What Jobless Claims Say About Recession (And Risk Of Significant Stock Market Selloff)

Takeaway: We're knocking on recession's door according to historical jobless claims data.

In the two charts below, Hedgeye Financials analyst Josh Steiner highlights how jobless claims data sub-330,000 is a harbinger of recession and hence significant stock market selloffs.


The first chart shows the last three cycles and the length of time jobless claims dropped below 330k before recession hit. The numbers are as follows: 24, 45, and 31 months (average: 33 months). With the current cycle in its 29th month below that level, we are


  • 5 months past the minimum
  • 4 months shy of the 33-month average
  • 16 months from the max

Chart #1

What Jobless Claims Say About Recession (And Risk Of Significant Stock Market Selloff) - zgogo



In the last cycle, the bottoming in jobless claims preceded a massive equity selloff.


What Jobless Claims Say About Recession (And Risk Of Significant Stock Market Selloff) - jobless stocks


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An Activist Can Do A Lot With Buffalo Wild Wings | $BWLD

Editor's Note: Shares of Buffalo Wild Wings were up 5.8% yesterday after it was announced that activist Marcato Capital Management had acquired a 5.1% stake in the company. In the institutional research note below, originally published on 6/13, Hedgeye Restaurants analysts Howard Penney and Shayne Laidlaw wrote that BWLD was "vulnerable to activism" and lay out the problems that have long plagued the company.


An Activist Can Do A Lot With Buffalo Wild Wings | $BWLD - bwld2


For the past two years, BWLD has underperformed the S&P 500 by 11% and is down 8% year-to-date.  There is a very strong possibility that FY2016 is going to be a disaster for BWLD when the company posts negative SSS for the first time in 9 years and the second year of disappointing earnings growth.  Although we remain very bearish on the Casual Dining industry overall, BWLD has a unique position within the industry to capitalize on their live TV offering, being a great place for people to gather and watch a game for three to four hours.


The recent decision for CFO, Mary Twinem to retire after a disastrous acquisition in 2015 suggests that the company has other issues to deal with.  From an outsiders perspective, this move could be a sign that the business may have been financially mismanaged over the past few years.  We highlight certain capital allocation concerns that could be improved to create significant shareholder value.  More recently, the company’s track record when it comes to projecting their performance has come into question. BWLD has missed SSS for 4 of the last 5 quarters; and missed EPS for the past 6 quarters.


We are confident that the BWLD brand is not dead, but the company has had some missteps that have led to underperformance in the business.  There is a lot an activist can do with a business like BWLD and in a slowing sales environment the chances of someone taking action could increase. 


An Activist Can Do A Lot With Buffalo Wild Wings | $BWLD - bwld


An Activist Can Do A Lot With Buffalo Wild Wings | $BWLD - CHART 2


Strategic missteps

  • Acquiring franchise stores increases business risk – BWLD went from 39.3% company-owned restaurants in 1Q12 to 50.7% company-owned in 1Q16.  Why in a slowing sales; lower return environment would the parent company want even greater exposure to the volatility in the business?

An Activist Can Do A Lot With Buffalo Wild Wings | $BWLD - CHARt 3


  • BWLD has used price aggressively to drive same-store sales for years, but was increasingly aggressive in FY2015. Closing out 2015 with +4% price is likely to have an impact on performance, and will continue to have an impact throughout 2016. 

An Activist Can Do A Lot With Buffalo Wild Wings | $BWLD - CHART 4


Distracted management

  • Management has diversified away from the core Buffalo Wild Wings brand, adding in R Taco and PizzaRev.
  • They have a minority interest in Pie Squared Holdings which is the operator and franchisor of PizzaRev a California based fast-casual pizza restaurant. In addition they own and operate PizzaRev restaurants in Minnesota.
  • In addition, BWLD has majority interest in Rusty Taco, Inc. the operator and franchisor of R Taco.
  • They currently franchise two (2) PizzaRev restaurants and four (4) R Taco, with six (6) franchised R Taco’s.
  • With the total number of Buffalo Wild Wings units standing at 1,190, these peripheral concepts merely serve as a pipe dream for growth, and more likely distract management from their core concept, which has plenty of issues in its own right.


Poor capital allocation

  • Excessive new unit growth - new unit returns (new unit productivity) are slowing as they increase their unit count into a slowing restaurant environment.
  • The company announced its first ever share repurchase authorization in November 2015. 
  • The company currently does not pay a dividend 
  • BWLD’s net debt / LTM EBITDA currently stands at 0.15x which is far below the industry norm, leaving them plenty of room to increase leverage and return some to shareholders.


