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THE HBM: YUM, MCD

THE HEDGEYE BREAKFAST MONITOR

 

MACRO NOTES

 

Comments from CEO Keith McCullough

 

Europe failed to deliver on a consensus failure to understand what they could deliver. Back to reality.

  1. INDIA – all the Growth Slowing on the East side of the world continues - China (down another -1% to a new low last night, down -18.4% YTD) and India put up their worst Industrial Production print in 28 months last night (down -5.1% y/y) = Sensex dropped another -2.2% (crashing, down -23% YTD)
  2. EURO – get the USD right, you’ll get the big beta moves generally right and that’s what’s shaking out there this morning w/ the EUR/USD testing 1.32 again. All European stock markets making consecutive lower-highs and now testing immediate-term TRADE lines of support (the only lines left) of 5845, 3071, and 15102 on the DAX, CAC, and MIB, respectively.
  3. COPPER – the Doctor is ill this morning, trading down -2.7% moving back into a Bearish Formation as Gold fails at $1743 TREND resistance ($1683/oz last) and Brent Oil’s TAIL remains broken ($110.11/barrel) – all this started breaking down again on Thursday morning after the ECB press conf call where it was clear that there would be no ECB backstop (bond buying).

Interconnectedness should insulate the risk management of ranges. We like US Consumption stocks (Healthcare and Consumer Discretionary) as the USD strengthens and Deflating The Inflation becomes more and more obvious.

 

KM

 

SUBSECTOR PERFORMANCE

 

THE HBM: YUM, MCD - subsector fbr

 

 

QUICK SERVICE

 

YUM: Pizza Hut acquired almost 50 of its Southwest Ohio locations from a local franchisee.  Details of the transaction have not been disclosed. 

MCD:  McDonald’s was reiterated “Buy” at UBS and the PT was raised to $106 from $98.

 

THE HBM: YUM, MCD - stocks 1212

 

 

Howard Penney

Managing Director

 

Rory Green

Analyst

 


THE HEDGEYE DAILY OUTLOOK

TODAY’S S&P 500 SET-UP – December 12, 2011

 

Back to reality! Europe failed to deliver on a consensus failure to understand what they could deliver. Interconnectedness should insulate the risk management of ranges. We like US Consumption stocks (Healthcare and Consumer Discretionary) as the USD strengthens and Deflating The Inflation becomes more and more obvious.   As we look at today’s set up for the S&P 500, the range is 37 points or -1.77% downside to 1233 and 1.18% upside to 1270. 

 

SECTOR AND GLOBAL PERFORMANCE

 

THE HEDGEYE DAILY OUTLOOK - levels 1212

 

THE HEDGEYE DAILY OUTLOOK - daily sector view

 

THE HEDGEYE DAILY OUTLOOK - global performance

 

EQUITY SENTIMENT:

  • ADVANCE/DECLINE LINE:  -2150 (+4348) 
  • VOLUME: NYSE 819.22 (-11.96%)
  • VIX:  26.38 -13.76% YTD PERFORMANCE: +48.62%
  • SPX PUT/CALL RATIO: 1.61 from 1.23 (+30.30%)

 

CREDIT/ECONOMIC MARKET LOOK:

  • TED SPREAD: 53.67
  • 3-MONTH T-BILL YIELD: 0.01%
  • 10-Year: 2.07 from 1.99   
  • YIELD CURVE: 1.85 from 1.77

 

GLOBAL MACRO DATA POINTS (Bloomberg Estimates):

  • Japan November corporate goods price index +1.7% y/y vs cons +1.5%. November machine tool orders +15.9% y/y.
  • Australia October trade balance A$1.60B vs cons A$1.90B.
  • Germany Nov wholesale price index +4.9% y/y vs consensus +4.2%, prior +5.0%
  • 11:30am: U.S. to sell $29b 3-mo., $27b 6-mo. bills
  • 2pm: Monthly budget statement, est. $139b (prior -$150.4b)

WHAT TO WATCH:

 

  • President Obama meets with Iraqi PM Nuri al-Maliki at White House
  •  U of Iowa holds news conference on results of latest Hawkeye Poll of likely Republican caucus-goers, 10am
  • U.S. Deputy Secy of Energy Daniel B. Poneman travels to Taipei
  • U.S. online holiday spending up 15% to $24.6b Y/y: ComScore
  • Google Chairman Eric Schmidt speaks at Economic Club of Washington, 12:30pm
  • Lehman said to prepare $1.3b bid for Archstone stake

 

COMMODITY/GROWTH EXPECTATION (HEADLINES FROM BLOOMBERG)

 

COPPER – the Doctor is ill this morning, trading down -2.7% moving back into a Bearish Formation as Gold fails at $1743 TREND resistance ($1683/oz last) and Brent Oil’s TAIL remains broken ($110.11/barrel) – all this started breaking down again on Thursday morning after the ECB press conf call where it was clear that there would be no ECB backstop (bond buying).

