WEN – THE CURRENT PAIN TRADE

As highlighted in the two charts below, WEN short interest has risen from 7.9% at the end of 1Q13 to 13.97% today.  In addition to the high short interest, 19.0% of analysts currently rate WEN a Sell compared to 23.8% of analysts that rate stock a Buy.

 

We were previously of the view that the run in WEN was over and the stock was likely “to take a breather,” as its price performance was largely driven by multiple expansion rather than earnings revisions.  Admittedly, there are a lot of names in the restaurant industry currently trading with stretched valuations.  However, our opinion on Wendy’s is changing as the new Pretzel Bacon Cheeseburger appears to be exceeding expectations.  Since the July 4th launch, we are hearing that same-store sales are running well into the double digits thus far.

 

How much of the recent spike in the stock is due to short covering rather than new buyers remains unclear.  That being said, at 13.97% short interest, we anticipate more short covering and potentially some upgrades coming out within the next few weeks.

 

The recent success of Wendy’s new product launch gives us more conviction that MCD continues to struggle amidst an increasingly competitive environment.

 

WEN – THE CURRENT PAIN TRADE - WEN SI2

 

WEN – THE CURRENT PAIN TRADE - WEN RATE

 

 

Howard Penney

Managing Director

 


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

Amazon's New 'Big Idea': Ignore It At Your Own Peril

"We all see another ‘big idea’ out of Amazon (or the press making one up) just about every day," writes Retail Sector Head Brian McGough. "But whatever you do, DON’T ignore this one!"

read more