(B)(N) YUM Yum! Brands Incorporated

Drama. The “market” pulled the trigger on Yum! Brands today and dropped the share price from $72 to $66 in after-hours trading on a volume of 6.5 million shares which is roughly twice the average daily volume.

But that’s $2.7 billion of market value erased from the $30 billion company or, to put it another way, a free KFC bucket dinner delivered to every household in America this evening. Gone!

KFC Store 4,000 opens in Dalian City, China
Courtesy: Yum! Brands

It’s likely that the trades were “programmed” and, hence, meaningless and because of a weak earnings report anticipated for tomorrow on news that’s apparently been known for a long time (Reuters, October 8, 2013, KFC parent Yum warns of delay in China sales recovery).

And so, instead of a free dinner, loses were delivered to mutual funds and pension plans all over America. Which creates a buying opportunity for investors like us who aren’t computers or computer algorithms tied to the wire.

The company has been in the Perpetual Bond™ since 2009 at much lower prices of $30 and our estimate of the downside in the stock price due to the demonstrated volatility is minus ($4) per share per quarter so that we would not be surprised by any price between yesterday’s $72 and $68 to $76. Please see Exhibit 1 below.

We were stopped out today at $68 but we can buy the stock back at a lower price because it’s still trading way above the current price of risk, the Risk Price (SF) of $55 and rising.

From our point of view – because we have a reason to buy and hold the stock – we didn’t lose $4 per share today. We made $2 and we’ll see what else the market delivers tomorrow.

That’s yummy, and the company also expects to pay a dividend of $660 million to its shareholders this year for a current yield of 2.2%.

Exhibit 1: (B)(N) YUM Yum! Brands Incorporated – Risk Price

(B)(N) YUM Yum! Brands Incorporated

Yum! Brands Incorporated develops, operates, franchises and licenses a worldwide system of restaurants which prepare, pack and sell a menu of food items.

(Please Click on the Chart to make it larger if required.)

From the Company: YUM! Brands Incorporated together with its subsidiaries, operates quick service restaurants in the United States and internationally. It operates in six segments: YUM Restaurants China, YUM Restaurants International, Taco Bell U.S., KFC U.S., Pizza Hut U.S., and YUM Restaurants India. The company develops, operates, franchises, and licenses a system of restaurants, which prepare, package, and sell various food items, as well as operates Chinese casual dining concept restaurants. It operates approximately 39,000 restaurants in 125 countries and territories under the KFC, Pizza Hut, and Taco Bell brands, which specialize in chicken, pizza, and Mexican-style food categories. The company was formerly known as TRICON Global Restaurants, Inc. and changed its name to YUM! Brands, Inc. in May 2002. YUM! Brands, Inc. was founded in 1997, has 78,000 employees and is headquartered in Louisville, Kentucky.

For more on what risk averse investing has done for us this year, please see our recent Posts on The S&P TSX “Hangdog” Market or The Wall Street Put or specialty markets such as The Dow Transports & Utilities or (B)(N) The Woods Are Burning, or for the real class action, La Dolce Vita – Let’s Do Prada! and It’s For You, Dear on the smartphone business.

And for more stocks at high prices, The World’s Most Talked About Stocks or Earnings Don’t Matter – NASDAQ 100.

Postscript

We are The RiskWerk Company and care not a jot for mutual funds, hedge funds, “alternative investments”, the “risk/reward equation” and every other unprovable artifact of investment lore. We have just one product

The Perpetual Bond™
Alpha-smart with 100% Capital Safety and 100% Liquidity
Guaranteed
With No Fees and No Loads on Capital

For more information on RiskWerk, please follow the Tags or Categories attached to this Letter or simply enter Search for additional references to any term that we have used. Related data may be obtained from us for free in a machine readable format by request to RiskWerk@gmail.com.

Disclaimer

Investing in the bond and stock markets has become a highly regulated and litigious industry but despite that, there remains only one effective rule and that is caveat emptor or “buyer beware”. Nothing that we say should be construed by any person as advice or a recommendation to buy, sell, hold or avoid the common stock or bonds of any public company at any time for any purpose. That is the law and we fully support and respect that law and regulation in every jurisdiction without exception and without qualification to the best of our knowledge and ability. We can only tell you what we do and why we do it or have done it and we know nothing at all about the future or the future of stock prices of any company nor why they are what they are, now. The author retains all copyrights to his works in this blog and on this website. The Perpetual Bond®™ is a registered trademark and patented technology of The RiskWerk Company and RiskWerk Limited (“Company”) . The Canada Pension Bond®™ and The Medina Bond®™ are registered trademarks or trademarks of the Company as are the words and phrases “Alpha-smart”, “100% Capital Safety”, “100% Liquidity”, ”price of risk”, “risk price”, and the symbols “(B)”, “(N)” and N*.