Theme parks cost cutting = lower quality experience

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Jeffrey R Smith said:
"That said, stock price is not a measure of a company's success."

What is then? Seems to me like this would be the closest objective measurement we have for this company. A 6.5 % return is a neutral return for a neutral rated company.

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Except that I already shot holes in your position when I showed you that FUN has been growing faster than the market or in line with it for five years. That's on top of the distribution. You said that wasn't the case.

You want an objective measurement? I'll get to that in a moment.

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Those of you who idolize Cedar Fair as all-knowing speak of the ever-illusive data that the all-wise executives possess as some sort of Holy Grail. I merely point out that whatever data these guys have been using... it has lead to average results.

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Tell me you're joking. I've given you an example of the data they collect. You can see them doing it. It's not even high tech. They write turnstile numbers on a clipboard every hour. And average results? Are you kidding?

Looking at FUN's 2005 numbers (because the 2006 numbers are not typical given the acquisition), they had net revenue of $568 million. They had net income of $160 million. That's a 28% margin! How many business do that?

You can spin it anyway you would like. Your man-love for Cedar Fair is well-known to anybody that has been on here for a while. I agree…and have agreed with much of your past admiration for this particular company. I don’t deny anything you are trying to say as to the fundamentals, slow growth market, etc. I merely point out that this is a neutral/average stock. If your quest to “shoot holes” in my argument continues to involve ignoring this obvious fact…well I’m not sure what else there is to discuss. At best FUN is average…in strict financial terms. Nobody is excited to own this company sans fanboys or others with a personal interest in seeing them succeed. The mere fact that 6.5% is the threshold excitement point tells everything we need to know about FUN.

The point of my participation is to point out that there is more than strict bottom line forces in effect here. The fact that you…and I assume (?) others who agree with you willingly accept that this is a slow growth market and seem happy with 6.5% ROI on one side of your mouth…yet consistently defend any cut in services as smart business decision on the other side…glares of conflict in argument. If it were actually about getting the MOST profit possible…those involved would not be in the amusement park business and individual investors would certainly find better investment tools besides FUN. Nobody would settle for 6.5% ROI…

P.S. Not trying to belittle or "shoot holes" in anybody's argument here. Just demonstrating that 6.5% ROI is average to weak. Also noting that FUN is a recommended hold to slight sell on average...while Disney is a buy to strong buy. By all means...if you love this company and get excited at 6.5 %then buy it up!

But it's NOT just the 6.5%. If anything, that's what makes it above average. Countless stocks that keep in line with the markets' growth don't pay any dividend, FUN does, on top of the growth that matches the overall market. That's not spin. In fact, the units have a very long history of being in the better-than-hold position by analysts. Spin indeed.

But regardless, you're still suggesting that stock price is a measure of success. Tell that to all the people who took a bath in 2001 with ridiculous and unrealistic valuations on companies that didn't even have a solid business plan. Indicator, indeed.

When you can show me how many companies are protecting a 28% margin, get back to me. Until then, I'm pretty comfortable with (tying back to the original discussion) the idea that parks know what they're doing when they cut back on their hours.

Naaa, I'll stick with what brought me over 15% last year. Ooo, and it's compounding too. :) edit-Jeff slipped a post in here.

On a different note. I, as well as others, would love to see the sales data for the later operating hours.

Were they actually losing money? Were they breaking even? Were they not making the margins that they feel they need to justify staying open? What percentages of the operating nights did they hit the mark that allowed them to go ahead with this decision?

Lots of speculation abounds. The only fact that we have is that they saw something that told them that they could shorten hours with little, if any, affect on profit.

Either that, or they really are cruel heartless bastards and they will be introducing thug tactics for the 2010 season. "Buy a $15 20 oz. soda and I'll tell you where your kid is." ;)

*** Edited 4/26/2007 2:54:55 AM UTC by Incidentalist***

First off, let me say I own shares in FUN, which I bought at two separate times in 05 and 06. I also subscribe to Motley Fool's Income Investor, which has recommended Cedar Fair twice in July 05 and August 06.

The shares I bought the first time around are down, and the ones I bought later are up quite a bit. With the distributions inbetween, I'm ahead, but it's nowhere near the best performer in my portfolio.

Since the Fool's first recommendation, CF is basically flat, even with reinvestments, while the S&P is up over 25% over the same time. Since the second recommendation, CF is up almost 19%, but the S&P is up 24%, so CF is still lagging.

So I suppose my own investment in CF is somewhat of an emotional case for me. If it were strictly business, I'd have sold those shares and purchased more of something else in my portfolio that has better returns.

Maybe someday Coasterbuzz will indeed become the primary source for stock recommendations. For now, on this special evening when the stock market is at the highest level in history…I can’t find one reputable company rating FUN a buy.

