The Call @ Hedgeye | Monday, September 18, 2023 [REPLAY]

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TICKERS DISCUSSED LONGS: DRI, DKNG, FL, NKE, FDX SHORTS: LBLCF, MPW OTHERS: KVYO, BABA

Broadcast Summary

Consumer Staples: Daniel Biolsi - 00:00:47

• Grocery Taxes: Canadian Prime Minister Justin Trudeau invited the leaders of the country’s five largest grocery chains (including Loblaw, Walmart, and Costco) to discuss how they planned to control food inflation today; he has threatened new taxes on the grocers if they did not provide relief for consumers; grocery prices rose 8.5% YOY in July; Loblaw Companies Limited (LBLCF) remains a short

Gaming, Lodging & Leisure: Todd Jordan - 00:02:38

• Macau: Bounce back after typhoon hit; big holiday coming up in late September/early October; looks like Macau is sold out
• Online Sports Betting: Massachusetts numbers came out; DraftKings Inc. (DKNG) is number 1 market share leader; New York numbers out a week ago; forward-looking indicators show they will continue to gain market share; DKNG remains a long

Retail: Brian McGough - 00:05:14

• Long – Foot Locker, Inc. (FL): Upped FL above Nike on our best idea long list; this model has so much upside; Nike is only half of its business right now; we think Nike and Foot Locker have a revenue problem; they both need each other; FL remains a long
• Long – NIKE, Inc. (NKE): Took down a few notches on our best idea long list; reports earnings in 2 weeks; we are ahead of consensus but what the company says will be important; we still think the TAIL call makes a lot of sense; we are cautious on Nike into the print; NKE remains a long

Restaurants: Howard Penney - 00:10:22

• Long Bench – Darden Restaurants, Inc. (DRI): Darden reports on Thursday; good intra quarter read into sales trends; traffic trends for Olive Garden are slightly negative; Long Horn Steakhouse is slightly positive QoQ; both seeing a significant deceleration within the industry; we don’t think the company will raise guidance; DRI remains on the long bench

Healthcare: Tom Tobin - 00:14:05

• GLP-1: We will be hosting a call on Friday on our findings on GLP-1; after digging in, we are still pretty balanced on the longer term impact to obesity broadly, and the downstream impacts to medical cost; there are more than a few reasons for that view, an important one being the distribution of BMI by income; lower income populations make up 24.5% of the population, but 40% of the highest BMI group; the highest income group is 30% of the population but only 11% of the highest BMI group; this data points to affordability as a headwind for adoption

Healthcare Policy: Emily Evans - 00:18:58

• Inflation: We have a GOP agreement on a short-term CR; it does not have any healthcare provisions in it; not going to tame inflation unless fiscal part of it is under control

Macro, Housing & Financials: Josh Steiner - 00:23:47

• Data: Today at 10:00am we will get updated data from the National Association of Home Builders Housing Market Index; we will see how this latest back up of rates is rattling or not rattling builder confidence; the higher rates go, the greater disincentive for listing a home for sale; Redfin called out home purchase cancellation rate spike as of August
• Fed H.8 Data: Real-time read on what’s happening from a lending standpoint across the country; across all categories we’ve seen a rate of change slowdown; C&I lending is down to 0.7% growth on a YoY basis; on the commercial real estate side, this category decelerated from up 7.8% to 7.3% YoY; credit card lending also slowed; auto lending has been negative and remains negative

REITs: Rob Simone - 00:37:00

• Short – Medical Properties Trust, Inc. (MPW): It has been a week since we posted our note about Prospect deferred rent in 2022; the silence is deafening from the company; MPW remains a short   

Industrials: Jay Van Sciver - 00:40:45

• Long Bench – FedEx Corporation (FDX): Reports on Wednesday for the quarter ending August 31^st, so we should see any impact from the UPS strike; cyclical part of their business is the express business; FDX remains on the long bench
• Water Infrastructure Black Book on Thursday at 2:00pm ET

Technology: Ami Joseph - 00:43:44

• Semis: Big move in semis on Friday due to TSMC delaying acceptance of more equipment; TSMC took CapEx down in their July report and we think they will take it down again in the back half of this year; TSMC had a strong 2021, this is the year when the bill comes due; guidance has gotten worse and worse; major changes in semis come alongside geopolitical changes and we have seen China overorder semiconductor equipment due to potential increased regulation from United States
• Klaviyo, Inc. (KVYO): Raised the price of their IPO by $2 this morning and will now be priced at 10x revenue post raise

China: Felix Wang - 00:51:20

• Property Market: The property market in China remains on edge; more debt deadlines coming up later this week; Country Garden remains the focus; high level meetings continue between China and U.S.
• Alibaba Group Holding Limited (BABA): Very focused on overseas opportunities; announced a substantial investment into their Turkey platform this morning; making strides to keep merchants and users happy which is a key reason why the company keeps talking about DAUs

Telecom-Media Policy: Paul Glenchur - 00:56:40

• Artificial Intelligence: Question whether there will be certain players who dominate A.I. development; FTC is worried about it and UK now hinting they may go in this direction as well

Macro Policy: JT Taylor - 01:00:02

• Continuing Resolution: House Republicans going to put forward a CR that lasts until October 31^st; during this interim, there will be 8.1% cuts to all non-defense spending; no Ukraine money and no new disaster money in this CR; this definitely doesn’t fly with House Democrats or with the Senate

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