Heading into 1Q21 earnings, our preview was entitled “'Recovery Trade' in Late Innings with Reversal by Mid-'21” (4/19). And post earnings, expectations for a full US recovery are front & center with restaurants & distributors seeing a sharp re-acceleration in sales, often above ’19 levels, as dine-in restrictions ease & consumers receive stimulus dollars, both allowing for resumption of pre-pandemic behaviors. In this note, we analyze 1Q21 comp & EPS trends, 2Q21 QTD comps, and historic stock price seasonality. 

30+ years of historic data support the seasonal ‘sell in May & go away’ thesis (despite COVID disruption in ‘20, when the S&P gained in June & July). We believe the thesis, in the midst of a strong start to ’21 for the S&P and more recent inflationary concerns, is overwhelming the ‘recovery trade’ that we assumed would sustain into 2Q21 earnings. The latter was based on 2Q21 being a full quarter of outsized sales coupled with a full quarter of executing ‘more with less’ lessons on profitability. With that said, we believe the names best positioned to sustain the ‘recovery trade’; SBUX, DRI, PFGC.