Luke’s Fave Consumer Spending Sector
RESTAURANTS
Given news of the Trump Birthday Ceasefire with Iran (not that Israel will listen), for now, markets are bouncing with gold as oil falls and consumer stocks are popping off the bottom.
Here is Contributor Luke Tao’s LaDucTrading posted analysis on his fave consumer spending stock picks in restauarants he posted last week.
For some, these would be considered value plays to offset the AI mania. For others, a nice sector rotation theme for bottom-fishing stock picks - or “sell the rumor of consumer spending slow down, buy the news“. Either way, they look good this morning on falling oil.
I will review all of these Monday in our live trading room; and as always, you can reach out to @Luke Tao and @archnakj every day in our live-huddle daily sessions!
Luke Tao for LaDucTrading
As you guys know, I’m really big into restaurant stocks lately as the war winds down and with it crude and gasoline prices - added together these will function as a tax CUT on consumers and lead to increased household budgets for discretionary spending! I used to cover the sector for my team at Blackrock so consumer has always been where I was very comfortable, and I see some opportunities here that I have not seen in YEARS. @Samantha LaDuc
We nailed $TXRH. We (would have) nailed $CBRL (if i didn’t paper hand on hantavirus fears) but I understand some of you held and caught that 40% move on earnings.
A recovering consumer is not the consensus bet, nor is there much evidence to suggest that it is happening right now. And yes, GLP fears have SMOKED the sector. But the stocks always recover before the sector does, and funds have been shorting discretionary AND staples as a source of funding for long AI trades. Therefore, long consumer should have very little sensitivity to the indices should they begin to come back in. Unlike say hotels, restaurants have been getting slaughtered for months if not years, but as of late restaurant names were already beginning to make recoveries off the bottom, and we have timed many of these VERY well. I remain long in $KRUS $WING $JACK so i’ll talk about those first then the others
JACK is beyond mispriced. heavily shorted yet multiples are a total joke and chart is gorgeous. might be my favorite one here.
WING off the anchored VWAP has delivered long term returns of 400%, 400%, and 600% the last three times this level was revisited. need i say more? How about a rather interesting angle of a beef to chicken rotation thanks to screwworm?
KRUS - trump might have bought it by accident but I’m buying this here on purpose. gorgeous, well behaved chart.
DIN looks incredibly interesting here - ihop + applebee’s parent - i will likely be initiating a position here monday so i’ll talk about this more in live-huddle monday
PLAY looks PLAY-able here, albeit not for the long term with that balance sheet - 26% shorted so squeeze potential
BLMN is further along in its recovery story, but it’s still very cheap at 8 forward earnings.
CMG - I’m less certain this one is done going down entirely and also not confident in the trajectory of its recovery, but if you sniped this under $30 like @archnakj did thats a fantastic buy point. I’d add time here
CHA - I alerted this one at $11, now $12.16. Recovering nicely
PZZA - It’s trying. This one has buyout potential, i believe an offer was made at 47 but not sure if the Qataris are still in
SG - Sweetgreen was the first one to really put the sector back on my map during it’s first breakout, and now it’s just round tripped its second one but the resistance support flip is complete and headed higher again. Ultimately I don’t love this setup as much but their recovery has kind of led many of the other names higher so definitely a bellweather to watch. I also don’t entirely trust the recovery of this particular consumer segment
MCD - it’s held where it needed to, but there are better setups out there. Less potential here, but likely higher from here
BJRI - I’ll be honest I didn’t think this one was going to work as I’ve been monitoring this one for a while.... guess who just proved me wrong this week. WOWZA! The BJ Restaurant’s (separate from BJ wholesale whose name i’ll never utter ever again) move is what I’m targetting for all of my plays.
BH - Biglari chart is amazing but it’s been a strong move already, and the corporate structure here is a total mess as they also own an oil company and Maxim magazine (don’t ask)
FWRG - Florida diner chain. double bottom in play here, likely done going down here, very strong week.
DPZ - Pain might not be over, avoid.
WEN - this has been tried many times, it has never once worked. it will work at some point but chart remains woeful
LOCO - gorgeous cup and handle formation for el pollo loco. decent chicken
SBUX - old chipotle ceo is doing wonders for the starbucks turnaround, has been an amazing recovery since October but limited opportunity here if not already in.
BROS - @archnakj nailed this Dutch Bros play, absolutely amazing recovery play here and full breakout. I’d rotate elsewhere if not already in, but congrats to those already in.
TXRH - You guys know i have a soft spot for this one but the screwworm thing affects certain tickers more than others, still like this name but sadly better opportunities elsewhere right now.
SHAK - I absolutely love where this bounced, because it kind of had to. Last week would have been a great entry but this recovery is likely going to take a while.
CAKE - I can’t recommend this here at all time highs but the execution on this name has been FLAWLESS and you’d never know we are in a k shaped economy judging by this stock’s performance. Had to shout out the best in business here.
CAVA - Some charts you can just tell that a lot of smart money has been accumulating. I think a lot of accumulation happened here and in the sector overall this week. 71 last week to 91 now is a pretty serious move.
EAT - Brinker has delivered, very strong chart here I like this to 170 on strength where it likely cools off. Prefer other charts with better risk reward
YUM - Nothing too exciting here, better setups elsewhere than this KFC Taco Bell parent.
DRI - Another good setup with a STRONG weekly. Again, more interested in catching the next weekly candle to look like this rather
QSR - Starting to notice all the fast casuals got the same weekly candle here - this only gives me further confidence in this rotation. Keep em coming!
