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THE M3: RWS REFI

The Macau Metro Monitor, January 4, 2011


RESORTS WORLD REFI GETS S$2BN IN COMMITMENTS IFR Asia

According to sources, at least 10 banks have joined syndication of the S$4.1925BN fully underwritten refinancing for RWS, committing around S$2BN.


TALES OF THE TAPE: EAT, RT, SONC, MCD, SBUX, COSI, PEET

Some news items from the restaurant world:

  • EAT was initiated with a “buy” rating and traded up on strong volume
  • RT is scheduled to report Q2 (Nov) earnings tomorrow after the market close.  Yesterday the stock was upgraded and outperformed its peer stocks, finishing the day up 10%.
  • SONC is expected to report fiscal Q1 (Nov) earnings today after the close.
  • MCD traded down on a positive day for the market and the restaurant space.  Volume also accelerated which is a bearish indicator.  We will be publishing a Black Book on MCD next week; our outlook for 2011 is decidedly bearish for the stock.
  • MCD officially rolled out oatmeal nationwide as part of its breakfast menu
  • SBUX is now offering a $2 breakfast sandwich with any beverage as part of a special offer
  • SBUX: There is a story on Bloomberg this morning.  In my view, there is more to the Kraft deal than the single serve business.  Starbucks wants to control the distribution channel.
  • COSI traded up on strong volume as the company’s turnaround continues.
  • PEET was rated "Hold" at McAdams Wright Ragen 24-month target price is $48.00 per share.
  • Bar and Grill traded well yesterday, trading up on accelerating volume.

TALES OF THE TAPE: EAT, RT, SONC, MCD, SBUX, COSI, PEET - STOCKS 14

 

Howard Penney

Managing Director


Q4/2010 HOTEL TRANSACTIONS UPDATE

US hotel transaction market snowballed in 2010, gathering momentum for 2011

 

 

Market M&A Trends for Q4 and Year 2010

  • 2010 US transaction volume shot above $8BN.  Global transaction volume also soared this year, not far from 2008 levels.
  • Q4 saw as many portfolio deals as Q3.
  • In Q4, there were several luxury non-US property sales that surpassed $1MM in average price per key (APPK).      
  • REITS (existing and newly formed) have dominated the M&A market this year.
    • Chatham Lodging Trust and Chesapeake Lodging Trust were the two hotel REIT IPOs.
  • Financing still weak but lenders coming back
    • For Q4, LTV for first mortgage debt trended between 40-55%, lower than the median LTV of 60% in 3Q, according to STR.
      • Most of the loans have a 3-5 year maturity.
    • According to Fitch, CMBS hotel loans continue to default at a relatively high rate.  November delinquencies reached 14.27%. 
    • Lenders—BofA, Deutsche, GS, Wells Fargo, and JPM—are returning, albeit slowly, to the hotel lending market.

Luxury Segment

  • Average Price per Key
    • $998,687 (9 transactions in Q4)
    • $529,161 (42 transactions in 2010)
      • US average: $383,831

Upper Upscale Segment

  • Average Price per Key
    • $257,295 (11 transactions in Q4)
      • US average: $291,945
    • $229,265 (42 transactions in 2010)
      • US average: $264,971

Q4/2010 HOTEL TRANSACTIONS UPDATE - hotel2

 

Q4 Transactions (Summary)

 

Q4/2010 HOTEL TRANSACTIONS UPDATE - HOTEL TRANSACTION


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Staring at The Sun

“It's best not to stare at the sun during an eclipse.” 

-Jeff Goldblum

 

As a younger man who came to America in the mid 1990’s wearing Canadian cutoff jean shorts, I enjoyed sunning myself. As I age, I try not to do that as much; especially during an eclipse.

 

Today the world will see the first partial eclipse of 2011. Africans and Europeans will witness it at sunrise. Russians and Chinese will get their eclipse at sunset.

 

No matter where you are in this world this morning, there it is – a new year, new investment opportunities, and new risks. If you are staring at a market price that’s already gone straight up in 2011, our best recommendation is to heed Jurrasic Park’s Jeff Goldblum’s risk management advice – don’t stare at it – it’s going to be a long race.

 

As market prices around the world race higher this morning, the sun is shining on the bulls. While I’m certainly not basking like Countrywide CEO Tan-gelo Mozilo did back in the day (my SPY short position is currently -3.80% against me), I’m as happy as the next clam who is long anything. Market prices that go lunar ahead of an eclipse are cool that way. Everybody gets paid.

 

In yesterday’s Early Look, I walked through our Hedgeye Asset Allocation Model. This morning I’ll focus on the Hedgeye Virtual Portfolio. They are 2 separate risk management products and I call them “virtual” because instead of running money, I run my mouth.

 

Currently the Hedgeye Portfolio is in what I consider a neutral position. We have 12 LONGS and 12 SHORTS.

