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risk manager jeff
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I'm not really a Risk Manager, but I play one in real life
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The Yuppie Pig
  • A Sector Short - Restaurants 0 comments
    Nov 2, 2009 1:48 AM | about stocks: CMG, PNRA, EAT, CAKE, RT, DRI

    A Sector Short - Restaurants

    One sector I've been watching over the past few months is the restaurant sector. I'll quickly bullet the highlights that I see as reasons to be bearish on this sector.
    • Generally poor reactions to earnings lately.
    • It seems like only PNRA (Panera Bread) has generated a favorable response, and is the last General in the sector standing. CMG (Chipotle - the other General) failed to inspire, and I believe its growth rate is in question, which is going to put serious downside pressure on the stock despite its good fundamentals. Longer term, I still like this stock. But not this quarter!
    • Unlike retailers, much of the restaurant business is domestic and levered to the consumer. As long as jobs are continually lost, this sector is going to suffer. I'll note that I don't consider MCD (McDonalds) as part of this sector, as its more of a recessionary stock, in my opinion.
    • Commodity inflation is back. Two quarters ago, this sector saw huge year over year declines in commodity prices. Those easy compares are over, and in fact, have been rising recently - although the agricultural sector has lagged somewhat. Gasoline rising, is again, going to pressure the sector.
    • Terrible charts! If the market indeed, is rolling over here, there is very little support in these stocks! Downward volume has generally been decreasing (excluding the Generals) and there have been some major selling volume spikes.

    Disclosure - Long MCD in retirement account; No other positions
    Stocks: CMG, PNRA, EAT, CAKE, RT, DRI
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