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Notable news items and price action over the past 24 hours:

  • WEN shares surged on emerging news of Wendy’s/Arby’s planning to sell Arby’s.  I have been in favor of this divestiture for some time and wrote about this yesterday.  I think the stock is worth close to $7.
  • MCD was the subject of yet another positive report, this time from Janney.  There were some interesting points in the report, including; “For this go-round of the survey, we asked our participants the following two questions: ‘The Wall Street Journal recently reported that, at present, McDonald’s offers over 100 menu items. Do you feel menu complexity is a problem in your operations?’ and ‘What items (if any) would you remove from the McDonald's menu, and why?’  The majority of responses indicated that in fact franchisees believe that the menu is getting to be too complex.  Some respondents to the survey stated that the menu contained “too many slow moving products such as salads, McCafe” and that “Even our customers know it and complain they can’t read the menu boards.”  Thank you to Janney for confirming what we already knew.  Franchisees want McCafe to go because it is not working.  As I said last week on an conference call with clients, Starbucks can’t sell food and McDonald’s can’t sell espresso because these products are not part of their core business.
  • MCD - In maple country of Vermont, consumers know the real thing. So starting Feb. 1, customers at Vermont McDonald's stores can request 100 percent maple syrup or sugar to be added to the restaurant chain's new Fruit and Maple Oatmeal to settle complaints that the company improperly labeled the product as maple flavored in the state.
  • YUM  - down on accelerating volume.  The company has the street focused on Emerging markets as the next avenue of growth for the company.  The current problem with that  is slowing growth in the Emerging markets in 2011.  As Keith McCullough noted today Asia was a mess again overnight; China bounces to another lower-high (to down -3.3% YTD), but Indonesia, which has been getting powdered YTD lost another -2.2%, Korea had its worst day in 3 months -1.7% and Japan wasn’t much better at -1.6%. Thailand, which internally cut their GDP growth forecast this week almost in half vs. LY +8% GDP down another -1.5%.  Global Inflation matters when it ramps sequentially like this. It always has – and a 42% owner’s equivalent rent weighting on US CPI will not change that.  MCD will be impacted too.
  • EAT, PFCB, CAKE, and  CBRL gained on accelerating volume.  Brinker continues to perform well and, the intra-quarter slowdown in Knapp Track trends notwithstanding, I maintain a positive view on this stock for 2011. 
  • The Orlando Sentinel published a story titled, “Rising food prices hit Central Florida shoppers” which details the impact of rising prices on food consumption patterns, particularly those of older generations living on fixed incomes.

TALES OF THE TAPE: WEN, MCD, YUM, EAT, PFCB, CAKE, CBRL - stocks 121

Howard Penney

Managing Director