RCI Hospitality has been a fantastic investment. In fact, its five-year annualized performance is a whopping 27%. That actually beats Apple (Nasdaq: AAPL) by a bit, which comes in at 26%.
RCI reported its fiscal year fourth quarter results on December 15. Its fiscal year runs from September to September.
Total revenues were $71.4 million for the quarter, up 29.9%. For fiscal year 2022, the company posted sales of $267.6 million. That represents a 37.1% year-over-year growth.
On that $267 million, it generated a net income of $46 million and earnings per share of $4.91. One of my favorite metrics is operating cash flow, which was north of $64 million, representing a 53% year-over-year increase.
The company does issue a small annual dividend of $0.20, paid quarterly. It has increased its dividend by 18.8% in the last year and 58% over the last five years. That’s not bad for a small $900 million company.
Of course, over at Maximum Profit, we don’t particularly care about the dividends (we’re trading short-to-medium-term). But this is another factor that helps attract investors and create momentum.
And the stock is indeed seeing a lot of momentum. As you can see, shares have been steadily climbing higher and recently broke out to new 52-week highs. Exactly what we like to see.
Now, there’s one risk we have to consider. A deep recession could hurt sales as fewer people would likely spend money at gentlemen’s clubs.
Nevertheless, if you’re looking for an interesting small-cap name with momentum, this is a name to consider. And remember, if this pick isn’t your cup of tea, that’s okay too. My job is to provide you with investing ideas — that’s it.
Also, remember what I’ve said several times over the past few months. Keeping losses small is a major key to our success over at Maximum Profit. So if you’re trading this market, your plan of attack should be to get singles and doubles. Don’t forget to pull some profits off the table as our trades approach our price targets. And of course, don’t hesitate to sell when a sell signal is triggered.
In the meantime, my team and I have just released a report of “shocking” predictions for 2023 (and beyond)…
This report is easily one of the most hotly-anticipated pieces of research we release each year. And if history is any guide, it could be one of the most profitable things you read all year…
In my latest presentation, I’ll tell you how you can receive an in-depth report that reveals the research and analysis that went into these forecasts. I also describe the specific investment opportunities which can help you reap exceptional profits from each one of my predictions.