uncoveredalpha

Ex-sell side/buy side. Spent years writing research nobody read on stocks everybody owned. Now writing research people actually want on stocks nobody covers.

[uncoveredalpha @uncovered_alpha]

Everyone aspiring investor should read this twice.

This logic is the exact reason I own $HOG. The share price is up ~11% since I purchased the shares a month ago. And it is still trading well below intrinsic value if you do the work and correctly calculate the enterprise value. Opportunities like these are available, but only if you anchor your investment process to price first. $HOG is a great example of a business that by consensus estimates lacks a “moat” yet it was and still is trading well below true intrinsic value

[Lee Roach @leevalueroach]

There is a generation of investors, now in their twenties and thirties, who have been so thoroughly brainwashed by the word “moat” that they have, in a precise structural sense, lost the ability to recognize a cheap stock when one is sitting in front of them, because the word has been wielded, in interviews and podcasts and annual letters and Twitter threads, with such relentless authority for the last 25 years that it has crowded out the older, simpler, more durable investing concept that built every fortune in the history of the discipline before the moat-industrial complex was invented, which is the concept of price.

Price is the actual edge. Price has always been the actual edge. The entire history of compounded returns in equity investing, from Graham through Schloss through Ruane through the early Buffett through every quiet practitioner who never appeared on a podcast, was built on buying things for less than they were worth, and the question of whether the underlying business had a moat was, in the original framework, a secondary consideration that mattered only insofar as it affected the calculation of intrinsic value, not a primary lens through which every potential investment was filtered before the price was even examined.

The moat-brainwashed investor in 2026 will look at a profitable, debt-free, asset-rich small-cap company trading at 3x earnings and dismiss it in a single sentence, because the business “lacks a moat,” and he will then turn around and buy a software platform at 80x revenue because it “has a moat,” and the moat will turn out, in 36 months, to have been a marketing slogan attached to a business model that the market had already decided was going to deteriorate, and the 3x earnings company, which never had a moat and was never going to have a moat, will compound quietly at 14% a year for the rest of his life while he is busy explaining to his friends why his moat thesis was actually correct in spirit and just wrong in price.

The most expensive lesson in modern equity investing, the lesson that has been paid for in real money by an entire generation of educated, well-read, intellectually serious young people who genuinely believed they were doing the work, is that a moat at the wrong price is worse than no moat at the right price, and that the entire late-Buffett framework that produced this confusion was a personal philosophy developed by a specific man, with a specific tax situation, deploying a specific amount of capital that prevented him from running the original Graham strategy that had actually built his fortune, and that the canonization of his late-stage approach has, for 25 years, been actively harmful to ordinary investors who do not have his constraints and who would, in almost every case, be better off doing what he did when he was their age, which was buying small, cheap, unloved, unfashionable companies at fractions of their underlying value, and ignoring the moat question entirely until the price question had already been answered.

You can do this. You can run the original strategy. You can buy the cheap stocks the moat-brainwashed investor will not touch, at prices he refuses to consider, in a basket sized appropriately, held patiently, while he is busy paying 80x revenue for a story that will not survive its next earnings call. The price will save you. The price has always saved every investor who paid attention to it. The moat is not the edge. The moat was never the edge. Price is the edge, and price is sitting there, in 2026, in dozens of unloved, unfashionable, ignored small-cap names that an entire generation of investors has been trained to walk past, which is, as it has always been, the entire reason the trade still works for the small minority of investors who never accepted the brainwashing in the first place.

[uncoveredalpha @uncovered_alpha]

Excellent summary and insights into why $BROS sold off despite headline beats.

I always think as an investor you need to think about positioning/sentiment as much as the quality of the underlying fundamentals. Headline beats don’t always translate into strong stock performance. Expectations matter.

