text: Value Investing Challenge Winner Ryan Fusaro - Business Insider
  Oct. 2, 2012, 3:47 PM
  Image courtesy of TomAtwood.com Ryan Fusaro, a 27-year-old analyst at New York-based hedge fund LionEye Capital Management, impressed some top hedge fund managers with his investment idea. Fusaro was named the winner of the Value Investing Challenge hosted by the Value Investing Congress and SumZero.
  Fusaro presented his long recommendation of Jack In The Box (Nasdaq: JACK) with a target price of $57.00 at the Value Investing Congress — a high-profile industry event featuring heavyweight speakers such as Bill Ackman, David Einhorn and Barry Rosenstein. He told Business Insider in an interview that there are three main components to his investment thesis for the fast food hamburger chain detailing why it's a value investment. 1. It's transformed from being a restaurant operator to a franchiser. In 2005, Jack In The Box started to sell off its restaurants and convert from being an operator of restaurants to being a franchisor, which Fusaro noted is a much better business. As a franchisor, Jack In The Box is able to collect royalty payments on the underlying franchisees. "I think the market hasn't fully appreciated this transformation," Fusaro told Business Insider. "I think a franchise business deserves a higher multiple than a restaurant business because it's a much higher margin business," he said, adding that it's more predictable and they're less volatile. 2. Jack In The Box owns Qdoba. Fusaro told Business Insider that he used to eat a Qdoba for lunch and loved the food. That's when he decided to find out who owned them. It turned out that Qdoba was owned by Jack In The Box. Fusaro sees Qdoba, a growing popular concept of fast, casual Mexican food, as a "hidden asset" within the burger chain. "I don't think a lot of people realize this," he said.
  3. Non-core real estate. They own a significant amount of real estate, Fusaro explained. As they're selling off their assets, they no longer need to own this real estate. Now they're renting them out, so they generate revenue from franchisees leasing these buildings. "You have these three pieces that kind of underpin Jack, but the market continues to look at it as stodgy, slow growth, low margin restaurant business, but it's completely inaccurate," he said. Fusaro, a native of Manhattan, joined LionEye Capital about four weeks ago. He's a graduate from Fordham University. After college, he got a job at Ramius Capital, a fund of funds. While working at a fund of funds, he realized that he liked equities and had an interest in direct investing and value investing. That's when he starting reading things like Ben Graham's "Intelligent Investor." "What was great was at the fund of funds I was exposed to all these sub-strategies within equities — event driven, activist," he said, adding, "I realized I wanted to be on the direct investing side." He explained that one of the benefits of working at a fund of funds is that you get to understand the thought process and you start to understand what makes a good idea.
  As a result, Fusaro started putting together his own investment presentations and sending them to people he respected in the industry. "I really enjoy it. On weekends I'll spend my entire weekend for a month putting together a PowerPoint when the idea strikes. That's always been my passion." To date, he's completed ten investment presentations all of which are activist ideas. We also asked Fusaro about his first investment. Back in 2007, he bought a hundred shares of Apple at $100 and sold at $120. "I thought I was a lot smarter than I was," he said. "In hindsight, I knew nothing." Part of the problem, he explained, was he had no thesis at the time. "I had no real view. I had no concept of value," he said, adding, "My style has completely evolved. Now I'm a lot more disciplined." More: