THE HBM: GMCR, PNRA, SONC, BAGL, DPZ, KKD, MCD, CAKE, RUTH, BJRI, BWLD

THE HEDGEYE BREAKFAST MENU


MACRO

 

MBA MORTGAGE APPLICATIONS SURVEY – With the yield on the 10-year U.S. government bond is hovering around 1.87%, the yields are translating to lower mortgage interest rates for refinancing and purchasing homes. The contract rate for 30-year fixed-rate conforming mortgages finished at 4.06%, down 5 basis points from its week ago level, and down 2 basis points from four weeks ago.  The mortgage applications composite index surged 23.1% in the week ending January 13, 2012, with big gains in both the purchase and refinance indices.

 

THE HBM: GMCR, PNRA, SONC, BAGL, DPZ, KKD, MCD, CAKE, RUTH, BJRI, BWLD - mba mortgage apps

 

 

ICSC SALES TRENDS - ICSC Research anticipates January comparable-store sales will grow by 2% to 3% for the month compared with a hefty 4.7% pace in January 2011.  For last week, the ICSC chain store sales index remained weak, with sales reduced by warm weather, but supported bygift car redemption.  The index gained only 0.1% following the prior week’s record 5.4% decline. Year-over-year growth also recovered only a small portion of its decline, rising from 2.8% to 3%.

 

MACRO COMMENTS FROM OUR CEO - Top 3 (most read) story on Bloomberg this morn is the World Bank cutting its US and Global GDP estimates – thanks for coming out guys:

  1. GROWTH – I hosted a dinner w/ 10 PMs at Patroon last night and it was clear that the most contrarian call I have right now is the opposite of the call I was making at the same dinner 12 months ago – I think US Growth estimates/expectations are too low for 2012. World Bank cutting US growth to 2.2% for 2012 (down from 3%) when  they should be raising estimates from 1.5% > 2.2%.
  2. GERMANY – both German Bunds and German stocks are flat out ripping at this pt of 2012. With the DAX now up +8.2% already for the YTD and 3.4B in 2yr notes coming in at 0.17%, the yield on Bunds is now lower than USTs and return on DAX for YTD higher than the SP500. A move > 6502 in the DAX (its long-term TAIL) could make this move a much bigger one. Germany likes a lower Euro.
  3. SENTIMENT – plenty are still frozen by this melt-up. Being net short is a train wreck position for 2012 YTD and being really long everything that’s really working means you had to buy it when it was getting clocked NOV/DEC. Beta chasing remains reality in the career risk mgt exercise; VIX 22.20 is a bearish TREND; and the II Sentiment survey is leaning too bullish at 2000 bps wide.

 

Something for everyone out there, which is why I think this US stock market’s range remains very trade-able w/ a bullish bias provided that my long-term TAIL of 1267 holds.

 

 

SUB-SECTOR PERFORMANCE


THE HBM: GMCR, PNRA, SONC, BAGL, DPZ, KKD, MCD, CAKE, RUTH, BJRI, BWLD - subsector fbr

 

 

QUICK SERVICE


NOTABLE PERFORMANCE ON ACCELERATING VOLUME:

 

GMCR – got a big boost from some positive comments and scanner data

 

PNRA – I suspect PNRA continues to benefit from falling wheat prices and strong sales trends

 

SONC – After three long, painful years SONC might be bottoming.  I spent a lot of time at ICR trying to find out what the catalyst could be and walked away empty handed.  The set up for the long side is looking better, with valuation and sentiment both positive. The overriding negative is the strength of McDonalds and its current sales trends.

 

BAGL – New breakfast items or is it that wheat is in a bearish formation?

 

DPZ – After being up 90% over the past year its was going to be hard for DPZ to say enough yesterday to keep the momentum going. 

 

KKD – Despite yesterdays performance KKD has outperformed the S&P 500 by 360bps YTD.

 

OTHER QSR NEWS

 

MUSINGS FROM THE RESTAURANT FINANCE MONITOR – Where Do Fast Casual Customers Come From?  “During his presentation at the ICR XChange investors' conference last week, Smashburger CEO Dave Prokupek discussed the results of a survey the burger chain did of its customers—specifically, where they would have gone had they not gone to Smashburger. The results were revealing.  A few of Smashburger's customers, 17 percent, said they would have gone to a fast-food restaurant, while 32 percent said they would have gone to a casual-dining concept. This proves that casual dining chains are indeed more likely to lose customers to a fast-casual restaurant. More interesting was this: more than half, 51 percent, said they would have gone to another fast-casual restaurant, such as a burrito chain or a bakery-cafe concept.”

