Sneak Preview: Admit It When It's Too Hard

It's a dangerous game, and it's not one I think you can win. These numbers are just too hard for you, me, or anyone else to predict with any accuracy. You never want to go into a volatile situation without an edge, and when it comes to same-store sales at restaurants, believe me, no one has that edge.

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I came up with this rule, and have stuck to it, ever since I got totally bagged by Domino's Pizza(DPZ Quote). ... I made my big mistake in this stock when I recommended it after interviewing the CEO, David Brandon, at the University of Michigan on April 25, 2006.

The previous year, Domino's had delivered impressive same-store sales growth, which meant they would have an extra-difficult time maintaining or beating that level of growth in 2006. I made that point to the CEO, but he assured me that Domino's would be able to meet its same-store sales targets. I believed him, and I'm sure he was being totally honest.

He just got it wrong. Shortly afterward, Domino's reported a same-store sales shortfall, and over the next three months the stock sank from $28, where it was when I recommended it at Michigan, down to $22.50.

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Sure I may have been right about Domino's initially, but my correct opinion wasn't based on a lot of homework. I knew Domino's was going to be up against tough compares, which means they were going to be measuring their growth against a really good previous year, but plenty of companies have gone up against tough compares before and won out.