Rick's Cabaret (RICK)...Should You Just Close Your Eyes and Shut Your Ears and BUY

Why not?

It’s been Wallstripped so it must be a winner :)

Most of trend following is just looking at the recent past and assuming it will continue. I like to add a touch of cherry picking to the madness on this blog, because I have an ego.

I have written enough about why I like RICK’s. This weekend Barron’s had Peter Siris – a hedgie – discuss the stock:

 First, they have 90% gross margins. If you go into a gentlemen’s club, they charge you a cover and a lot of money for drinks. Secondly, the girls who work there, the dancers, or what the industry calls the “talent,” pay $150 to $200 a shift for the privilege of working. It’s my kind of business where you charge both customers and employees to walk in the door … I asked one guy in the business, ‘What’s the biggest risk to your business model?’ He said if the government stops immigration from Eastern Europe.

These companies net 35% to 40% pre-tax, after all their expenses. There are huge barriers to entry. Why? Because most people don’t want them in their neighborhoods. There are big zoning restrictions. These companies can make acquisitions at three to five times earnings. Why? Because there aren’t a lot of buyers. The church isn’t going to buy one. We may laugh about it, but flash back 20 or 30 years ago, and people might have reacted the same way to an investment in a casino company. Now the funds that won’t buy an MGM Mirage are few and far between.”

Makes more sense than me :) . This trend looks super early, not as a business obviously…it has been around in many shapes and forms forever, but as an accepted investment for Mutual Funds and Hedge Funds.

Hang tough here as there are few pure plays in the space. I am buying more tomorrow and the day after.

Thanks to the Chairman for the Barron’s repaste. I love that I don’t need to spend my time reading Barron’s anymore and to Phil (Gin Phil) for pitching me the story in the first place.

Disclosure – Long RICK (insert joke here)