Anybody who reads me regularly on Seeking Alpha knows that I go bullish or bearish, by and large, on the basis of the story. If companies make the right strategic moves, I generally believe their stocks will rise as a result of innovative narratives and quantitative markers such as revenue growth and profits following through.
The following companies continued along with or embarked on excellent examples of innovation in 2011. While I consider each case remarkable, the big question is should you take buy the underlying stocks in 2012?
Domino's Pizza (DPZ). Talk about an incredibly risky, yet ultimately successful turnaround story. Long story short, Domino's basically exposed itself to the world. It said, in no uncertain terms, our customers are correct, our pizza stinks. From there, the company had little choice but to follow through. And it has.
From a purely personal perspective, I'm more than impressed. I tend to be a tough guy to please when it comes pizza, but I actually like Domino's product. I've been known to wolf down an entire medium thin crust with banana peppers and diced tomatoes myself while watching Hockey Night in Canada on Saturday evenings, but I digress.
Maybe even more importantly, I love the experience that goes along with ordering Domino's Pizza online. It's great theater. Domino's lets you track your order with real-time play-by-play. Yubitza began preparing your order at 4:32 p.m. Yubitiza put your order in the oven at 4:36 p.m. Edgar left the building with your order at 4:52 p.m. And, then, in less than 10 minutes, Edgar, himself, knocks on your door.
Domino's has managed to perfect the type of interactive, social experience consumers have come to expect, yet many tech and new media companies cannot seem to create. The Domino's experience, food quality aside, prompts me to order more often and tip bigger when the driver arrives.
You can provide instant feedback. Share your experience straight away via social media. And if you Tweet Domino's, somebody almost always replies. It's all quite impressive and well-executed.
The second dumbest thing I've ever done as an investor was buying DPZ at the beginning of 2011 and selling it for a modest profit shortly thereafter. For all intents and purposes, the stock has known just one direction for most of 2011. Personally, I'm not buying because I would just feel like I was chasing it and trying to avenge my premature sale. That said, you should give it a look. I would not be surprised to see DPZ continue to surge in the new year.
McDonald's (MCD). Selling DPZ too early was "the second dumbest thing I've ever done as an investor" because getting out of the MCD DRIP I was in the late 1990s stands tall as the first. I don't even want to think about how much those shares would be worth today.
While McDonald's international growth story hardly ranks as news, its delivery strategy overseas was something I was unaware of. As a recent The Wall Street Journal article details, the numbers are nothing short of impressive:
Mr. Fenton says sales from delivery have been posting double-digit growth every year in every country where it's offered. In Egypt, where McDonald's first started offering delivery in 1994, more than 30% of total sales come from delivery. And delivery accounts for nearly 12% of McDonald's sales in Singapore.
That's nothing short of impressive and innovative. While the company says it has no plans to expand delivery to the U.S., I wonder if a pilot program or two will spring up outside of Manhattan. That's nothing more than me wondering aloud if McDonald's can create the same type of online ordering experience as Domino's has.
However the company chooses to proceed, it's a great one to own. And if you have a long-term time horizon (i.e., more than 3-5 years), I don't think you could ever chase it, even as it approaches $100. My money is on a stock split before long. This is the kind of stock that needs to stay attractive to legions of new and small investors.
I intend to reopen a dollar cost average position in MCD in 2012.
Clear Channel (OTCQB:CCMO) and Cumulus Media (CMLS). I know I've been writing a lot lately about the partnership between these two companies that will see all of Cumulus' radio stations broadcast on Clear Channel's iHeart Radio app. Pardon the redundancy, but I think it's a big deal. And if it happened outside of the radio industry, we would be talking about it a heck of a lot more.
When I was a kid, I used to struggle to tune in out-of-market radio stations. Of course, I could only do this at night and with AM stations. I dreamed of a day when I would be able to listen, static-free, to any radio station in the country. As a kid, I naturally thought of satellite delivery as the way it would all go down.
Well, we have satellite radio, in the form of Sirius XM (SIRI), but the content proves less-than-inspiring. (This comment I received to a recent Sirius/XM article I wrote says it all with relation to satellite radio's content). And toying around with the iHeart app online actually reminds me that rumors of radio's demise have been greatly exaggerated. There's certainly lots to be desired, but you can find quite a bit of quality programming across the country. Once the Cumulus stations hit iHeart, the value proposition enhances.
For Cumulus it's a win-win. I'm not sure if part of the deal it cut with Clear Channel requires Cumulus to put up some dollars to market iHeart, but, if it does, it's money well-spent. Clear Channel can provide Cumulus the type of exposure and, presumably, multi-platform advertising revenue it would have a much more difficult time securing on its own.
That said, as impressive as Clear Channel's recent moves, it's not a sound investment at the retail level. Cumulus, on the other hand, has a better balance sheet than Clear Channel. Plus, it's on a cost-cutting spree that rivals Clear Channel's infamous hatchet jobs. While I do not intend to take up a large position in CMLS, I might enter a modest speculative one in 2012. Of the few pure plays on terrestrial radio, CMLS might be the best bet.
The bigger story, however, is the logical expectation that the type of cooperation we see from Clear Channel and Cumulus represents an emerging trend. I'm on record as stating that Sirius XM should look to a company like Pandora (P) to help it secure a chunk of the 18-34 year old demographic Howard Stern should have access to. I also believe big companies on the video side should team up to deliver the digital versions of their content to consumers.