Losing an Intellectual Giant: Dr. Roy Menninger

Dr. Roy Menninger

By Michael Hooper

Dr. Roy Menninger, 97, an intellectual giant, former CEO of the Menninger Clinic, died Thursday, Oct. 24, 2024, at Stormont-Vail hospital. 

Dr. Roy is perhaps the wisest, most respected man I have ever interviewed, a person with a history of improving and shaping psychiatry in our world. He was a highly accomplished CEO, who worked with some of the finest minds in psychiatry as president of the Menninger Clinic from 1967 to 1993.

I met Dr. Roy Menninger around 2001-2002. I was writing stories for the Topeka Capital-Journal about the Menninger Clinic’s impending departure from Topeka. Dr. Roy talked about the difficult financial challenges facing Menninger after managed care changed the amount of money that clinics could charge customers. In the old days Irving Sheffel said they would bill the insurance companies for the cost of care and the insurance companies paid it. But that changed. 

Fundraising became increasingly important. There was a professional fundraising staff, but sometimes the potential donor wanted to meet with the top leader.

One of the many fascinating people Dr. Roy met over the years was a donor from Los Angeles, her name was Liliore Green Rains, an heiress to an oil and land-development fortune from her father, Beverly Hills developer Burton Green. Dr. Roy befriended Mrs. Rains. She gave smaller amounts to the Menninger Foundation. 

Dr. Roy and his wife Beverly visited Mrs. Rains in her lovely home filled with many pieces of art in Los Angeles. Dr. Roy gave her confidence that her gifts would help people suffering from mental illness. After she died, Mrs. Rains left $40 million to the Menninger Foundation. That gift benefited the organization for many many years.

The Menninger Clinic started in Topeka in 1925 and employed more than 1,000 employees before leaving in 2003 for Houston.

Like others in Topeka, I was sad to see the Menninger Clinic move away, but it seemed that Dr. Walt Menninger, then president, and Dr. Richard Munich, then chief of the medical staff, wanted the organization to be tied to a top-tier university system that would support education and research. The clinic in Houston partnered with the Baylor College of Medicine, creating its Menninger Department of Psychiatry and Behavioral Sciences.

How we view mental illness today is in large part due to the efforts of people like Dr. Roy Menninger and his father Dr. Will Menninger, his uncle Dr. Karl Menninger and Dr. Roy's grandfather Dr. C.F. Menninger. The treatment of mental illness is no longer a taboo thing or something to be hidden or something that we should be ashamed of but rather it’s something we should actually have compassion toward and open our hearts toward helping people suffering from these illnesses.

Dr. Roy said something recently that was really profound. Menninger provided training in therapy to every employee, and that included the grounds keepers, cafeteria workers, and housekeepers. All of these people, along with the professional staff, combined together to help reduce tension and increase healing. 

“ I think it’s what made us unique,” Dr Roy said.

"I particularly appreciated your reference to Drs. Karl, Will  and CF," Dr. Roy wrote to me. "Though I am happy to take some credit for the institution's progress after 1967, in truth, in a very essential way, my  working philosophy was rooted in  the values and perspectives of my forebears. My views were encouraged and nurtured by the intellectual excitement and the satisfactions of  all those working there, which was a consequence of widely shared values – our appreciation of the worth and integrity of every person, staff as well as patients, the impact of the mutual teaching and learning on all of us, and the vision that our work was effective and valued by both patients and staff. I think it was a rare environment. Given the current constraints on both time and money, it is hard to see how a world like that one could be created or even sustained now. And that is a sad fact. The consolation, at least for me, is the realization that the values that infused our world persist in the lives of those we helped and the helpers who helped them."

He wrote a paper recently describing his history in psychiatry. 

Dr. Roy had great patience. He was willing to sit down and talk to some of the most difficult patients, including a schizophrenic patient who was catatonic. He sat with this patient every day for several weeks during his residency in Boston. Sometimes he would just read the newspaper to her. And during that time he only got one real acknowledgment or response, she lifted her finger. His patience with this person shows the real heart of a man, not a machine, but a man with compassion and empathy, even in the face of few results.

I last saw Dr. Roy on Oct. 9. He was lucid, wise and thoughtful, a great listener and curious about everything. He was in book club where he listened often and spoke infrequently, sometimes not at all, but when he did speak, he was articulate, perceptive, and thought provoking.

Dr. Roy touched and inspired many lives. May he rest in peace.

Here is a link to his obituary

Investor Opportunity: Casey's General Stores Grows in Texas

By Michael Hooper

I recently added to my position in Casey's General Stores (CASY) even though the stock is near historic highs.

I learned, over 30 years of investing, to sell the losers and buy more of the winners. CASY stock has been a winner for many years. I started buying the stock in spring 2020 during the Covid stock market crash. 