 

  • China May Add to Reserve-Ratio Cuts as Europe Exports Weaken
  • Gold Drops to Two-Week Low in London as Dollar Gain Cuts Demand
  • Oil Falls on Europe’s Debt Crisis as Moody’s Readies to Review
  • Speculators Miss Oil Drop on European Debt Woes: Energy Markets
  • Funds Cut Bets on Rising Food Costs to 27-Month Low: Commodities
  • Whitehaven Agrees to Buy Tinkler Assets for A$2.72 Billion
  • Copper Drops on Rising China Stockpiles; Europe Crisis Concern
  • South African Platinum Drop ‘Unprecedented,’ JPMorgan Says
  • Indian Mines Bill Before Parliament Seeks to Share Profits
  • Peru to Hire Consultants to Review Stalled Newmont Gold Project
  • Palm Oil Drops Most in Two Months on Higher Global Soy Reserves
  • Copper Declines on Speculation Chinese Demand May Weaken
  • Wheat Drops as Global Harvest May Reach Record, Boosting Supply
  • China, India Vow Pollution Cuts in Biggest Climate Move
  • Rubber Growers May Back Physical Market to Set Up Benchmark
  • U.K. Gold Hallmarking Slumps as Retailers, Consumers Cut Demand
  • China’s November Foreign Trade by Commodity (Table)
  • Goldman Sachs Said to Back Former Barclays Trader’s Hedge Fund
  • DuPont Cuts Profit Forecast on Weakening Electronics Demand

 

THE HEDGEYE DAILY OUTLOOK - daily commodity view

 

CURRENCIES

 

EURO – get the USD right, you’ll get the big beta moves generally right and that’s what’s shaking out there this morning with the EUR/USD testing 1.32 again.  All European stock markets making consecutive lower-highs and now testing immediate-term TRADE lines of support (the only lines left) of 5845, 3071, and 15102 on the DAX, CAC, and MIB, respectively.

 

THE HEDGEYE DAILY OUTLOOK - daily currency view

 

EUROPEAN MARKETS

 

THE HEDGEYE DAILY OUTLOOK - euro performance

 

ASIAN MARKETS

 

INDIA – all the Growth Slowing on the East side of the world continues - China (down another -1% to a new low last night, down -18.4% YTD) and India put up their worst Industrial Production print in 28 months last night (down -5.1% y/y) = Sensex dropped another -2.2% (crashing, down -23% YTD)

 

THE HEDGEYE DAILY OUTLOOK - asia performance

 

 

MIDDLE EAST (HEADLINES FROM BLOOMBERG)

  • Singaporeans Deny Conspiring Against U.S. in Technology Exports
  • Speculators Miss Oil Drop on European Debt Woes: Energy Markets
  • Dubai Sukuk Yields Rise as Debt Payments Loom: Islamic Finance
  • Armed Clashes in Syria Leave Scores Dead in Anti-Assad Campaign
  • Etihad Orders More Boeing 787-9s, 777s in $2.8 Billion Deal
  • Syria’s Death Toll Mounts as Economic Squeeze Tightens
  • Aramex Taps South African Market With Berco Express Purchase
  • Egypt May Borrow Abroad to Bolster Economy, Prime Minister Says
  • Mideast Sectarian Strife Is Symptom of Weak States: Noah Feldman
  • Taqa Will Repay Remainder of 5.62% Bond at Maturity in October
  • Bahrain Bank Lending Grows Helped by Personal Loans: Arab Credit
  • Iran Wants OPEC to Adjust Output for Libya, Iraq Oil, Mehr Says
  • BP Sees Pipeline Gas Price Moving Away From Oil Index in Europe
  • Barcelona Faces Qatar’s Al-Sadd in Club World Cup Semifinal
  • Iran Seeks to Decode Information Stored on Downed U.S. Drone
  • Nakheel Says to Pay 10% Profit on Islamic Bonds on Time
  • Arab States May Suffer 24% Foreign-Investment Slump After Unrest
  • Alstom Signs EU400m Contract for 728mw Power Plant in Iraq

THE HEDGEYE DAILY OUTLOOK - MIDEAST PERFORMANCE

 

The Hedgeye Macro Team

Howard Penney

Managing Director

 


MONDAY MORNING RISK MONITOR: INTERBANK RISK CONTINUES TO CLIMB

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Interbank Risk continues to mount in this morning's Risk Monitor, as measured by the TED spread, the Euribor-OIS spread, and the ECB liquidity deposit. All three series made new highs in the last week.  This demonstrates that risk in the system has not abated in the slightest.

