Brief Breakdown: AdvisorShares EATZ ETF (Ticker: EATZ)
In my Brief Breakdowns,I pick a stock and present opposite sides – I present the bullish argument and the bearish argument.
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Company Description and Qualitative Analysis
The AdvisorShares Restaurant ETF is an ETF which only holds restaurants, bars, pubs, fast food, take out facilities, food catering services and more food related industries. AdvisorShares reports that the restaurant industry grew 25% in 1955 and 51% in 2019, showing increasing growth throughout the years. With more restaurants and chains popping up globally, there is a post-COVID opportunity for a lot of these restaurants to capitalize on pent-up demand.
Quantitative Analysis
At the time of this writing (7/24/2022), EATZ is trading at $17.87 with a 52 week range of $16.92 - $2479. The top 10 holdings of EATZ Dave & Buster’s Entertainment at 9.78%, Arcos Dorados Holdings Inc at 9.75%, RCI Hospitality Holdings Inc at 8.77%, BBQ Holdings Inc. 7.89%, Dutch Bros Inc Class A at 6.91%, The One Group Hospitality Inc. at 5.58%, Papa John’s International Inc. at 4.88%, Chuy’s Holdings Inc. at 4.77%, Domino’s Pizza Inc. at 4.4%, and Darden Restaurants Inc. at 3.88%. You can view EATZ holdings here.
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Bullish Thesis
Here are three points to support the bullish thesis updates:
Consistent Growth: As stated in the qualitative analysis, the restaurant industry grew 25% in 1955 and 51% in 2019. Although there has been a lack of demand in 2020 to 2021 due to the lockdowns, there is a pent-up desire to go to in-person dining and facilities to socialize with friends and family. I’ll look for this industry to continue to grow as demand increases.
Global Growth: Currently, many of these corporations in the EATZ ETF are primarily based in the United States. This means that the majority of these companies have room to expand in Europe and other countries. Expansion would mean potential for more growth and a larger retail footprint. This will come with some up front costs and experimentation to ensure the same concepts that work in the US will work in Europe, but this is the nature of the beast.
Trends Do Not Drastically Affect: There are many food trends that occur all over the world. It can either be something like a fad diet, increase in veganism, or even just more awareness of what people put in their bodies. A very positive note is that this industry sees consistent growth despite all of these food related trends. Restaurants can be reactionary and follow trends and be slightly behind them without seeing any drastic negative after effects.
Bearish Thesis
Here are three points to support the bearish thesis:
Are Lockdowns Done?: Despite what anyone thinks about the pandemic, there’s an element of the ease of the ability to lock the globe down that could easily be replicated. There has been a MonkeyPox scare and other potential lockdowns in China due to COVID, so there is a chance that in some areas of the world lockdowns are not finished.
Global Recession: This is all but confirmed at this point. Everyone is feeling the inflationary pressures, businesses are raising prices and wages are not following as quickly. Soon, consumers will need to choose where to cut out miscellaneous spending and that could include bars and restaurants. This potential would hurt most industries that are not dire, so at least there’s that?
Limited Growth Potential: This is for a lot of ETFs but I believe especially for the food industry. This industry is for steady growth and therefore will never have a BOOM like a growth stock or something of that nature. This ETF could provide steady returns in an industry known for that, but does not have the boom or bust potential of other industries.
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Disclosure: The article was written by Brandon Keys, and it expresses the author's own opinions. I am not receiving compensation for it. I have no business relationships with any company whose stock is mentioned in this article. The information presented in this article is for informational purposes only and in no way should be construed as financial advice or recommendation to buy or sell any stock. Brandon is not a financial advisor. I encourage all readers to do further research and do your own due diligence before making any investments.