The table below lists our current Investment Ideas as well as our Watch List – a list of potential ideas that we are in the process of evaluating. We intend to update this table regularly and will provide detail on any material changes.
EAT – We're pulling Brinker from our long list. The stock has acted well for us over the past year, but the departure of CFO Guy Constant, declining traffic trends and rising food costs are beginning to concern us.
MCD – We’re relegating McDonald’s to the short watch list. We removed it from our Best Ideas list back in mid-February amid concerns of a potential financial engineering event. It could be through refranchising or a leverage event, we’re not quite sure, but we don’t want to be in the way. We still believe the McDonald’s business is in secular decline, but there are several reasons, including easy comparisons and an attractive dividend, that give us reason to believe the stock has support.
BWLD – We’re relegating Buffalo Wild Wings to the short watch list. While we believe the stock is fully valued, we see very few short-term catalysts that suggest near-term downside. Declining new unit sales performance, ROIIC, and CFFO/Net Income are three metrics that make us bearish, but we believe the company has enough near-term drivers to support the stock.
04/14/14 Monday Mashup: DRI Comes Under Fire
04/14/14 The Casual Dining Dilemma
04/15/14 Investment Ideas: Longs
04/16/14 Investment Ideas: Shorts
04/18/14 CMG: Building Market Share
Events This Week
04/22/14 MCD earnings call 11:00am EST
04/23/14 YUM earnings call 9:15am EST
04/23/14 EAT earnings call 10:00am EST
04/23/14 CAKE earnings call 5:00pm EST
04/24/14 DNKN earnings call 8:00am EST
04/24/14 DAVE earnings call 11:00am EST
04/24/14 SBUX earnings call 5:00pm EST
Chart of the Day
WEN trades at a discount to BKW and YUM and in-line with a market-saturated MCD despite having significantly more runway to improve revenues, margins and returns. Despite strong performance in 2013, Wendy’s continues to be an out of favor name giving value-oriented investors a compelling opportunity. We expect to see meaningful multiple expansion as Wendy’s continues to reimage its restaurants, rebalance its franchise mix and generate stronger returns.
Recent News Flow
Monday, April 14
- PLKI announced the resignation of CFO Melville Hope, who plans to depart in May to pursue opportunities. The company has begun a search for his successor.
Tuesday, April 15
- SBUX announced the relocation of its European headquarters from the Netherlands to the UK
- SONC upgraded to buy at Sterne Agee with a $25 PT
Wednesday, April 16
- TAST announced it will hold a secondary stock offering to raise $60 million. The proceeds are expected to be primarily used to accelerate the 20/20 restaurant reimage program and acquire franchised restaurants.
Thursday, April 17
- CMG reported a strong quarter with same-store sales up 13.4%, primarily driven by traffic. Despite this, the company is seeing margin compression from rising food costs and announced plans to take mid-single digit price beginning at the end of 2Q14. Chipotle continues to take market share in an increasingly competitive environment.
XLY Quantitative Setup
The XLY (+1.0%) underperformed the SPX (+1.7%) last week, as both casual dining and quick service stocks, in aggregate, underperformed the broader XLY benchmark. From a quantitative setup, the sector remains bearish on an intermediate-term TREND duration.
Casual Dining Restaurants
Quick Service Restaurants