Category: INO.com Contributors

2 Stocks to Play the Rebound in the Restaurant Sector

Posted on by Taylor Dart

It’s been a solid quarter thus far for the AdvisorShares Restaurant ETF (EATZ) and the restaurant index as a whole, with the ETF and the index up 9% and 17%, respectively, thus far in Q4, a significant outperformance vs. the S&P-500 (SPY).

This outperformance can be attributed to the fact that many restaurant stocks were priced very attractively heading into Q4 after a violent 18-month bear market and because gas prices have been trending lower and inflation looks to have peaked, which both benefit restaurant brands.

The reason? Restaurant food traffic is sensitive to gas prices which impact discretionary budgets, and food costs and labor costs have been rising for two years, pinching the margins of many restaurant brands.

Unfortunately, while some names like Restaurant Brands Intl (QSR) are sitting at 52-week highs, others have remained under pressure, and Jack In The Box (JACK) and Dine Brands (DIN) are two examples of names that haven’t participated much in the recent rally. Given that both are well-run and trading at attractive valuations, I believe both make solid buy-the-dip candidates.

Jack In The Box (JACK)

Jack In The Box is a small-cap stock in the restaurant sector, with two brands, including Jack In The Box and Del Taco, after completing the $585MM acquisition earlier this year.

Unfortunately, the stock has lost over $300MM in market cap since the deal closed in March, with this attributed to weaker restaurant-level margins at both brands of 16.2% and 15.9%, respectively (Jack In The Box/Del Taco). At Jack In The Box, this represented a 390 basis point decline year-over-year, impacted by higher food, labor, electricity, and paper costs.

In the company’s most recent quarter (fiscal Q4), it reported revenue of $402.8MM, up 45% year-over-year, but this was largely due to the new contribution from Del Taco that made the results look much better.

Meanwhile, on a same-store sales basis, same-store sales were up just 4% at Jack In The Box and 5.2% at Del Taco in fiscal Q4, suggesting meaningful traffic declines when factoring in double-digit pricing.

This is not the end of the world, and the rest of the industry is also seeing traffic declines, but it is a little disappointing, given that the quick-service and fast-casual brands have been outperforming casual dining.

Hence, I expected a little stronger results from Jack In The Box. Continue reading "2 Stocks to Play the Rebound in the Restaurant Sector" →

USDJPY: Reversal or Setback?

Posted on by Aibek Burabayev

Back in September, I shared with you my take on the USDJPY currency pair based on 360° view. A combination of fundamental factors and technical factors has supported the continued strength of the U.S. dollar relative to the Japanese yen.

However, the majority of readers predicted the opposite, as you can see in the screenshot below.

Poll Results

As the second largest vote played out the best, the USDJPY has soared more than six percent to reach a peak of ¥151.94. The previous time this level appeared on this chart was in the summer of distant 1990, two decades ago. That move was close to hit the CD=AB target at ¥152.89, however it has lost the momentum.

The pair has lost more than it gained in that call and there is a question, is that all or are we just in a large correction?

I prepared for you another bunch of visualizations below to answer that question.

Let’s start with the fundamentals first in the interest rate comparison below.

US vs JP Real Interest Rate

Source: TradingView

Continue reading "USDJPY: Reversal or Setback?" →

Electric Vehicle Exposure That's Not Tesla

Posted on by Matt Thalman

Just a few years ago, it seemed that electric vehicles were never going to "catch on," whether that was because of price, possible reliability issues, or, most importantly, range anxiety. (Range anxiety is the fear that the electric vehicle will not have enough battery to reach its destination or the next charging station, ultimately leaving the driver stranded.)

But, better, much better battery technology, vastly more vehicle and brand options for consumers to pick from, and exponentially more charging stations located all over the country, have changed consumers' minds about the electric car.

While a large number of new, start-up car manufacturers are developing only electric vehicles, one significant change we are seeing is that almost every major car manufacturer is already offering fully electric vehicles or plans to do so in the next few years.

This is nice because we can get our iconic-looking vehicles in electric form; think the Ford F150 pickup truck, the Jeep Grand Cherokee, or even the gas-guzzling Hummer!