The best part of this post was the guy who said not one mind has been changed. I should have followed his advice and stayed out of this pissing match…as I’m actually debating the guys I mostly agree with.

Silly me for taking time to check what financial experts actually think about this company…and the decisions they’ve made at this special moment in history. I should have saved my time and just asked you guys. I’m sure the information on Coasterbuzz is fair and objective as compared to all those other financial sites. They must just be pissed about the increased parking prices and early closing hours. ;)

How about we go beyond CP for a moment:

Busch Parks: Cut hours to 10pm Sat close, 9pm weekday

Universal: Is hardly ever open when its dark, even after going many times during the spring break/easter season my trip right before the 4th will be the first time I will see the park close at 9

Six Flags: Cut hours (nay even operating days) last year, and checking out their dream park SFGAm has 6 weeks of 10 pm closings this summer, thats it

WDW: Has just started last year keeping the MK open really late again (midnight) however AK, Epcot and MGM continue to all close by 10 at the latest. This does not include EMH times, and the week between Christmas and New Years and the 4th of July which is a different animal. Also, the Disney geeks will tell you of the days of yor when midnight closings were standard at the MK and Epcot as well.

But yeah this is so totally a Cedar Fair issue :). *** Edited 4/26/2007 3:49:05 AM UTC by Touchdown***

^ Jeff started the FUN bit. He did it, he did it! :)

RGB...don't let a little financial reality about actually having to outperform the market cloud the picture. ;) It is much easier to pretending a stock you own is gaining even when the said stock trails the market.

Your post gets to my point EXACTLY. There is an EMOTIONAL component to owning this stock. Based purely on financials and objectivity...money would be elsewhere. As expected on a coaster forum…many own this stock as I have in the past.

The current emotional responses toward my illustration of FUN's performance parallel the emotional responses demonstrated by those people who are pissed about early closing times.

Everybody has certain issues where maintaining objectivity is impossible. For some this is losing out on "atmosphere" at their favorite amusement park when hours are cut...for others it is blindly recommending and supporting a certain stock near and dear to ones heart…even when all reputable financial agencies are rating the stock a hold…or even sell.

I’ve got the same answer for both scenarios. Speak with your wallet. Buy more stock if you believe this is a sound company. Sell it if you don’t. Go to the park if the new policies don’t bother you. Stay home if you believe the policy sucks.

In conclusion…I know that nobody is capable of changing their minds on here…but for those who do not think stock price is a reflection of a companies business model and decision making abilities…there is good reason that Six Flags goes for $6. Of course there is many factors besides stock price that you can judge a company on (especially in an internet argument where giving an inch would be ultimate defeat)…but in the end…the market sorts out the junk and rewards the solid companies. If 6.5% ROI and barley beating the market average or possibly trailing the market average are your idea of a financially prudent vehicle…then speak with your wallet.

^^I wasnt complaining about the stock talk, just that Im a CF fanboy. In the grand scheme of park chain management I put CF only above SF, Disney, Universal, Busch all do it better. Just because someone is making an arguement you dont agree with does not make them a fan boy.

Wait, so because the market as a whole is outperforming FUN, that means FUN is failing? After spending more than a billion dollars to acquire new parks? Er, OK, whatever you say.

Remember the graph of FUN vs. the indexes? Did you even look at them?

You crack me up. The market had a record day... and it was about 1% higher than yesterday. Because one company doesn't exactly match that increase, it sucks? Riiiiiight.

Let's see, what else won't you respond to. You won't respond to the fact that analysts have generally favored it as an above-average rated stock for years (see link). You won't respond to the profit margin, or name companies that can achieve those numbers.

Oh, and Sharebuilder says my average return since I started slowly accumulating FUN in 2000 (5% of my portfolio), it has been getting just under 15% a year overall. I assume it's calculating in the distribution. Like I said, just about where the markets in general have been.

I spent the day catching up on this thread, so I haven't had much to say that hasn't already been said more eloquently. However...

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Jeffrey R Smith said:
Silly me for taking time to check what financial experts actually think about this company…and the decisions they’ve made at this special moment in history. I should have saved my time and just asked you guys. I’m sure the information on Coasterbuzz is fair and objective as compared to all those other financial sites.

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In all fairness, while a lack of data abounded throughout the earlier discussion, you were the one who brought the stock market into it. And when you introduce new angles, opinions, or arguments, you have to be willing to acknowledge that other people might have a handle on things and could speak with an equal or greater level of erudition on the topic than you have. Because maybe they do. Doesn't make anyone any less right than anyone else, but it does mean that you can't march in and proclaim dominance over an entire area of the debate since you may not actually possess it.

To claim that those talking finance here are just pretending to have knowledge and to subsequently subtly imply that you are the only one knowledgeable enough on the topic to make any legitimate claims is pretty arrogant and hypocritical. If you don't want to follow the rules, you shouldn't have started playing the game.