Casey's stock is up 42% year-to-date and up 133% over the past five years. The stock closed Friday, Oct. 18, 2024, at $390.15 per share.

Recently I've been watching the company strategically plan and grow in Texas.

Casey’s is acquiring Fikes Wholesale with 198 retail stores and a dealer network. Most of those stores, 148, are in Texas. The $1.15 billion acquisition will close by year’s end. 

A year ago, Casey’s had made its first move into Texas with the purchase of 22 Lone Star Food Stores. The Fike’s deal also includes 50 stores in Alabama, Mississippi and Florida, bringing to 20 the states with Casey's stores after the acquisition is complete.

“To say we would have 1,000 stores in Texas someday is not a huge stretch,” said Darren Rebelez, president, and CEO, and chairman of the board of Casey’s. He and other managers spoke about the company’s operations and outlook during Analysts Day Oct. 15 in Ankeny, Iowa, headquarters for Casey’s. I listened to their presentation for an hour and 45 minutes online. The CEO and the executive team seem very knowledgable about opportunities to grow the business and improve margins.

Rebelez said management like the Fike's deal because of its large format stores, with 4800 square feet, with kitchens; and they're in great geographies, in the target market of Texas and the growing Alabama/Florida panhandle.

Casey's has more than 2600 convenience stores in the Midwest and is third-largest convenience store retailer and the fifth-largest pizza chain in the United States.

Casey’s stock is up $100 per share since I wrote about the company in this piece in January recommending investors buy the stock.

After such a runup, I still believe investors should own the stock, however they are buying today at a higher than normal price/earnings ratio. The P/E ratio on the stock has risen from 21 to 28 this year. The historical average P/E ratio for this stock is 22, according to ycharts.

As a result of the big run up, I believe the stock is more of a hold than a buy, however, I have recently purchased more shares at $365 and $387 per share. 

I believe the stock is in the trading range from $362 per share to $392 per share. Take a look at this chart:

CASY chart for 15 days of trading

See how the stock fell to about $362 per share at the far left and then started climbing up and hit $375 and then went down below $370, dipped into the $360s and then ran up to $396 and suddenly dropped substantially to the $377, when I bought more shares.  I figure the stock will go back to $392 again and perhaps $400 per share eventually.

I recommend buying and holding this stock for 3 to 5 years to get the most benefit out of the current strategy.

Casey’s strategy is buying stores at 6 to 9 times earnings, renovating with new kitchen for fresh baked goods like their popular pizzas and donuts. This is a high margin business that makes the convenient store more profitable.

"There are 150,000 convenience stores in America. Food is our differentiator," Rebelez said.

Indeed, about 2/3 of Casey’s gross profit, stems from in-store sales, customers buy a lot of pizza and beer. Cigarette sales are on the decline, but that doesn't hurt Casey's because of its diverse merchandise offerings, including its own company label snacks and water.

Rebelez said employees recently rebuilt the sandwich lineup with its new Spicy Crispy Chicken Sandwich, Crispy Chicken Sandwich and Quarter Pound Angus Beef Burger. These sandwiches are in the warmers, freshly prepared every day, ready to eat. Sales for sandwiches have increased substantially as some customers choose a whole meal rather than just a snack.

Casey’s has been averaging about $0.35-$0.40 per gallon margin on the sale of gasoline. That brings in millions every day.

The company's growth model is about 50 percent acquisition and 50 percent new builds, but this changes depending on economic conditions. Cost of construction has gone up considerably in recent years.

"M&A or organic growth, we can do it either way," Rebelez said.

Casey's serves a lot of small towns but also has quite of few stores in larger cities like Topeka, which has five Casey's locations. A sixth location is going into Campus Center at 17th Street and Washburn Ave., across the street from Washburn University.

In 2019, Red Mountain Group, Inc. of Santa Ana, Calif., purchased Campus Center shopping center in Topeka located at 1634 SW Washburn Avenue. In spring, the group started renovating the retail space while preparing the land at the corner for a new building for Casey's General Stores. That store will attract a lot of customers because of its prime location.

Stocks like Casey's trade at a high multiple for a reason. I think the reason is a proven plan of growth.

Casey's strategy: 

--delivering Quintle EBITA growth of 8-10% per year.

--Accelerate the food business

--Grow the number of units

--Enhance operational efficiency.

Casey's has consistently achieved 8+% Ebita growth for over 10 years, Rebelez said. Not many retailers have done this. O'Reilly Auto Parts has done this.

I believe management have figured out the growth strategy after years of experience. CASY stock is near all time highs but I want more shares. If there is a pullback of 5% to 10%, I'm going to buy more. I might buy more anyway. My experience with winning stocks is they don't go down much, and if they do, they tend to climb back up and eventually go higher.

Evercore ISI Group analyst Michael Montani recently said he maintains an outperform rating on Casey's General Stores and raised his price target from $435 to $440.