EATZ: 2nd Quarter 2022 Portfolio Review
After a weak 1st quarter in 2022, the restaurant industry has continued to struggle in the 2nd quarter with EATZ returning -27.83% (NAV) for Q2 2022. The S&P 500 was also negative.
Winners and Losers
The lone bright spot in the portfolio for Q2 was McDonald’s, but only by about 5 basis points (0.05%). Everything else was negative for the quarter. EATZ’ portfolio was most negatively impacted by a few names, including Dutch Bros., BBQ Holdings, Dave & Busters, and Sweetgreen, each one contributing just over -3% to the portfolio.
The restaurant industry is beginning to feel the impact of the Federal Reserve’s (Fed) aggressive approach to curbing inflation. We find ourselves in a fine balance between capturing the pent-up demand from people clearly ready to get out and socialize versus increased labor costs, a tight labor market, and a delayed rebound to pre-pandemic levels in business events.
During the 2nd quarter, a few small tactical trades were made to try to take advantage of what we believed were short term over-bought or over-sold conditions. One notable position that we continued to add to was Dutch Bros. which, as noted above, was one of our most underperforming positions for the quarter. We believe that the market acted much too aggressively to knock the price down, so we took advantage of that decline to add to our position and lower our cost basis.
The markets are clearly volatile this year. We have what some would call an overheated economy driven by the unprecedented action of both the Fed during the pandemic and by federal legislators who were aggressively driving capital into tax-payer’s bank accounts in an attempt to offset economic losses during the lockdown. Now, with the Fed trying to tame inflation, it appears there is a price to be paid for so much financial stimulus. Additionally, there is war in Ukraine, and China is still struggling to contain their COVID related issues – both impacting global economies.
|Ticker||Security Description||Portfolio Weight %|
|BROS||DUTCH BROS INC-CLASS A||10.93%|
|ARCO||ARCOS DORADOS HOLDINGS INC-A||10.48%|
|BBQ||BBQ HOLDINGS INC||7.84%|
|PLAY||DAVE & BUSTER’S ENTERTAINMEN||4.59%|
|STKS||ONE GROUP HOSPITALITY INC/TH||4.51%|
|BLMN||BLOOMIN’ BRANDS INC||4.44%|
|CMG||CHIPOTLE MEXICAN GRILL INC||3.69%|
|JACK||JACK IN THE BOX INC||2.81%|
As of 06.30.2022. Cash is not included. Subject to change.
Please see our complete Fund holdings at advisorshares.com/etfs/eatz. The holdings details are updated each market day.
Past Manager Commentary