Most people don't like change. Thus changing the way a vehicle looks and what powers it may have been some of the reasons consumers didn't rush to get an electric car a few years ago but are now more willing to do so.

Regardless of the reason or reasons why more people are purchasing electric vehicles, the fact is, it appears electric vehicles are not only here to stay but may be the only type of cars on the road in just a few decades. This major shift in how we move from one place to another can also be a massive windfall for your portfolio.

Even though some people may feel they missed the EV investment because they didn't buy Tesla 5 years ago, there are still plenty of opportunities out there that you can put money into today and reap the rewards for decades to come.

Let's take a look at a few Exchange Traded Funds that will expose you to not just car manufacturers in the EV space but also crucial materials and technologies that EVs need to operate.

The first two are ETFs that focus on the production of electric vehicles and the future of transportation. The KraneShares Electric Vehicles and Future Mobility Index ETF (KARS) and the Fidelity Electric Vehicles and Future Transportation ETF (FDRV) invest in essentially the same companies. Continue reading "Electric Vehicle Exposure That's Not Tesla" →

2 Gold Miners With Large Safety Margins

Posted on by Taylor Dart

It’s been a rollercoaster ride of a year for the Gold Miners Index (GDX), with the ETF starting the year up more than 15% and massively outperforming the major market averages, only to suffer a 48% decline over the next five months.

Since then, the GDX has returned to outperforming, and some of the best names, like i-80 Gold (IAUX), are now up more than 50% from their lows.

This extreme volatility is why it can be difficult to trade the Gold Miners Index successfully. The reason is that one must be ultra-patient when establishing new positions to avoid large drawdowns during the down cycle, but being too complacent at the lows can be costly as the index can turn on a dime when it does bottom.

Fortunately, while several of the best names are already off to the races and out of low-risk buy zones, a couple of stocks are still in the proverbial stable and trading at attractive valuations. In this update, we’ll look at two names that offer large safety margins.

Sandstorm Gold (SAND)

Sandstorm Gold (SAND) is a $ 1.6 billion precious metals royalty/streaming company.

It finances developers and producers in the gold and silver space, giving them capital upfront to build or expand their assets. In exchange, Sandstorm receives either a royalty on the asset over its mine life or a stream on the asset, meaning that Sandstorm has a right to buy a percentage of metal produced at a fixed cost well below the current spot price of gold/silver.

Since royalty/streaming companies typically have royalties/streams on over 20 assets, they are much more diversified than producers with 5-10 mines.

They also have much higher margins, given that they do not have to pay for labor, chemicals, fuel, explosives, and transportation but simply sit back and collect their metal deliveries from these assets.

Finally, the major benefit to owning royalty/streaming companies is that they are not required to spend annually on sustaining capital to maintain an operation, including mine development, drilling, and tailings expansions. In fact, any added resources are very beneficial, given that the royalty/stream is bought and paid for already. Hence, this is a proverbial cherry on top.

Unfortunately, while Sandstorm benefits from this superior model that carries very low risk, the company has had a tough year in 2022. This is because it went out and completed two major acquisitions ($1.1BB value), a smart move, and these deals transformed its portfolio from an average royalty/streamer to one with a phenomenal portfolio. Continue reading "2 Gold Miners With Large Safety Margins" →

Poor Man's Gold Shines The Brightest

Posted on by Aibek Burabayev

Please take a look at the graph below. These futures left their competitors far behind with a tremendous gain of almost twenty percent in only one month.

1 Month Futures Performance

Chart courtesy of finviz.com

On a one-month horizon, silver's meteoric price increase is undeniable. None of the metals can even come close. Copper is lagging eight percent behind as gold futures show only half the performance of silver. By the way, I am about to show you the relative dynamics of these top metals in the chart below.

Gold-Silver Ratio

Source: TradingView

The chart above visualizes the comparative superiority of silver futures over gold futures that we revealed in the first graph. The white metal has been reversing its nine-year losses since the bottom of 2011 at 30 oz up to the all-time high at 127 oz in 2020, where the large age long cycle has been completed. Continue reading "Poor Man's Gold Shines The Brightest" →