 

MCD has increased the price of some products in China by 0.50 to 2 yuan starting Jan. 12

 

 

FULL SERVICE

 

NOTABLE PERFORMANCE ON ACCELERATING VOLUME:

 

CAKE – The ICSC sales trends remain weak and CAKE has a 0.8 positive correlation to that data set.

 

RUTH – continues very strong volume for a name with limited liquidity

 

For the second day in a row these two names are highlighted on the down side.  So far in 2012 BWLD and BJRI and the two worst performing stocks in the FSR space.

 

BJRI – Continues to struggle following the ICR performance

 

BWLD – Despite the whispers of strong top line trends in 4Q, this is out favorite short for 2012

 

 

OTHER FSR NEWS

 

DIN - A lawsuit challenging Applebee’s tip credit policies for servers and bartenders will go to trial later this year after the U.S. Supreme Court on Tuesday declined to hear an attempt to stop the case.  The Supreme Court’s move leaves intact a lower court’s ruling that will allow the Applebee’s tip-credit case to proceed to trial in September - NRN

 

THE HBM: GMCR, PNRA, SONC, BAGL, DPZ, KKD, MCD, CAKE, RUTH, BJRI, BWLD - stocks

 

 

Howard Penney

Managing Director

            

 

Rory Green

Analyst


Did the US Economy Just “Collapse”? "Worst Personal Spending Since 2009"?

This is a brief note written by Hedgeye U.S. Macro analyst Christian Drake on 4/28 dispelling media reporting that “US GDP collapses to 0.7%, the lowest number in three years with the worst personal spending since 2009.”

read more

7 Tweets Summing Up What You Need to Know About Today's GDP Report

"There's a tremendous opportunity to educate people in our profession on how GDP is stated and projected," Hedgeye CEO Keith McCullough wrote today. Here's everything you need to know about today's GDP report.

read more

Cartoon of the Day: Crash Test Bear

In the past six months, U.S. stock indices are up between +12% and +18%.

read more

GOLD: A Deep Dive on What’s Next with a Top Commodities Strategist

“If you saved in gold over the past 20 to 25 years rather than any currency anywhere in the world, gold has outperformed all these currencies,” says Stefan Wieler, Vice President of Goldmoney in this edition of Real Conversations.

read more

Exact Sciences Up +24% This Week... What's Next? | $EXAS

We remain long Exact Sciences in the Hedgeye Healthcare Position Monitor.

read more

Inside the Atlanta Fed's Flawed GDP Tracker

"The Atlanta Fed’s GDPNowcast model, while useful at amalgamating investor consensus on one singular GDP estimate for any given quarter, is certainly not the end-all-be-all of forecasting U.S. GDP," writes Hedgeye Senior Macro analyst Darius Dale.

read more

Cartoon of the Day: Acrophobia

"Most people who are making a ton of money right now are focused on growth companies seeing accelerations," Hedgeye CEO Keith McCullough wrote in today's Early Look. "That’s what happens in Quad 1."

read more

People's Bank of China Spins China’s Bad-Loan Data

PBoC Deputy Governor Yi says China's non-performing loan problem has “pretty much stabilized." "Yi is spinning. China’s bad-debt problem remains serious," write Benn Steil and Emma Smith, Council on Foreign Relations.

read more

UnderArmour: 'I Am Much More Bearish Than I Was 3 Hours Ago'

“The consumer has a short memory.” Yes, Plank actually said this," writes Hedgeye Retail analyst Brian McGough. "Last time I heard such arrogance was Ron Johnson."

read more

Buffalo Wild Wings: Complacency & Lack of Leadership (by Howard Penney)

"Buffalo Wild Wings has been plagued by complacency and a continued lack of adequate leadership," writes Hedgeye Restaurants analyst Howard Penney.

read more

Todd Jordan on Las Vegas Sands Earnings

"The quarter actually beat lowered expectations. Overall, the mass segment performed well although base mass lagging is a concern," writes Hedgeye Gaming, Lodging & Leisure analyst Todd Jordan on Las Vegas Sands.

read more

An Update on Defense Spending by Lt. Gen Emo Gardner

"Congress' FY17 omnibus appropriation will fully fund the Pentagon's original budget request plus $15B of its $30B supplemental request," writes Hedgeye Potomac Defense Policy analyst Lt. Gen Emerson "Emo" Gardner USMC Ret.

read more