 

* The TED spread made a new YTD high at 54.2 bps, indicating risk in the banking system continues to rise. We consider the TED spread to be a more sober reflection of systemic risk in the banking system.  This is a strong cautionary note amid widespread equity gains.  

 

*Credit default swaps for Eurozone countries widened on Monday. Italian swaps were particularly noteworthy widening by 27%.

 

* We have added two new series to our Risk Monitor, the Euribor-OIS spread and the ECB Eurozone Liquidity Recourse to the Deposit Facility.  Both measure interbank lending risk in the Eurozone.  

 

* Our macro quantitative model indicates that in the short term (TRADE), there is currently around 1.8 times more upside than downside in the XLF (2.2% downside vs. 3.9% upside).

 

Financial Risk Monitor Summary (Across 3 Durations):

  • Short-term (WoW): Negative / 2 of 12 improved / 3 out of 12 worsened / 6 of 12 unchanged
  • Intermediate-term (MoM): Negative / 2 of 12 improved / 5 of 12 worsened / 5 of 12 unchanged
  • Long-term (150 DMA): Negative / 1 of 12 improved / 9 of 12 worsened / 2 of 12 unchanged

 

MONDAY MORNING RISK MONITOR: INTERBANK RISK CONTINUES TO CLIMB - summary2

 

1. US Financials CDS Monitor – Swaps tightened for 22 of 27 major domestic financial company reference entities last week.  

Tightened the most vs last week: MTG, RDN, TRV

Widened the most vs last week: AXP, MBI, AIG

Tightened the most vs last month: GS, COF, CB

Widened the most vs last month: SLM, RDN, MBI

 

MONDAY MORNING RISK MONITOR: INTERBANK RISK CONTINUES TO CLIMB - CDS  us

 

2. European Financials CDS Monitor – Bank swaps were wider in Europe last week for 25 of the 40 reference entities. The  median widening was 14.4%.

 

MONDAY MORNING RISK MONITOR: INTERBANK RISK CONTINUES TO CLIMB - CDS  euro

 

3. European Sovereign CDS – European sovereign swaps mostly widened last week. Italian sovereign swaps widened by 27% (+117 bps to 549) and Spanish by 20% (+74 bps to 434).

 

MONDAY MORNING RISK MONITOR: INTERBANK RISK CONTINUES TO CLIMB - Sovereign CDS 1

 

MONDAY MORNING RISK MONITOR: INTERBANK RISK CONTINUES TO CLIMB - Sovereign CDS 2  2

 

4. High Yield (YTM) Monitor – High Yield rates rose 1 bps last week, ending the week at 8.96 versus 8.95 the prior week. 

 

MONDAY MORNING RISK MONITOR: INTERBANK RISK CONTINUES TO CLIMB - HY

 

5. Leveraged Loan Index Monitor – The Leveraged Loan Index rose 2 points last week, ending at 1578.

 

MONDAY MORNING RISK MONITOR: INTERBANK RISK CONTINUES TO CLIMB - LLI

 

6. TED Spread Monitor The TED spread rose 1 point last week, ending the week at 54.2 this week versus last week’s print of 53.3.

 

MONDAY MORNING RISK MONITOR: INTERBANK RISK CONTINUES TO CLIMB - TED

 

7. Journal of Commerce Commodity Price Index – The JOC index rose 1 point, ending the week at -20.2 versus -21.2 the prior week.

 

MONDAY MORNING RISK MONITOR: INTERBANK RISK CONTINUES TO CLIMB - JOC

 

 8. Euribor-OIS spread – The Euribor-OIS spread (the difference between the euro interbank lending rate and overnight indexed swaps) measures bank counterparty risk in the Eurozone. The OIS is analogous to the effective Fed Funds rate in the United States.  Banks lending at the OIS do not swap principal, so counterparty risk in the OIS is minimal.  By contrast, the Euribor rate is the rate offered for unsecured interbank lending.  Thus, the spread between the two isolates counterparty risk.  The Euribor-OIS spread tightened by 3 bps to 96 bps versus last week’s print of 99 bps.