I would encourage everyone to think about positioning into the print. Short interest changes, volume traded into the print, estimate revisions etc. one thing that is a bit harder to judge but critical is the buy side whisper. We all see the sell side consensus KPIs for the next Q. But if the buy side whisper is what really matters most in terms of how the stock trades on the day

[Mike Kudrna @MichaelKudrna]

Good question why Dutch Bros $BROS fell....4 things stick out at me:

1) The stock had already rallied ~13% into the print. "Beat and raise" was largely priced in, so longs sold the news

2) At 90x PE, you're paying for acceleration. Q1 was 8.3% comp, Q2 guide is "approaching 5%" ....that's a deceleration, even though it still beats consensus. High multiple stocks rerate fast on trajectory shifts

3) The back half gets harder: ~100bps of price rolls off in Q3, coffee cost pressure peaks in 2H, and the comp comparisons get tougher (Q4 2025 was +9.5%). The math gets worse before it gets better

4) Macro tape: investors are deleveraging out of high multiple growth for safety. BROS has a beta around 2.5 .... it gets sold first in a derisk move, regardless of fundamentals

Bottom line: a great quarter from the company doesn't always equal a great day for the stock. When positioning unwinds in a hostile tape, even good prints get sold. (see my $CAVA reference why I love the company but can't buy before earnings on a 150x PE after seeing bombs explode).

Opportunity: these moves create watch list opportunities...the fundamentals didn't change, the price did....wait for the timing to add risk back at cheaper prices

[uncoveredalpha @uncovered_alpha]

@MichaelKudrna Improving is the wrong word. I mean perhaps confidence from investors that numbers don’t get worse which is kinda an improvement in this context. Not that I agree with that view, more that the tape suggests that might be what others are betting on

[uncoveredalpha @uncovered_alpha]

Was reading Rothschild & Co Redburn's new "Caffeine Revolution" report this week and it got me thinking about the McDonald's–Red Bull deal in a completely different light. I don't think the market has clocked how big this is for the US QSR caffeine landscape.

Redburn forecasts the global energy drinks category grows ~8% pa to 2030, with the US at ~7% pa (5.5% vol, 1.5% price). Energy is only 19% of US soft drink retail sales but drove >50% of incremental soft drink growth in 2025. It's where the action is.

Even more striking: zero-sugar energy drinks have accounted for 100% of US category growth since 2019 (~15% CAGR), while added-sugar variants are quietly declining ~1% pa. Operators who still over-index on full-sugar fountain are on the wrong side of this.

And here's the line that made me sit up: energy drinks are just ~15% of US caffeine consumption today. Coffee is 85%. That ratio was 91/9 in 2019. The caffeine pie isn't just growing — it's being redistributed, fast.

Why? Two-thirds of US coffee is now consumed cold. Cold brew caffeine is approaching energy-drink levels. And critically: coffee prices are +50% since 2022, energy drinks only +17%. The affordability gap has inverted. A $3 can of Red Bull vs a $6 iced oat latte is an easier decision than it used to be.

Which brings me to McDonald's. In August 2026 they roll out Red Bull Dragonberry Energizer across US stores, priced explicitly to undercut Starbucks, Dutch Bros and Sonic. This is the McCafé-vs-Starbucks 2009 playbook — but this time the target isn't lattes, it's the afternoon caffeine occasion.

For 25 years, Red Bull's US distribution has been c-store-heavy via RBDC. QSR foodservice has been Monster/Coca-Cola territory. McDonald's just handed Red Bull c14,000 foodservice doors overnight — the largest QSR footprint it has ever plugged into.

There's an awkward subplot here: McDonald's is Coca-Cola's flagship US account, and Coca-Cola distributes Monster. Putting Red Bull on the McDonald's menu means Coke is effectively helping carry a rival energy brand. Worth watching how that tension resolves.

Read-across to Starbucks: not good. Cold, highly-caffeinated, low-priced Red Bull through a McDonald's drive-thru attacks the exact occasion where Starbucks has been most exposed — afternoon cold coffee with Gen-Z.

Read-across to Dutch Bros: probably worse. Rebel energy is ~30% of DB's drink mix and the core Gen-Z/female traffic driver. McDonald's at a value price point commoditises exactly the white-space DB has been monetising at premium prices.

For McDonald's equity story specifically: (i) beverages are ticket-accretive and margin-accretive, (ii) it slots straight into their value-meal architecture, (iii) afternoon daypart has been a weak spot — energy peaks exactly there, (iv) Gen-Z and lower-income traffic rebuild gets a cheap, on-trend weapon.

Full credit to Charlie Higgs and the Redburn team — "Caffeine Revolution" is one of the best pieces of sector work I've read this year.

