A fresh look at Casey's General Stores; Meta Platforms' newest products make me more bullish; Howie Buffett's generous support in Ukraine
1) On August 21 and August 22 of last year, I took a look at Casey's General Stores (CASY) and concluded that it's "an exceptional, long-term growth story" but was concerned about its high valuation.
Then reader Jeff C. put Casey's back on my radar in January, e-mailing me:
It's a great Iowa success story – I own 25 shares and my 88-year old mother owns 500 shares with a basis of about $8 from a purchase in the late '90s.
The first Casey's store was located in my hometown of Boone, population 13,000. Now you find one in just about every small town in Iowa plus many bigger cities throughout Iowa and the Midwest.
After visiting a Casey's during a trip to Abilene, Texas, I wrote an update on June 30, concluding:
Though it has pulled back 16% from the all-time high it hit earlier this month, it's still trading at 33.2 times forward earnings.
I don't doubt this fabulous company's stock is worth such a high multiple, but it's hard to argue that it's cheap. So I'm going to wait patiently and hope for a better entry point.
I hadn't looked at the stock since then before Jeff e-mailed me again on Monday:
Circling back with you on CASY now that it has been badly whacked – has it now fallen far enough for you to recommend it?
Thank you for the reminder, Jeff. The stock has indeed pulled back sharply, tumbling 35% in just over three months – from its all-time-high closing price of $916.28 on June 11 to $597.31 yesterday. Here's the 10-year stock chart:
Might this be the pullback I've been waiting for? Let's take a look...
The stock drifted lower over the summer due to growing consumer unease as gas prices climbed (they hit record highs on Labor Day).
Then Casey's reported fiscal first-quarter earnings on September 8, which caused the stock to drop 14% the next day.
At first glance, it was a strong quarter. Revenue of $5.68 billion beat estimates of $5.57 billion. And adjusted earnings per share were $7.37, handily beating the consensus of $6.68. But investors sold the stock for three reasons...
The first was slowing same-store sales. Growth was 3.2%, below the 3.8% analysts were looking for, and down from 5.5% the prior quarter. This confirmed investors' concerns that rising fuel prices are leading consumers to spend less inside the store.
Second was the low-quality beat. The main reason Casey's exceeded revenues and earnings expectations was rising fuel prices, which can just as quickly reverse.
Lastly, management reaffirmed guidance but didn't raise it. It maintained its fiscal 2027 outlook of 2% to 5% same-store sales growth and 8% to 10% growth for earnings before interest, taxes, depreciation, and amortization ("EBITDA"). Stocks trading at a premium multiple tend to get whacked if management doesn't raise guidance.
As for valuation, the 17 analysts who follow the company expect it to earn $21.33 per share this year and $23.41 next year (up 10%). That means it's trading at 28 times this year's estimates and 25.5 times next year's. Those are much more reasonable multiples than the previous times I've looked at the stock.
My view hasn't changed a bit: Casey's is still an exceptional, long-term growth story, and I think its stock will be a solid compounder for many years to come.
My team and I will discuss Casey's, and if we decide it looks compelling enough to add to the Stansberry's Investment Advisory model portfolio, our subscribers will be the first to know – as always.
If you aren't an Investment Advisory subscriber already, you can become one by clicking here.
2) Following up on my e-mails from Monday and Wednesday about Meta Platforms (META) and its new AI agent, Muse – check out this New York Times reporter's rave review: I Gave My Life Over to Meta's A.I. Agent and Was Blown Away:
To test Muse, I experimented with it nonstop for two weeks, giving over many aspects of my life to it. I had to trust Muse with my most personal data, which included connecting it to my bank accounts and email. Then I had it perform dozens of day-to-day tasks, including ordering my groceries, scheduling my meetings and setting my fantasy football lineups.
Two weeks in, I found Muse to be the most useful A.I. app I had ever used. One clarifying moment came after I connected my credit cards to Muse and asked it to track my spending in Google Sheets. I watched as it spun up tabs with hundreds of rows of data each in minutes, then flagged two duplicate subscriptions, which it canceled for me. Then Muse used my email to request a refund for a free newspaper trial that had expired, saving me $44.99.
I'm even more bullish on Meta after watching CEO Mark Zuckerberg's keynote address at Meta Connect yesterday, which centered on hardware built around Muse.
The coolest gadget I can't wait to get my hands on is Meta's new virtual-reality ("VR") glasses, which Zuckerberg introduced starting at 38:00 in the video.
I tried Meta's old Oculus VR headset years ago and quickly discarded it, as it was too big, heavy, and uncomfortable. But the new glasses weigh only 100 grams, about as much as a deck of cards. And they look amazing. They'll be available next spring for $1,299.99.
Zuckerberg also announced a new gadget called the Muse Charm – a tiny, keychain-sized device with a 2-inch touch screen and front and rear cameras that gives instant access to Muse without needing a smartphone.
He also announced Ray-Ban Meta Audio, the company's first glasses without a camera, as well as the next generation of Ray-Ban Meta glasses, which I own and like.
Overall, I think Meta has made major strides toward further integrating itself into every aspect of the lives of its users, who currently number 3.6 billion – 57% of the 6.3 billion adults on the planet!
Whether this is a good thing or not is open to debate. Regardless, I think it'll be good for Meta's stock.
3) Last Friday, I wrote about Warren Buffett stepping down as chairman of Berkshire Hathaway (BRK-B), to be replaced by his son Howard, aka Howie. I think he'll do a great job at the two things his father is asking of him: maintaining Berkshire's culture and, if necessary, replacing the CEO.
Howie is an extraordinary human being with a giant heart, as this X post from Ukrainian economist Roman Sheremeta highlights:
He has invested more in Ukraine than 185 countries combined.
Meet Howard Buffett, Warren Buffett's middle son. He is 71 years old. He dropped out of college three times. He drinks Dr Pepper and looks for a McDonald's wherever he travels.
Since the beginning of the war, his foundation has become the largest private donor to Ukraine: $1.4 billion.
Over four years, he has personally visited Ukraine 27 times...
He celebrates birthdays in Ukraine, comes for Christmas, and even has a Ukrainian godson.
Friends, this is truly a great man – someone who understands that he cannot take all his money with him when he leaves this world.
I simply want to thank him and wish him well.
Whatever else one may say, this is real help from a person who had no personal obligation to Ukraine.
He simply chose to help.
Best regards,
Whitney
P.S. I welcome your feedback – send me an e-mail by clicking here.