 

MONDAY MORNING RISK MONITOR: INTERBANK RISK CONTINUES TO CLIMB - EURIBOR

 

9. Markit MCDX Index Monitor – The Markit MCDX is a measure of municipal credit default swaps. We believe this index is a useful indicator of pressure in state and local governments. Markit publishes index values daily on six 5-year tenor baskets including 50 reference entities each. Each basket includes a diversified pool of revenue and GO bonds from a broad array of states. We track the 14-V1. Last week spreads widened, ending the week at 184 bps versus 173 bps the prior week.

 

MONDAY MORNING RISK MONITOR: INTERBANK RISK CONTINUES TO CLIMB - MCDX

 

10. Baltic Dry Index – The Baltic Dry Index measures international shipping rates of dry bulk cargo, mostly commodities used for industrial production. Higher demand for such goods, as manifested in higher shipping rates, indicates economic expansion. Last week the index rose 56 points, ending the week at 1922 versus 1866 the prior week.

 

MONDAY MORNING RISK MONITOR: INTERBANK RISK CONTINUES TO CLIMB - Baltic

 

11. 2-10 Spread – We track the 2-10 spread as an indicator of bank margin pressure.  Last week the 2-10 spread widened to 183 bps, 5 bps wider than a week ago.

 

MONDAY MORNING RISK MONITOR: INTERBANK RISK CONTINUES TO CLIMB - 2 10

 

12. XLF Macro Quantitative Setup – Our Macro team’s quantitative setup in the XLF shows 3.9% upside to TRADE resistance and 2.2% downside to TRADE support.

 

MONDAY MORNING RISK MONITOR: INTERBANK RISK CONTINUES TO CLIMB - XLF macro chart

 

13. ECB Liquidity Recourse to the Deposit Facility – The ECB Liquidity Recourse to the Deposit Facility measures banks’ overnight deposits with the ECB.  The ECB pays lower rates than the market, so an increase in this metric demonstrates increased perceived counterparty risk and liquidity hoarding.  

 

MONDAY MORNING RISK MONITOR: INTERBANK RISK CONTINUES TO CLIMB - ECB liquidity

 

Margin Debt in October

We publish NYSE Margin Debt every month when it’s released. 

 

 NYSE Margin debt hit its post-2007 peak in April of this year at $320.7 billion. The chart below shows the S&P 500 overlaid against NYSE margin debt going back to 1997. In this chart both the S&P 500 and margin debt have been inflation adjusted (back to 1990 dollar levels), and we’re showing margin debt levels in standard deviations relative to the mean covering the period 1. While this may sound complicated, the message is really quite simple. First, when margin debt gets to 1.5 standard deviations or greater, as it did this past April, that has historically been a signal of extreme risk in the equity market - the last two times it did this the equity market lost half its value in the ensuing period. We flagged this for the first time back in May of this year. The second point is that margin debt trends tend to exhibit high degrees of autocorrelation. In other words, the last few months’ change in margin debt is the best predictor of the change we’ll see in the next few months. This is important because it means that margin debt, which retraced back to +0.43 standard deviations in September, still has a long way to go. We would need to see it approach -0.5 to -1.0 standard deviations before the trend reversed. There’s plenty of room for short/intermediate term reversals within this broader secular move, as we saw in October’s print of +0.78 standard deviations. But overall, this setup represents a material headwind for the market.  

 

One limitation of this series is that it is reported on a lag.  The chart shows data through October.

 

MONDAY MORNING RISK MONITOR: INTERBANK RISK CONTINUES TO CLIMB - Margin Debt

 

Joshua Steiner, CFA

 

Allison Kaptur

 

Trouble viewing the charts in this email?  Please click the link at the bottom of the note to view in your browser. 

 

 


the macro show

what smart investors watch to win

Hosted by Hedgeye CEO Keith McCullough at 9:00am ET, this special online broadcast offers smart investors and traders of all stripes the sharpest insights and clearest market analysis available on Wall Street.

Hope Control

This note was originally published at 8am on December 07, 2011. INVESTOR and RISK MANAGER SUBSCRIBERS have access to the EARLY LOOK (published by 8am every trading day) and PORTFOLIO IDEAS in real-time.

“We want control. We need control. And bad things happen when we don’t have it.”

