We continue to be of the view the Fed’s decision to set the stage for monetary tightening throughout 2015 seems incredibly politicized (i.e. raising rates for the sake of raising rates), rather than "data dependent". The preponderance of the data remains unsupportive, at best, calling into question the Fed’s increasingly likely desire to acquiesce to consensus expectations with a rate hike in September [insert “circular reference warning” here].
Click chart to enlarge.
In the face of these confounding dynamics, we will take this opportunity to reiterate our bearish bias on all things reflation (commodities, energy stocks, materials stocks and emerging market capital and currency markets in particular), as well as our bullish bias on Treasury bonds, utility stocks and REITs as yields continue to fall amid declining inflation expectations.
McDonald’s (MCD) is on the Hedgeye Restaurants Best Ideas list as a LONG.
Over the weekend we tried out the Create Your Taste experience at the newly remodeled McDonald’s location in Midtown East on the corner of 58th street and 3rd Ave. Walking into the newly remodeled MCD we were greeted by the brand new self-order kiosks with attentive staff there to assist you. Customers were very interested in using the kiosks, and everyone using them seemed to be having an easy time with it.
The whole process from creating your own burger to getting your food was simple and seamless. The self-order kiosk is easy to follow, you can order from the entire menu and pay from the kiosk. We decided to build a custom burger, in which you scroll through different screens selecting from a wide variety of cheeses and toppings. I must note however that they were out of a select number of topping items, as they are working out the kinks since just starting the Create Your Taste two weeks ago. After paying you take an electronic GPS enabled disk to your table so that the server can locate you within the restaurant. The ordering process was a pleasant experience and I would say will lead to increased checks as it is very simple to just click on additions rather than staring at the big board at the main register. As you can see from our receipt above, the total came to $10.88 definitely not the average check that a MCD customer is used to.
As we ordered we sprung up a conversation with a couple of staff members to get a read on how the staff likes the new system. The two people we talked to had overwhelming positive reviews of how the kiosks increase efficiency in the restaurant, specifically the kitchen, and allow for orders to be entered quicker. When asked specifically about the Create Your Taste, they said they love the concept and haven’t experience any major difficulties with it.
It was time to head to our table, we found a comfortable spot upstairs kind of in the corner to test out the GPS location ability on the disk we picked up at the kiosk. The server found us with no problem, total time from payment to food on the table was about 9 minutes, which is right in the middle of their 8-10 minute range. Although they didn’t fill up our drink as they said they would, everything else was presented very well. The food was still warm and everything tasted good.
For it being only two weeks into the process we were very impressed by the efficiency and mastery the staff is already displaying. We plan to head back to the same McDonalds location in the next month and check on their progress.
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Our iconoclast Consumer Staples and Restaurants Sector Head Howard Penney is making another stock call worth paying attention to. Last week, he added Snyder's-Lance, Inc. (LNCE) to his Top Long Idea list. Penney will be presenting his team’s deep-dive, granular Black Book this Wednesday August 19th at 11am ET.
A leader in the snacking category, innovation is a key source of growth particularly across ‘better for you’ snacking. Coming off a 3-year investment cycle to upgrade manufacturing capabilities and infrastructure, the company is now ramping its marketing spend to drive greater awareness and is lapping the divestiture of its private label business.
Our team sees 25%+ upside in the name.
*If you would like access to Penney’s institutional call this Wednesday please email firstname.lastname@example.org.
On today’s edition of The Macro Show, Hedgeye Director of Research (and native Canadian) Daryl “Big Alberta” Jones discusses three key drivers behind the continued underperformance of the Canadian Dollar.
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The Nikkei rallied +0.5% overnight (after holding @Hedgeye support) on the strength of a better-than-expected 2Q GDP report. The headline figure came in 20bps above consensus expectations of a -1.8% QoQ annualized decline, while the YoY rate of change accelerated to +0.7% from an upwardly revised -0.8% in 1Q.
Japan remains our favorite international equity allocation. It continues to outperform, down -0.9% WoW versus:
- -3.1% drop for the EuroStoxx 600 Index,
- -5.1% plunge in the DAX, a -4.2% fall in the CAC,
- -2.9% drop in the FTSE 100,
- -2.9% drop in the Hang Seng and
- -2.1% decline in the KOSPI.
Japan continues to outperform international peers from a fundamental perspective as well: underlying dividend growth in 2Q was up +16.8% in Japan vs. only +10% and +8.6% in the U.S. and Europe, respectively.
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