Keith bought EAT in the Hedgeye Virtual Portfolio this afternoon as the setup in his quantitative model was favorable. From our angle, too, the stock looks good on the long side.
From a fundamental perspective, as we wrote in our note titled “EAT – CAN THEY EXECUTE?” on 10/27, we believe that the company is operating well and will continue to improve going forward. At Chili’s, the remodeling program, kitchen retrofits and other initiatives are going to boost sales and customer satisfaction. As our note following earnings (10/27) highlighted, we believe that the skepticism among the sell-side community is misguided and would not interpret this negative sentiment as being anything other than a positive for a buyer of the stock. Having met with the company earlier this week (note titled “EAT MEETING”, dated 11/15), we are further convinced that Brinker is out-innovating the competition and, as a result, will outperform over the longer term TAIL duration.
This stock has been one of our favorite names for some time and is one of our top three long picks in the space over the intermediate term and long term despite it being overbought on the TRADE duration.