 

As of last night’s close, our biggest un-realized winners and losers are:

  1. Top Winner: LONG Starbucks (SBUX) = +188.63%
  2. Top Loser: SHORT American Express (AXP) = -4.81%

Not unlike anyone who runs real money in this business, all of the positions I take in the Hedgeye Portfolio are marked-to-market every second of every day. Unlike most of the conflicted and compromised broker ratings and market pundits out there, we are accountable to every position we take.

 

Yesterday, I made the following risk management moves in the Hedgeye Portfolio:

  1. Shorted Tech (XLK) on the Facebook “news” as it was immediate-term TRADE overbought
  2. Shorted Industrials (XLI) after the sector closed up +25.5% in 2010 and was also immediate-term TRADE overbought
  3. Bought US Treasury Curve Flattener (FLAT) as the yield spread continues to make what we call lower-highs at 274bps wide
  4. Sold Suncor (SU) as the stock and commodity prices were hitting new highs (it too was immediate-term TRADE overbought)
  5. Shorted Bank of America (BAC) on the “settlement news” after our Financials Sector Head, Josh Steiner, made a call on it

Booking gains and/or searching for new absolute return ideas on the long and short side is what risk managers do. Some people buy-and-hold. Some people day-trade. The market doesn’t really care what your style is – like an eclipse, it’s going to do what it is going to do.

 

While you may need to be staring directly into the sun right now to be willfully blind to Global Inflation Accelerating, you don’t need an eclipse to generate inflation when market prices are inflating. Post daisy dukes ditching at Yale, I paid my own room and board to learn that’s what happens when prices go up.

 

On the topic of inflation, while it will be interesting to read the Fed’s Minutes later on this afternoon, the rest of the world has already agreed with us that a +10% monthly spike in the 19 component CRB Commodities Index since the beginning of December to new highs of 333 yesterday is indeed inflationary.

 

In fact, in the last 24 hours these are the 2 words that the Brazilians and South Koreans used to describe inflations:

  1. Brazil = “plague”
  2. South Korea = “war”

We think they are serious. So is staring at the sun.

 

In addition to being long German Equities (EWG), US Healthcare(XLV), Oil (OIL), Sugar (SGG), and Treasury Inflation Protection (TIP), I remain bullish on American and Chinese Cash (UUP and CYB). I’m bearish on US Treasury bonds (SHY) and bearish on Gold (GLD) – those are 2 of the 12 positions in the Hedgeye Portfolio that were working for us yesterday. There’s always risk to be managed somewhere.

 

My immediate term support and resistance levels for the SP500 are now 1259 and 1273, respectively.

 

Best of luck out there today,

KM

 

Keith R. McCullough
Chief Executive Officer

 

Staring at The Sun - sun


PRESS RELEASE: Hedgeye Names Bob Brooke as Managing Director of Business Development


THE HEDGEYE DAILY OUTLOOK

TODAY’S S&P 500 SET-UP - January 4, 2011


As we look at today’s set up for the S&P 500, the range is 14 points or -1.01% downside to 1259 and 0.09% upside to 1273.   Economic data from around the world was bullish for equity markets as more evidence of continued improvements in the economy was seen. Equity futures are trading relatively in-line with fair value, despite gains in European and Asia.

 

MACRO DATA POINTS:

  • 7.45am, ICSC weekly retail sales
  • 10am, Factory Orders, Nov., est. -0.1%, prev. -0.9%
  • 11am, U.S. Fed to purchase $1-$2b TIPS
  • 11.30am, U.S. to sell 4-week bills
  • 2pm, Minutes of FOMC Meeting
  • 4.30pm, API Inventories
  • 5pm, ABC Consumer Confidence, Jan. 2, prev. -44

TODAY’S WHAT TO WATCH:

  • Motorola Mobility is spun off today, trades under MMI on NYSE 
  • President Obama will sign $1.4b food-safety bill today that marks the biggest change to oversight of the food industry since 1938 and sets up a funding fight with Republicans poised to take over the House.
  • Google is considering building a payment and advertising service that would let users buy milk and bread by tapping or waving their mobile phone against a register at checkout, two people familiar with the plans say. Service may debut this year
  • Airgas (ARG) bought Conley Gas and separately two other businesses 
  • Annaly Capital Management (NLY) plans an offering of 75m shrs
  • Belo (BLC) completes split of G.B. Dealey Retirement Pension Plan with A.H. Belo Corp; sees loss $19m-$23m on split, $5m-$7m tax benefit
  • Constellation Energy (CEG) completed acquisition of Boston Generating power plants for $1.1b
  • Corning (GLW) said Peter Volanakis retired as COO, President
  • Dick’s Sporting Goods (DKS) rated new buy at Janney  

PERFORMANCE: ALL 9 SECTORS BULLISH ON TRADE & TREND

  • One day: Dow +0.81%, S&P +1.13%, Nasdaq +1.46%, Russell +1.90%
  • Last Week: Dow +0.03%, S&P +0.07%, Nasdaq (-0.48%), Russell (-0.67%)
  • Month/Quarter/Year-to-date: Dow +0.81%, S&P +1.13%, Nasdaq +1.46%, Russell +1.90%
  • Sector Performance - BULLISH (All sectors were positive) - Financials +2.19%, Consumer Discretionary +1.18%, Tech +1.11%, Healthcare +0.91%, Materials +0.81%, Industrials +0.72%, Energy +0.72%, Utilities +0.49%, and Consumer Staples +0.14% 

