Shares of Zoës Kitchen (ZOES) have had a tough run since we added it to the long side of Investing Ideas this summer. While we've had more than our fair share of winners here, sometimes you have to acknowledge when it's time to move on.
The underperformance boils down to style factors. ZOES is a high beta, low cap name both of which are out of favor. According to Hedgeye CEO Keith McCullough, “I don’t want our individual subs wearing a small cap exposure into a recession, no matter how good the story is.” And, as he noted recently in the Early Look:
- High Beta Stocks lost another -8.9% week-over-week and are -17.6% in the last 6 months
- Small Cap Stocks lost another -6.9% week-over-week and are -17.3% in the last 6 months
ZOES is caught in this perfect storm.
Bottom Line: While our veteran Restaurants analyst Howard Penney remains very bullish on the long-term growth prospects of Zoës Kitchen, with the Russell 2000 currently in #Crash mode, the macro environment is turning a blind eye to the company at the moment.