By Frank Gristina – Portfolio Manager, Acadia Wealth Advisors
It’s always rewarding to watch investments flourish, and Darden Restaurants (DRI) has certainly delivered, showing long-term gains of over 40% for our clients. While it’s tempting to simply trim positions occasionally, we’ve reached what feels like the end of the all-you-can-eat pasta at Olive Garden. (Fun fact: Olive Garden was the second legacy franchise of Darden, though they have adapted and evolved impressively beyond it.)
Why We’re Selling Darden
Our proprietary G@RY screen is working exceptionally well, both at identifying promising new opportunities and signaling when it’s time to harvest gains. While Darden is not showing signs of fundamental decline, our analysis indicates it is currently more than fairly valued. At Acadia, our approach has always been disciplined: buy when companies are undervalued, sell when they become fairly or better-than-fairly valued.
New Positions: Home Depot and Pepsi
With the proceeds from selling Darden (DRI), we plan to increase cash reserves slightly and also begin averaging into two high-quality companies: Home Depot (HD) and Pepsi (PEP). Our proprietary screening model shows there’s a 78% chance for positive returns from Home Depot and an 81% chance for Pepsi over the next twelve months, and our deeper fundamental analysis confirms their long-term quality and value.
Why These Companies?
Both Home Depot and Pepsi are currently undervalued due to short-term investor fears:
- Home Depot: High interest rates and lower housing starts have investors wary, but we see these as temporary conditions that present a prime opportunity.
- Pepsi: Concerns about inflation and the impact of GLP-1 medications have temporarily depressed Pepsi’s valuation, creating another excellent entry point.
We are intentionally selecting mature, larger-cap companies with stable, growing dividends, solid management, and proven market share growth. While these may not be as exciting as the trendy “MEME stocks” like Palantir or Robinhood, this deliberate, strategic choice reduces volatility in your portfolio and helps ensure long-term, steady gains.
Behind the Scenes: G@RY’s Latest Enhancements
As a reminder, our process always begins with our proprietary G@RY screen. However, this initial step is then followed, when warranted, by intense fundamental and intuitive analysis – including listening to conference calls, assessing secular market trends, and performing channel checks.
Recently, we completed a major upgrade to G@RY using advanced Machine Learning Models, integrating premium data from Bloomberg, and applying rigorous curation. This new approach allows us to produce real-time lists of publicly listed companies that are considered “cheap” according to my standards. But finding cheap names is only part of the job – fitting them strategically into your portfolios still requires careful analysis and experience.
Our Commitment to Your Investments
Our overarching goal for your investment and retirement accounts remains to maximize returns while minimizing risk. We prioritize companies that either pay consistent dividends or demonstrate clear ability to pay dividends and grow sustainably – which is why Amazon (AMZN) was recently added to the G@RY portfolio despite its lack of dividend payments.
We remain committed to capturing market upside while mitigating downside risk. In approximately twelve months, we expect Home Depot and Pepsi to return to fair value, at which point we’ll carefully assess and likely harvest those gains as well.
Reach Out and Connect
I’m making a concerted effort to communicate clearly and frequently about our portfolio decisions and the rationale behind them. As much as I’d happily spend my days immersed in research and spreadsheets, engaging with you and explaining my thought process is equally important.
Feel free to reach out anytime to discuss the portfolio or our investment strategy in greater depth. (But fair warning, reserve about an hour!)
Frank Gristina
Acadia Wealth Advisors