@McFranchisee

[uncoveredalpha @uncovered_alpha]

It is an odd marketing tactic, I get it if you have operational fixes up your sleeve where the stores gradually start performing better and poking at the largest brand perhaps drives some engagement. But at this stage in the "turnaround" - and I use that term lightly - its just not funny

[uncoveredalpha @uncovered_alpha]

@MichaelKudrna Always a good reminder why reading the Non-GAAP reconciliation matters. Always think it makes more sense to look at raw restaurant dollars and margins and on the latter they are down c410bps YoY…

[uncoveredalpha @uncovered_alpha]

He’s just referring to the comp differential. Burger King US printed +5.8% SSS and McDonald’s did 3.9%. The 2yr is more striking Burger King was +4.6% and McDonald’s was 0.2%. Burger King saw a slight accel on a 2yr basis QoQ while McDonald’s decelerated 500bps. That’s probably what he is referring to IMO.

I think it was a pretty tough quarter for MCD tbh, and April trends deteriorated exiting Q1. So wondering whether McValue 2.0 can help regain momentum into May. Guess time will tell…

[uncoveredalpha @uncovered_alpha]

Bottom line: FY reaffirmed at the op mgn line, but mix deteriorated materially underneath. cc EPS only +1% – FX is doing the work. US McOpCo refranchising decision, remodel capex framework, and 2027 margin bridge all punted to Sept 23 Investor Day = overhang. Numbers come down on Q2 and more meaningfully on 2H / FY EPS mix. 21.6x 26E P/E, fade justified.

@HedgeyeFood

[uncoveredalpha @uncovered_alpha]

$MCD was up 2-3% in the pre-mkt. Faded to flat. The tape is telling you something. Q1 looked clean on the surface — SSS +3.8%, EPS $2.83 vs $2.74, op mgn 46%, FY guide reaffirmed, FX tailwind raised to +$0.20–0.30. But Q&A and the IR callback unravelled it.

[uncoveredalpha @uncovered_alpha]

IR callback added the real negatives beneath the reaffirmed headline:

US McOpCo mgn guide CUT to <11.6% FY25 (vs prior "slightly higher") – structural

IOM franchise take rate CUT to 17.0% (vs 17.2%)

China JV equity earnings CUT below $990m

Non-op expense raised $30m

Kempczinski misstated chicken share gain as "~2pts" — IR clarified actual target is +100bps by end-26 (half)

[uncoveredalpha @uncovered_alpha]

I tend to agree with a lot of your points. That said, when they beat/maintain instead of the miss/lower cycle it doesn’t really matter near term whether it was driven by giveaways or whether HEEP is skewed to certain regions. L/T they definitely need a shift in perspective, I personally wouldn’t mind them saying margins will be lower for the next 18 months in a deliberate move to reinvest in the store experience and focus on returning to 3-4% traffic growth. Most of the street seems to model a base system comp and don’t seem to bother decomposing comps into 1yr/2yr/3yr/mature comp performance. The mature comp performance is the health signal here and it is still deeply negative.

[uncoveredalpha @uncovered_alpha]

Yeah you make some fair points. Summer guided Q2 SSS to ~+1% (cons. +0.8%) and the implied traffic would actually be slightly negative given price guided to +1.5% and mix flat. Tough times. It’s just one of those situations where expectations are/were so low, so shares reacted positively despite this not being actual inflection in traffic.

I agree with you L/T. My concern has been Boatwright/Rymer. V different to Niccol/Hartung. What I find hard to square is Boatwright has the experience, both at $CMG and other concepts. And he was COO under Niccol. He must know how to improve in-store experience etc to drive traffic. I would think just trade some short term margin for better experience and you’ll see traffic inflect more aggressively. Wishful thinking maybe….

[uncoveredalpha @uncovered_alpha]

@0xfdf How would you do this for a 3-statement model with multiple divisional segments? Genuinely curious

[uncoveredalpha @uncovered_alpha]

@HedgeyeFood Yup. Great point on the higher minimums - $WEN has done the same, which is funny for a multitude of reasons.

[uncoveredalpha @uncovered_alpha]

Lol. I seriously would love to hear them justify some of their PT's when you have massive obvious decels in the 3p data.

Sure $WING beat on EBITDA and EPS, but that hardly matters here when comp decels are so violent that you question when the unit growth guide is lowered. Eventually mgmt will need to lower the unit guide - 15-16% just feels too high if your mature stores are likely comping double digit negative

[uncoveredalpha @uncovered_alpha]

@HedgeyeFood I expected a beat but that is mega. Even the txn comp is now positive on a 2-year stack.

[uncoveredalpha @uncovered_alpha]

@HedgeyeFood Right back at you my friend. Love your work. Not many call the accels/decels well, count yourself among the few!