The activist game plan for BWLD is clear cut and can create meaningful long term value for shareholders:

  • Focus On The Core

    • Remove the distraction of non-core brands.
    • Slow new unit growth 
    • Operations must be 100% focused on improving the performance of the Buffalo Wild Wings concept
  • Return Cash To Shareholders

    • BWLD can drive better shareholder returns through share repurchases and paying dividend.
    • With BWLD’s net debt / LTM EBITDA currently at 0.15x, they have ample room on the balance sheet to increase leverage and return cash to shareholders 
  • Refranchise Restaurants/Cut G&A

    • There is significant value from an operational perspective that can be gained by refranchising underperforming stores, especially from trimming corporate G&A
    • Asset sales will lead to incremental share repurchases
    • Improve the quality of the revenue stream to drive the multiple higher
  • This Board is Ripe For a Change

    • There are three people on the Board that have been there for 17+
    • The average age of the board is 63
    • Given the increasing role of technology in the industry and the company, nobody on the board has the relevant experience

Short Tokyo?

Takeaway: We still don't see signs of a rising sun anytime soon.

Heli-Ben IV ran out of fuel overnight – Yen ramped +1.5% to $104.23 and the Nikkei resumed its crash, closing down -1.4% to -21.6% from the Global Equity #Bubble high of 2015. Reiterating the short on Japanese Equities; fighting the BOJ continues to work as the #BeliefSystem continues to break-down.


Short Tokyo? - nikkei usdjpy


Editor's Note: The snippet above is from a note Hedgeye CEO Keith McCullough wrote for subscribers this morning. Click here to learn more.

Early Look

daily macro intelligence

Relied upon by big institutional and individual investors across the world, this granular morning newsletter distills the latest and most vital market developments and insures that you are always in the know.

Daily Market Data Dump: Tuesday

Takeaway: A closer look at global macro market developments.

Editor's Note: Below are complimentary charts highlighting global equity market developments, S&P 500 sector performance, volume on U.S. stock exchanges, rates and bond spreads, key currency crosses, and commodities. It's on the house. For more information on how Hedgeye can help you better understand the markets and economy (and stay ahead of consensus) check out our array of investing products




Daily Market Data Dump: Tuesday - equity markets 7 26


Daily Market Data Dump: Tuesday - sector performance 7 26


Daily Market Data Dump: Tuesday - volume 7 26


Daily Market Data Dump: Tuesday - currencies 7 26


Daily Market Data Dump: Tuesday - rates and spreads 7 26


Daily Market Data Dump: Tuesday - commodities 7 26

CHART OF THE DAY: Long 2010 Brunello Vs. Short $QQQ

Editor's Note: Below is a brief excerpt and chart from today's Early Look written by Hedgeye CEO Keith McCullough. Click here to learn more.


"... For those of us who have been investing in real estate, private companies, gold, platinum, wine, an NHL team, etc., that’s an easy question to answer. With Italian wines in particular, #EuropeImploding has provided for some fantastic buying opportunities this year.


If you want a primer on investing in IGW (Investment Grade Wines), the aforementioned quote comes from a great book that my wife Laura got me, titled Investing In Liquid Assets. As David Sokolin likes to say, “with wine, there’s no such thing as a losing investment”… if you’re underwater, you eventually win by drinking it! Long 2010 Brunello vs. Short QQQ."


CHART OF THE DAY: Long 2010 Brunello Vs. Short $QQQ - 07.26.16 chart

[From The Vault] Cartoon of the Day: Iceberg(s)

 [From The Vault] Cartoon of the Day: Iceberg(s) - Greek iceberg cartoon 06.30.2015 large

Our inimitable, in-house cartoonist Bob Rich is on a much-deserved summer vacation. While he kicks back and relaxes, we're going into the Hedgeye Vault and highlighting some of his best work. On that note, and given the resurgence of Europe’s ongoing, multifaceted issues, we bring you this audience favorite. Originally published in June 2015, it's just as fitting today as investors fret over Italian bank solvency and a host of other issues in Europe.

Daily Trading Ranges

20 Proprietary Risk Ranges

Daily Trading Ranges is designed to help you understand where you’re buying and selling within the risk range and help you make better sales at the top end of the range and purchases at the low end.