 EQUITY SENTIMENT: BULLISH

  • ADVANCE/DECLINE LINE: 1469 (+1220)  
  • VOLUME: NYSE 1060.24 (+78.96%)
  • VIX:  17.61 -0.79% YTD PERFORMANCE: -0.79%
  • SPX PUT/CALL RATIO: 1.41 from 1.97 (-28.68%)  

CREDIT/ECONOMIC MARKET LOOK: BULLISH


Treasuries were weaker with the curve steepening slightly

  • TED SPREAD: 16.89 -1.624 (-8.865%)
  • 3-MONTH T-BILL YIELD: 0.15%   
  • YIELD CURVE: 2.75 from 2.72

COMMODITY/GROWTH EXPECTATION: BULLISH

  • CRB: 333.02 +0.07%
  • Oil: 91.55 +0.19% - trading +0.12% in the AM
  • Oil Trades Near 27-Month High as Economic Recovery May Boost Energy Demand  
  • COPPER: 445.75 +0.24% - trading -0.55% in the AM
  • Copper Rises to Record for Fourth Day in London on U.S. Growth Speculation
  • GOLD: 1,420.05 +0.09% - trading -0.89% in the AM
  • Wien Forecasts Gold Above $1,600, Grains Surge in `Ten Surprises' for 2011 - He went 0 for 10 last year!

OTHER COMMODITY NEWS:

  • Hedge Funds Increase Bullish Crude Bets to Four-Year High: Energy Markets
  • Flooding May Threaten More Cotton Crops in Queensland, Growers Group Says
  • Rubber Futures Advance to Record as U.S. Production Raises Demand Outlook
  • Gold Falls for Second Day as Reports May Show Recovering Economic Growth
  • Soybeans Advance on Concern Dry Weather in South America May Cut Supplies
  • Sugar Output in India's Top Producing State May Miss Forecast After Rains
  • Molycorp May Double Planned Rare-Earth Metals Output to Meet Global Demand
  • Vietnam Aims to Ship `About' 6 Million Tons of Rice, Deputy Minister Says
  • Australia Forecasts More Rain as Floods Isolate Thousands, Shut Down Mines
  • Alcoa Recommended as `Top Stock' by CNBC's Cramer; Shares May Gain to $22
  • Noble Stock Advances to Record as Acquisitions to Drive Growth in Earnings

CURRENCIES:

  • EURO: 1.3375 -0.07% - trading +0.20% in the AM
  • DOLLAR: 79.127 +0.13% - trading -0.07% in the AM

EUROPEAN MARKETS:

  • European Markets: FTSE 100: +2.12%; DAX +0.17%; CAC 40: +0.62%
  • Most European indices started the day slightly lower and are now trading in positive territory while the Footsie is up 2.12%, catching up with the rest of Europe following yesterday's strong session.
  • Notable divergence is Greece down 1.52%, Estonia up 2.90%
  • Energy shares are among today's best performers, helped by BP after the Daily mail reported Royal Dutch Shell thought about bidding for the company during oil-spill crisis.
  • France Dec Consumer Confidence (36) vs consensus (31) and prior revised to (33) from (32)
  • German Dec unemployment change, seasonally adjusted, +3K vs consensus (10K) and prior revised (8K)
  • UK Dec Manufacturing PMI 58.3 vs consensus 57 and prior 58
  • UK Nov mortgage approvals 48,019 vs consensus 47,000 and Oct 47,315

ASIAN MARKTES:

  • Asian Markets: Nikkei +1.7%; Hang Seng +1.0%; Shanghai Composite +1.6%
  • Most Asian markets rose today, except India -0.30% and Taiwan -0.31%
  • For several markets, this was the first trading day of the year.
  • Japan rose +1.65%, reflecting buoyant investor sentiment on gains throughout the world, with 32 of 33 sectors going up. Resource related stocks gained 3-5%. Exporters rose on strong ISM manufacturing data from the US. Megabanks followed their US peers up 2%, and consumer lenders Promise and Aiful soared 17% and 11%, respectively.
  • Property counters surged to lead China higher by 1.59%, with materials stocks providing strong support. China Shenhua Energy and Yanzhou Coal Mining rose 2% and 3%, respectively, on coal supply concerns arising from the flooding in Australia. Shippers rose 4% on optimism that export demand would be lifted.
  • South Korea found strength +0.73% from brokerages and shipbuilding stocks.
  • Property stocks led gains in Hong Kong +0.99% - Cathay Pacific rose 3% when its COO said the airline is reasonably confident about the year.
  • The floods in Queensland held Australia flat, as early gains were pared by falls for insurance companies. Insurance Australia Group, QBE Insurance, and Suncorp fell 2-3%.
  • The yen is trading at 82.07 to the US dollar

THE HEDGEYE DAILY OUTLOOK - setup

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