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THE HEDGEYE BREAKFAST MONITOR

MACRO NOTES

Commentary from CEO Keith McCullough

I’m on the road seeing clients in Minneapolis – this melt-down in the Japanese Yen remains our top new risk mgt topic:

  1. CHINA – got Growth Slowing yet? Interestingly, but not surprisingly, the Hang Seng (-1.1%) snapped its immediate-term TRADE line of 21,255 overnight, joining India’s Sensex as the 2nd major Asian Equity market to break a significant line of momentum.
  2. US Dollar – my intermediate-term TREND line of support of $79.33 is once again under assault by central planners who are absolutely hooked on the inflation policy born out of it (Obama’s % chance of winning the election just shot up to another new high of 60.5% in the Hedgeye Election Indicator (+200bps wk/wk) - stock market inflation is a big factor in our back-test).
  3. GOLD – rising UST yields is bad for Gold on the margin. Period. Gold’s intermediate-term TREND line of $1691 remains broken as 10yr yields remain comfortably above my intermediate-term TREND line of 2.03%. 

KM

SUBSECTOR PERFORMANCE

THE HBM: DPZ, SBUX, YUM, DNKN - subsectors

 

QUICK SERVICE

DPZ: Domino’s was downgraded to underperform at BofA.  The PT was lowered to $34 from $41.  BofA believes that the catalyst (special dividend) has passed.  This seems like a good move to us by BofA but we are waiting for further data points to gain conviction that DPZ is going to underperform.

DPZ: Domino’s announced the completion of its recapitalization yesterday, along with a special dividend of $3 per share. 

SBUX: Starbucks was reiterated Buy at UBS and the PT was hiked to $61 from $52.

SBUX: Starbucks has opened the first Evolution Fresh-branded stores in Washington State. 

YUM: Yum Brands was initiated Outperform at Oppenheimer with a PT of $82.

YUM: Yum Brands’ KFC South Africa division is doubling stores in its delivery stable by the end of this year.

DNKN: Dunkin’ Brands is projecting comparable-store sales at its U.S. Dunkin’ Donuts chain will grow 6.7% to 7% for 1Q12.  We still believe that the company needs to disclose its backlog of new units.  The company’s future profitability is far more levered to new unit openings than comps and our contention, going on the information we have, is that the backlog is declining and not growing.

NOTABLE PERFORMANCE ON ACCELERATING VOLUME:

DPZ: Domino’s gained 3.4% on accelerating volume yesterday on news of the completion of its refinancing and special dividend announcements.

DNKN: Dunkin’ Brands declined -1.3% on accelerating volume.

CBOU: Caribou declined -3.9% on accelerating volume.

CASUAL DINING

NOTABLE PERFORMANCE ON ACCELERATING VOLUME:

RUTH: Ruth’s Chris gained 3.4% on accelerating volume.

THE HBM: DPZ, SBUX, YUM, DNKN - stocks

Howard Penney

Managing Director

Rory Green

Analyst