MCD

Starbucks Reports Earnings, Coronavirus to Hurt China Sales

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Image Shown: How Starbucks Corporation views its competitive strengths. Image Source: Starbucks – December 2019 IR Presentation By Callum Turcan On January 28, Starbucks Corporation (SBUX) reported first-quarter earnings for its fiscal 2020 (period ended December 29, 2019) that modestly beat consensus expectations on the EPS front and matched consensus expectations for its revenues. Shares were broadly flat after-hours and traded down on the January 29 session. Overview Same-store sales in the US were up 6% while rising competitive pressures in China limited same-store sales growth to just 3% year-over-year. Luckin Coffee (LK) has been aggressively growing its store count in China, growing from ~625 stores in mid-2018 to 3,680 stores as of its third quarter earnings report for fiscal … Read more

Resetting Your Mental Model

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Image Source: affen ajlfe A version of this article was originally published on our website October 6, 2013. Having the right mental model and using the right information can be the reason why you win or lose in investing. “What is the definition of timeliness? Many believe it is getting information to investors as quickly as possible after an event, or updating something every single day or week for immaterial information. I believe in a different definition of timeliness. I believe timeliness is using all information available in a mosaic approach to accurately predict the event before it even happens. Take Kinder Morgan as the latest example. We were the only ones predicting what was going to happen before it did. To investors, … Read more

Yum! Brands Buys Habit Restaurants

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Image Shown: An overview of Yum! Brands Inc’s operations. Image Source: Yum! Brands Inc – Investor Fact Sheet By Callum Turcan On January 6, quick-service restaurant chain Yum! Brands Inc (YUM) (which owns the KFC, Pizza Hut, and Taco Bell brands) announced that it was acquiring fast causal burger joint Habit Restaurants Inc (HABT) for $14 per share in cash for a total cash consideration of $375 million. Habit Burger’s footprint includes ~265 restaurants in total across more than a dozen US states and China under its namesake brand, Habit Burger Grill, and please note roughly 90% of those locations are company-owned. While Habit Restaurants’ footprint is relatively small compared to Yum! Brands’ footprint of over 49,000 locations in more … Read more

Valuentum Exclusive Success Rates Trump Even the Best Quant Hedge Funds

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Image: President of Investment Research Brian Nelson, CFA By Brian Nelson, CFA A new book, “The Man Who Solved the Market,” hit bookshelves last year, and thus far it has been a hit. The text goes into the story of quant hedge fund Renaissance Technologies and its hedge fund, the Medallion Fund, which has put up mammoth returns since inception. Though the book focuses more on the life and times of founder Jim Simons and dedicated only a page or two to the fall of Long-Term Capital Management (LTCM), another quant fund that went belly-up during the late 1990s, it was nonetheless a thoroughly interesting and enjoyable read. But why I am bringing up one of the most successful quant … Read more

5 Things We Learned in 2019

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5 Things We Learned in 2019      “The further a society drifts from the truth, the more it will hate those that speak it.” — George Orwell By Brian Nelson, CFA    I’m looking at the beautiful Smoky Mountains in Tennessee as I’m writing this piece. I hope that you and yours are having a wonderful holiday season with family and friends. I wanted to share with you a few things that I think investors learned during 2019. Before I do, however, you’re probably wondering why I decided to lead in with this particular quote from Orwell. — — The quote, in some ways, is a reflection of how I think many approach truth in finance. Maybe they don’t … Read more

Cracker Barrel Doing Well Despite Industry Headwinds

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Image Source: 2019 Annual Shareholder Meeting, November 21. Although the restaurant business continues to face pressures, Cracker Barrel’s fundamentals have outperformed. By Brian Nelson, CFA The month of October was not kind to many in the restaurant business. While restaurant same-store sales advanced 0.06% in October, according to data from TDn2K, comparable traffic fell 3.1% during the month. While comp sales for the broader restaurant industry may remain positive through the remainder of 2019 thanks to pricing growth, the problem is that to-go and off-premise sales are hurting traffic. Here’s what TDn2K had to say about that: The erosion of guest counts remains unchanged, as restaurants rely on to-go and off-premise sales to fuel growth. Third-party delivery is playing a … Read more

McDonald’s Enters the Chicken Sandwich Wars

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Image Shown: Shares of McDonald’s Corporation have pulled back over the past couple of months after an epic run during most of 2019, which we view as the market recognizing shares of MCD had gotten way ahead of themselves. By Callum Turcan McDonald’s (MCD) is testing out a new crispy chicken sandwich offering in two US cities; Knoxville, Tennessee and Houston, Texas. This pilot project is expected to run through January 2020. While McDonald’s offers the ‘McChicken, its new chicken sandwich offering is far more substantial (the McChicken is to a chicken sandwich what the ‘McDouble’ is to a burger) and meant to compete with offerings from privately-held Chick-fil-A and Restaurant Brands International Inc’s (QSR) Popeyes Louisiana Kitchen. We still … Read more

Economic Commentary: Marks, Dalio, and the Discount Rate

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Image Source: Mike Cohen We sat down with the Valuentum team to discuss their latest thoughts on recent economic developments. To kick off the conversation, let’s start with the team’s views on the latest memo from Oaktree’s Howard Marks: Mysterious. For those that don’t know Howard, he is the Director and Co-Chairman of Oaktree, which managed about $122 billion in AUM, as of September 2019. The memo goes into depth on the reasons for negative interest rates, the impact of negative interest rates, and opines on whether the US will ever see negative interest rates. Then, we’ll go from there! Brian Nelson: The concept of negative interest rates is not merely academic, but they have far-reaching implications across the global … Read more

Our Reports on Stocks in the Restaurants – Fast Food & Coffee/Snacks Industry

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Structure of the Restaurants – Fast Food & Coffee/Snack Industry The restaurant industry has benefited from a long-term trend toward eating out, but the space has become increasingly more competitive as new concepts are introduced and successful chains expand. Not only are there pricing pressures and trade-down threats, but rising costs for commodities and labor have pressured profits. Barriers to entry are low, and many constituents have a difficult time differentiating themselves. We tend to like larger chains that benefit from scale advantages and international expansion opportunities, though niche franchises can be appealing. We’re neutral on the structure of the group. For our coverage of firms in the Restaurants – Fast Food & Coffee/Snack industry, please click here.

Economic Commentary: Robots, Value Trap, and Politics on the Markets

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Tickerized for stocks in the DIA. Valuentum sat down for the latest installment of its periodic economic commentary, and the team tackled a wide array of topics, from robots on Wall Street, to President of Investment Research Brian Nelson’s new book Value Trap, to political influence on the markets and boyond. Let’s set the stage with a prompt from a recent Bloomberg article, “The Master of Robots…Coming for Wall Street:” “The problem is, computer-powered strategies are struggling to live up to the hype, with a Eurekahedge index of AI hedge funds lagging peers in recent years. That spells opportunity for the likes of Lopez de Prado with his outfit True Positive Technologies — a dig at the erroneous conclusions derived … Read more