TRADE VS. TREND - A LOOK AT TXRH, DRI AND WEN

The multi-factor approach:

TXRH—TXRH shaping up bullish; needs to hold 7.29

DRI—DRI healthy on a pull back, looking for 27.22

WEN—WEN looks strong, repo at 4.40

The fundamentals:

TXRH—I have to revisit this story as I have tended to have a negative bias toward the name in the past. The company screened positively relative to its competitors from both a balance sheet and regional store base exposure to current consumer challenges (gas prices, unemployment and housing market weakness) perspective. Please refer to my post from yesterday titled “FSR – Matrix Exposure” for more details.

DRI—I continue to think that DRI looks like one of the stronger FSR players with a strong balance sheet and proven concepts. Street estimates remain low even after the company provided significantly lower and more achievable FY09 EPS guidance. DRI’s more cautious guidance now assumes that same-store sales at the Olive Garden, Red Lobster and LongHorn Steakhouse will decelerate somewhat in the back half of the year, but Obama’s planned fiscal stimulus plans should provide some support to numbers. DRI also screened positively on the FSR Matrix.

WEN—WEN is in a strong position to right size the ship. We believe the company is on the right track with its new value initiative and will post positive MSD same-store sales in fiscal 2Q09.

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