THE HBM: MCD, DRI, CBRL

THE HEDGEYE BREAKFAST MONITOR

 

HEDGEYE VIRTUAL PORTFOLIO POSITIONS

 

LONGS: EAT, JACK, SBUX

 

Comments: Keith closed out the PFCB position yesterday, based on quantitative factors.  We remain bullish on the intermediate term TREND from a fundamental perspective.

 

SHORTS: BWLD, DNKN, MCD

 

Comments: Keith shorted BWLD yesterday in the virtual portfolio.  We continue to like it on the short side.  20% COGS inflation after seeing zero margin flow-through in a much more benign cost environment last quarter is going to pose a problem.  At the recent Telsey Advisory Group presentation, nobody brought up commodity pressures. 

 

MACRO NOTES

 

Commentary from CEO Keith McCullough

 

Pick your leading indicator in Global Macro – most stopped going up in late Feb/early March:

  1. HANG SENG – Hong Kong did not like the Chinese demand message for March w/ Chinese Imports only running +5.3% y/y; HK traded down another -1.1% overnight, taking the Hang Seng’s correction to -6.1% since peaking Feb 29th
  2. DAX – from an employment and stability perspective, Germany is definitely a healthier economy than the USA’s right now and the correction in German stocks is 2x that of the SP500’s; down -0.9% to start the wk (down -6.2% from the YTD high established March 16th)
  3. COMMODITIES – Dollar up days crush commodities; evidently dollar down days don’t help them now either as “weakening demand” rolls off the tongues of most who’s business is global. The CRB index is in what we call a Bearish Formation. Not good. Brent Oil broke $124.23 TRADE line support.

Growth Slowing will matter until growth slows at a slower rate.

 

KM

 

 

SUBSECTOR PERFORMANCE

 

THE HBM: MCD, DRI, CBRL - subsector

 

QUICK SERVICE

 

MCD:  OpenSecrets.org has an interesting page on the McDonald’s Political Action Committee which details its spending by election cycle and also the party split per cycle of spending.  It shows that from 1998 through 2006, 84% of the Federal McDonald’s PAC was spent supporting Republicans.  In 2008, 70% of the PAC’s spend went to Republicans.  In 2010, the GOP and Democratic party received 52% and 47% of the PAC’s spend, respectively. 

 

MCD: MCD Japan’s March same-store sales gained 6% year-over-year.  March 2011 performance, of course, was greatly impacted by the earthquake and tsunami of March 11th, 2011.

 

 

NOTABLE PERFORMANCE ON ACCELERATING VOLUME:

 

CMG: Chipotle gained in a down tape yesterday.  Unit level returns remain strong as this growth story sustains itself longer than many have expected along the way.

 

MCD: McDonald’s gained in a down tape yesterday.

 

DOM.LN: Domino's UK & Ireland cannot catch a bid.  The stock is down 10% since reporting disappointing comps on 3/28.

 

 

CASUAL DINING

 

CBRL: Cracker Barrel adopted a new shareholder rights plan with a 20% triggering threshold and a qualifying offer exception.  The Board also declared a dividend distribution of one preferred share purchase right on each outstanding share of CBRL common stock.  The Board’s action, according to CEO Sandra Cochran, is “in response to Biglari Holdings’ continuing open-market acquisition program of CBRL shares”.

 

DRI: Darden is planning to create the world’s largest lobster farm in Malaysia, allowing it to sell the crustaceans in Asia and supply them to its chains such as Red Lobster.

 

NOTABLE PERFORMANCE ON ACCELERATING VOLUME:


RT: The market didn’t buy on the leg down.  Ruby Tuesday declined 4.1% on accelerating volume yesterday.

 

THE HBM: MCD, DRI, CBRL - stocks

 

 

Howard Penney

Managing Director

 

Rory Green

Analyst

 



Another French Revolution?

"Don't be complacent," writes Hedgeye Managing Director Neil Howe. "Tectonic shifts are underway in France. Is there the prospect of the new Sixth Republic? C'est vraiment possible."

read more

Cartoon of the Day: The Trend is Your Friend

"All of the key trending macro data suggests the U.S. economy is accelerating," Hedgeye CEO Keith McCullough says.

read more

A Sneak Peek At Hedgeye's 2017 GDP Estimates

Here's an inside look at our GDP estimates versus Wall Street consensus.

read more

Cartoon of the Day: Green Thumb

So far, 64 of 498 companies in the S&P 500 have reported aggregate sales and earnings growth of 6.1% and 16.8% respectively.

read more

Europe's Battles Against Apple, Google, Innovation & Jobs

"“I am very concerned the E.U. maintains a battle against the American giants while doing everything possible to sustain so-called national champions," writes economist Daniel Lacalle. "Attacking innovation doesn’t create jobs.”

read more

An Open Letter to Pandora Management...

"Please stop leaking information to the press," writes Hedgeye Internet & Media analyst Hesham Shaaban. "You are getting in your own way, and blowing up your shareholders in the process."

read more

A 'Toxic Cocktail' Brewing for A Best Idea Short

The first quarter earnings pre-announcement today is not the end of the story for Mednax (MD). Rising labor costs and slowing volume is a toxic cocktail...

read more

Energy Stocks: Time to Buy? Here's What You Need to Know

If you're heavily-invested in Energy stocks it's been a heck of a year. Energy is the worst-performing sector in the S&P 500 year-to-date and value investors are now hunting for bargains in the oil patch. Before you buy, here's what you need to know.

read more

McCullough: ‘My 1-Minute Summary of My Institutional Meetings in NYC Yesterday’

What are even some of the smartest investors in the world missing right now?

read more

Cartoon of the Day: Political Portfolio Positioning

Leave your politics out of your portfolio.

read more

Jim Rickards Answers the Hedgeye 21

Bestselling author Jim Rickards says if he could be any animal he’d be a T-Rex. He also loves bonds and hates equities. Check out all of his answers to the Hedgeye 21.

read more