Is pizza a better bet than gold?
Upper crustDomino's dough continues to rise: UK sales increased nearly 18% in the last quarter. The company has a fast-growing international expansion programme; even in pizza-saturated US-of-A same-store sales continue to rise. Globally, the company is now worth $2.5bn in sales.
Let's take a closer look at Domino's UK sales first though. UK store sales increased more than 10% in the last quarter. Despite the appalling weather, Domino's moped riders still delivered. Its franchise UK sales for the year increased by almost 20% and full-year profits are now set to be ahead of City expectations.
Dividends continue to taste good. About £18m is to be returned to shareholders. Clearly the company is still some distance off saturation point. Then just think of the long-term potential in places like India and China...
Make mine a chicken feastYou simply can't argue those long-term fundamentals for gold. Gold is the emergency financial insulation, the insurance policy for the very worst-case scenario. Not a positive play for the future.
"It's fantastic to be reflecting on another incredible year of growth – especially as 2010 saw Domino's celebrating 25 years in the UK," said Domino's UK boss Chris Moore. "It has been a great year with a particular highlight being the opening of our new commissary, which provides the base we need to continue to grow over the coming years."
Heed that word "grow" in the last clause. Domino's is actually aiming to increase its franchise presence in the UK to 1200 stores by 2021 (it currently has around 550 UK stores). So it continues to look as if it can defy the recession for some time.
What about the long-term fundamentals for gold? Yes, it's had an amazing run. Currently gold's troy ounce spot price is $1371.38; compare that with its price in the first quarter of 2005 - $427.
All that glistens
But when the likes of investment banks such as Goldman Sachs and JP Morgan start flogging physical exchange traded funds, then that's the signal for some that gold has had its day.
Metal traders are so worried about the development that they've written to the Financial Services Authority (FSA) to express their concern that such ETFs could be the next financial bubble.
Risk of burningInvestors in commodities ETFs like gold, they argue, could increasing face expensive shippage, storage and disposal charges that would simply devour much of any investment gains made.
Gold, then, still remains a highly speculative investment play - a very different approach to a blue-chip business like Domino's that returns shareholder dividends, year in, year out, as well as offering a highly plausible growth model. Even if it's just selling more Pepperoni Passions.
Long-term investors should study both menus carefully.
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