Short interest data released yesterday shows that for the most recent two-week period, there were three significant changes in our sentiment scorecard: CBRL, JACK, and CAKE.


Here is our most recent iteration of the Hedgeye Restaurants Sentiment Scorecard, updated for yesterday’s release.  Our call-outs are below.


RESTAURANT SENTIMENT: CBRL, CAKE, JACK - hedgeye sentiment scorecard


Sentiment Scorecard Callouts


CBRL: Cracker Barrel has been one of the best performing casual dining names over one week, one month, six month, and one year durations.  The stock’s outperformance versus the S&P 500 did not materialize until late April as investors gained conviction that gasoline prices were rolling over.  Investor sentiment on the stock has changed dramatically; as the sell-side has upgraded the name, the buy-side has covered shorts, bringing short interest from 10.1% 14 weeks ago to 6.9% as of the most recent period.  This is a call we missed but should have called; we have done so previously on the short side when gas prices were turning higher so it hurts to miss this one. 





CAKE:  Investors have been turning increasingly bearish on The Cheesecake Factory over the most recent period (settlement date 5/31).  Cheesecake Factory comps tend to correlate quite highly with the ISCS Chain Store Sales Index (YoY change) and that index has been declining since mid-May.  This would not fully explain the drop off in sentiment, but we will certainly be revisiting it as we near the company releasing guidance.  Last quarter, it helped us to find a more-accurate-than-consensus estimate for CAKE’s comps.  We will be publishing a comprehensive note on CAKE ahead of earnings on 7/20.


JACK: Jack in the Box continues to win over the bears but we think that there is sufficient skepticism on the Qdoba growth story that the stock still represents an attractive long-term investment under the current outlook.  From a “sum of the parts” perspective, we see plenty of upside (roughly 45%) over the next three years.  We posted a note on May 8th outlining our positive thesis on Jack in the Box and, since then, the stock has gained 11% as the S&P 500 declined 3%.  The quantitative setup, courtesy of Hedgeye CEO Keith McCullough’s quantitative models, is below.




Howard Penney

Managing Director


Rory Green


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