THE HBM: WEN, SBUX, YUM

THE HEDGEYE BREAKFAST MONITOR

MACRO NOTES

Commodities

The world is running out of time to make sure there is enough food, water and energy to meet the needs of a rapidly growing population and to avoid sending up to 3 billion people into poverty, a U.N. report warned on Monday. As the world's population looks set to grow to nearly 9 billion by 2040 from 7 billion now, and the number of middle-class consumers increases by 3 billion over the next 20 years, the demand for resources will rise exponentially. Even by 2030, the world will need at least 50 percent more food, 45 percent more energy and 30 percent more water, according to U.N. estimates, at a time when a changing environment is creating new limits to supply. – Cattle Network

 

Comments from CEO Keith McCullough

Everything has a time and a price – good spot to buy on yesterday’s lows; don’t chase into today’s month-end:

  1. GERMANY - Contrast of The Day: Italy's unemployment rate hits an 8yr high of 8.9% as Germany's hits 20yr low of 6.7% - the Germans are absolutely killing it right now – gaining big political power, seeing a +10.2% YTD stock market move, and unemployment fall #winning
  2. COMMODITIES – anyone long inflation has to be right fired up again this morning (I am – bought Energy yesterday); the Bernank Tax is obviously very bad for the country/economy, but great for commodity longs – Gold and Copper have gone vertical since the FOMC statement, up +11.4% and +12.5% for JAN respectively!
  3. MONTH-END – you know it, I know it – it is what it is. Today is the day where anyone can suspend disbelief that the best JAN for stocks since 1997 is going to straight line as what happens for the rest of the year. From an immediate-term TRADE overbought perspective, this looks a lot like FEB 2011 – lower long-term highs right as Growth Expectations start slowing.

Treasuries agree w/ me on that last part. 10 and 30yr collapsing again to 1.85% and 3.01% respectively – both remain in a Bearish Formation as US policies to inflate have funds flowing to US Treasuries instead of US Stocks.

 

SUBSECTOR PERFORMANCE

THE HBM: WEN, SBUX, YUM - subsector

 

QUICK SERVICE

WEN: Wendy’s held its annual Analyst Day in New York City yesterday.  As we wrote in our note, published last night, at least $3.7 billion of spending is needed to carry out the remodeling program, according to the company’s figures.

WEN: Wendy’s was reiterated “Sell” by Goldman after the Analyst Day.  The firm feels that “resources were lacking and that there is still a risk to guidance.”

SBUX: Starbucks plans to raise prices of some espresso-based beverages and fresh-brewed coffee products by 1 Yuan to 2 Yuan in China.

SBUX: Starbucks has officially backed gay marriage, according to media reports.  Starbucks EVP Kalen Holmes expressed the company’s support for legislation in Washington State recognizing marriage equality for same-sex couples, saying that the legislation is “core to who we are and what we value as a company.”

YUM: Pizza Hut expects to surpass 2 million pizzas sold on Super Bowl Sunday.

 

NOTABLE PERFORMANCE ON ACCELERATING VOLUME:

PNRA: Steps up expansion in CDA – reporting EPS on 2/7 AMC

YUM: 2nd day of strong volume – reporting EPS on 2/6 AMC

GMCR: 2nd day of strong volume – reporting EPS 2/1 AMC

SBUX: Tata surged 10% on JV with SBUX

WEN: See my note from yesterday – my outlook for WEN has diminished


CASUAL DINING


KONA: Kona Grill named Berke Bakay president and CEO.  Bakay is the investment manager to BBS Capital Fund, Kona Grill’s largest shareholder (15.2% stake).

NOTABLE PERFORMANCE ON ACCELERATING VOLUME:


CHUX: Trading well heading into EPS – reporting 2/7 BMO

BBRG: Another good day: up 12% over the past month

THE HBM: WEN, SBUX, YUM - stocks

Howard Penney

Managing Director

Rory Green

Analyst