-Dan Gardner   

 

That’s an excellent behavioral psychology quote that I dog-eared this year after reading “Future BabbleWhy Expert Predictions Fail and Why We Believe Them Anyway.” (page 134)

 

Why political consensus still believes the Keynesian Quacks who promise them that money printing in Japan, Europe, and the USA is the best long-term path to prosperity is officially beyond me at this point.

 

That said, the market can remain beyond what any of us think for longer than even a centrally planned bank can remain solvent. While the core principle of Chaos Theory that Hedgeye’s Risk Management Process adheres to (Embrace Uncertainty) is what I start my every day with, it seems that these government people want to issue you the failed hope of the opposite, daily.

 

Hope is not a risk management process.

 

Back to the Global Macro Grind

 

First, let me preface this morning’s strategy thoughts with the Top 3 “Most Popular” headlines on the Bloomberg machine:

  1. Geithner Backs French-German Plan
  2. Bloomberg News Reponds to Bernanke Criticism
  3. Citigroup To Cut 4,500 Jobs On Slumping Revenue

Now let’s set aside Washington DC’s Hope Control messaging for 2011 that this Time Is Different, and focus on what’s actually happened since the beginning of the year on all 3 of these headline scores:

  1. Tim Geithner has spent 47% of his born life working on Big Government Intervention at the US Government – he is doing his very best to make said US style “free-market capitalism” look like whatever Europe is. He needs government control.
  2. Bernanke, like Obama, has talked a lot about “transparency, accountability, and trust” since 2006. As a functional matter, the US financial system has never looked so compromised, conflicted, and constrained. Main Street America doesn’t trust the Fed or its crony workings. Bloomberg pasted Bernanke to the boards with this article. It’s about time.
  3. Citigroup’s Vikram Pandit is going to cut costs so that he can get paid. That’s Old Wall Street. That’s what public financial services companies who are missing their revenue targets do. Meanwhile, as Yale’s vaunted Keynesian Economist, Irving Fisher, pleaded from 1929-1932, consensus pleads “but stocks are cheap because corporate profits are good.”

Fisher, Keynes, and all of their Big Government Intervention friends of the “Roaring 1920s”, of course, blew up most of their net worth buying on the way down well before we had a depression in this country.

 

Keynes, who was quite certain about the ‘devalue your currency and hope for exports model’, actually imploded early (in 1928 he was long corn, rubber – you know, the commodity trade baby!).

 

After this European Summit, where are we going? Where have we been? Contextualizing reality matters in mean reversion.

 

If you pull back the multi-duration and multi-factor curtain of what markets have actually done into and out of Big Government Interventions for the last 100 years, you’ll quickly notice that there has never been a central economic plan to debauch a citizenry’s currency that saved the world.

 

They’ve only saved us from what, allegedly, would have been even worse…

 

God Save The Geithner.

 

Timmy continues to take the other side of pretty much everything I think. Yesterday in Europe, this is what he said:

 

“This of course will take time… and a very substantial commitment and sustained commitment of political will.”

 

In other words, Japan and the US needed even bigger bailout and socialization bazookas. Timmy believes “deeply” in being fully “committed.”

 

And if we, The American People, were as “committed” to centrally planned risk taking and price volatility as Geithner and Bernanke wanted us to be, we’d all be fine. That’s what Irving Fisher and John Maynard Keynes said in 1929 too…

 

In other news – the rest of the world’s Growth Slowdown doesn’t cease to exist:

  1. Brazil reported its slowest year-over-year GDP number in 2 years (+2.1% y/y in Q311 vs +3.1% last quarter)
  2. China called the current slowdown in Global Export demand “under severe pressure”
  3. Santa’s Global Consumption Sleigh is running on $110/barrel oil

Follow the bouncing ball of hope. Piling-debt-upon-debt, bailing out banks, and money printing A) Shorten Economic Cycles and B) Amplify Market Volatility. The Hope Control’s market volume is running on empty. “And bad things happen when we don’t have it.”

 

My immediate-term support and resistance ranges for Gold, Brent Oil, German DAX, French CAC40, and the SP500 are now $1724-1743, $110-112-39, 5940-6242, 3104-3234, and 1233-1266, respectively.

 

Best of luck out there today,

KM

 

Keith R. McCullough
Chief Executive Officer

 

Hope Control - Chart of the Day

 

Hope Control - Virtual Portfolio


THE M3: SJM COTAI

The Macau Metro Monitor, December 12, 2011

 

 

COTAI PLOT GRANTED 'IN PRINCIPLE': SJM Macau Daily Times

“In principle we got a letter saying that it [the Administration] will grant the land to us but we haven’t been given any further notice about, for instance, the premium payment,” SJM CEO Ambrose So said.  So added that the Cotai investment will be about US$ 2 billion and he expects the land grant procedures to be ready next year.  After the concession is complete, SJM will begin diversifying its business with a bigger investment in non-gaming.   