Perhaps I missed something in the last dozen or so posts, but I'm not sure I get how the performance of FUN determines how many people are in the parks after 8pm on weeknights.

Can someone draw me a straight line to follow? :)

I can't!

[wait for it...]

^Well Gonch, if FUN is at 6.5% ROI.....then you divide the number of people that visit a park, then.....then calculate daylight savings time in a particular time zone....times the US GDP...wait.

I can't either! :)

-Tambo

But it does, in a roundabout way. And I'm thankful this came up because I don't think I could have come up with anything else to say about the previous debate. I think both sides pretty much beat that one into the ground, so let me just say this:

I agree with Gonch and Jeff that there is probably a lot of cold, hard data to support all major decisions that the parks make... certainly I'm not one in a position to argue if they really are losing money in the later hours on certain nights. But I stand by ym assertion that parks have to be careful when it comes to making too many changes because customers aren't morons- they know when they're getting less for their money, even if it has to do more with perception than anything else. And I won't even get into a discussion about how companies often have to assume small losses when looking for a larger gain. Maybe some parks lose a few pennies after 8pm, but maybe they'll lose a few more because their decision to close early manages to piss people off? It's definitely a possibility, and one that cannot be argued because I don't think any of us know what all customers are thinking.

Not to pick on either "Jeff", but I think they're both right and wrong. I don't follow FUN like some of you do but I know enough about it to know it pays regualr dividends, therefore making it a solid investment. A 6.5% return is excellent when you consider what you get (or don't get) with a savings account. While 6.5% isn't going to help the regular stockholder pay off his mortgage, it's not really all that bad. There are much worse investments you can make.

But seriously Jeff, you're preaching about how nothing matters but profit, yet you claim that the value of the stock is inconsequential? Come on, how can that be? As a stockholder, I don't care about how much profit a company makes, as long as I get my regular dividends and the value of the stock increases. Despite FUN not being a growth stock, I don't think any of its stockholders would prefer to stock value staying the same opposed to increasing.

Since a lot of people tried to shoot down my thinking with the standard, "it's a business decision" statement, I don't see how the quest for profit doesn't factor into the value of, say, FUN stock.

Nothing does matter other than profit. That's what business is. By saying that, I'm not discounting the fact that poor decision making can lead to short-term gains and long-term failures (see: Six Flags in the old regime), but I am saying that cutting hours isn't one of those cases.

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I'm not sure I get how the performance of FUN determines how many people are in the parks after 8pm on weeknights.

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Did anybody imply it did? The performance of FUN is just an indirect reflection of the company model and decision-makers’ competence.

The performance of FUN is nothing more than a public indication of what the market thinks of the company. The market sees this company as an average company. The word average seems to have evoked an emotional response...ironically from the very people who denounced such emotion early in this debate.

Guys on this website seem to value FUN higher than the market. I believe that the inflated opinion some hold for FUN that does not reconcile with market realities is reason to scrutinize unfounded claims of… "these FUN guys are brilliant and know what they are doing.”

I merely opine that in the PUBLIC arena where the data is there for ALL to see…the results of FUN have been average…and not too volatile I might add (good thing). I don’t say this to belittle “average.” I just call it as I see it from the most simple of data available.

Those disagreeing with me speak of secret data utilized by wise decision makers…I’m just offering up the angle that the super-secret data and wise-decision makers have not been all that special in terms of public results. Take from that what you will…

I think the closing hour was probably a super-secret-data-driven decision…no disagreement there. Given this company’s past decisions…some good and some bad…I doubt it means much. They are an average performer for a reason.

You can acknowledge that the public results are merely average (what is so wrong with this?)…OR you could start looking at other indicators to prop up the company and explain why the company is really better than what the market has determined. I’ve no interest in debating internals when the stock price is there to see. If the internals are so good…then buy up this stock and prove your genius. This is what the smart investor does. The market WILL catch up to good buys.

I will look at Jeff's reponses myself to see if indeed the market has undervalued FUN. I'm always looking for a good buy. This wouldn't be considered inside information would it?

…no claims of superiority here! I’m just a guy posting a different angle in the debate.

*** Edited 4/26/2007 2:45:03 PM UTC by Jeffrey R Smith***

So now you're saying it's all good? Then what's your point? If it's all good, what does it have to do with reduced hours or whether or not the company management is making prudent decisions? You're not adding anything to the discussion about whether or not cutting hours affects the value proposition of admission into the park.

Now I get to observe this from afar... not sure how that happened.

I see where you're both going with this. Jeff has been claiming that the company makes decisions necessary to increase their profits, stemming from claims by people such as myself that the company's decisions may create short-term increases and long-term problems. Jeffrey is claiming that Cedar Fair's stock has been average for a long time now- something that shouldn't be if the company is constantly searching for ways to make itself more profitable.

Am I close?