RESTAURANT SENTIMENT TAKEAWAYS

In our view sentiment is going to play a significant role in several restaurant stocks’ price action in 2012.  For some of our Hedgeye Restaurants Alpha top ideas, in particular, sentiment is an important component or risk factor, as the case may be.  Accordingly, we will be focusing more closely on sentiment going forward. 

 

The Sentiment Scorecard, below, incorporates both sell-side and buy-side sentiment.  As the table indicates, MCD and YUM are loved by the investment community.  This has been true for some time, especially for MCD, and we don’t see sentiment turning alone as a catalyst for the stock, but it is worth bearing in mind that if the fundamental outlook for the company were to deteriorate, there is plenty of room for sentiment to turn bearish.  MCD continues to be a favorite name of ours as it continues to take share with the latest monthly comps, reported last Thursday, indicated that global comps in November came in at +7.4% versus consensus at 5.1%.  Even the bullish sell side (73% Buys, 0 sells), was not bullish enough going into the release.  YUM has, over time, traded lower on China scares and our view is that these dips have made for opportune entry points on the long side.  The company continues to drive strong sales in China, despite the slowdown in macroeconomic data in the country, and is also maintaining its appetite for seeking high-return growth opportunities in emerging markets.  Both YUM and MCD are positive on Trade (3 weeks or less), Trend (3 months or more) and Tail (3 years or less) durations per our Hedgeye Restaurants Alpha list.

 

DNKN is not rated highly on the sentiment scorecard.   The hype around the IPO shot the stock and the cash flow multiple embedded therein, to an unrealistic level.  The stock has been trading poorly of late as investors have more closely scrutinized the growth strategy bulls are touting more closely.  We are negative on this stock on all three durations (Trade, Trend, Tail).

 

WEN is a stock that is not viewed favorably by the investment community.  We believe that there is a short-term opportunity for investors here with comparable restaurant sales running above the industry average.  We are positive on WEN for Trade and Tail durations in the Hedgeye Restaurants Alpha list.  Over the Trend, the stock may not perform well if a clear plan for remodeling the store base is not produced by management. 

 

EAT is hated and we love both the stock and the fact that it is so hated.  As investors, faced with the growing clarity around the improving performance of the Chili’s system, shed the emotional baggage that past experiences with the stock have burdened them with, we expect for a sea change in sentiment to buoy the stock price.  We are positive on EAT on Trade, Trend and Tail durations.  It should be noted that DRI registers a very positive reading on the sentiment scorecard and the company is experiencing significant difficulty in performing the current environment and its primary brand, Olive Garden, is hampered by an asset base in need of investment. 

 

BWLD is a high conviction idea of ours on the short side.  We have been publishing actively on this name, most recently last week on the significance of the Darden 2QFY12 EPS miss and its significance for BWLD going forward.  There have been no sell ratings on the stock since 3Q09 when traditional chicken wing prices were up 51% and company same restaurant sales were running at 0.8% (3.1% for FY09).  Please contact us for a copy of our latest work on BWLD; given the current fundamentals, the sentiment score is not taking into account the pressure the company will see in 1Q12 as wing prices squeeze margins and limit the viability of promotions as a means to driving comps.  We are negative on BWLD for Trade, Trend and Tail durations on our Hedgeye Restaurants Alpha list.

 

In terms of short interest, the second table below shows that CAKE has seen a decline in short interest as dairy commodity prices have come down.  Short interest as a percentage of shares out in EAT has been coming down but the absolute level, at 11.9%, remains above the industry average.  GMCR is the standout in QSR, as sentiment continues to swing to the bearish side with the company’s ability to generate cash flow coming under scrutiny in recent weeks.

 

 

RESTAURANT SENTIMENT TAKEAWAYS - restaurant sentiment scorecard

 

RESTAURANT SENTIMENT TAKEAWAYS - short interest

 

 

Howard Penney

Managing Director

 

Rory Green

Analyst

 

 

 


Hedgeye Statistics

The total percentage of successful long and short trading signals since the inception of Real-Time Alerts in August of 2008.

  • LONG SIGNALS 80.64%
  • SHORT SIGNALS 78.57%
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