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UA: Definite Net Negative

 

These management changes are definitely the right thing for UA, but they play into our call that you don’t want to own this stock when then the company is hunkering down, retrenching, reorganizing its business, and investing capital to facilitate the next leg of growth. 

 

In another 18-24 months, having a ‘Chief Supply Chain Officer’ and ‘Chief Performance Officer’ might prove to be the best move since they launched Compression Apparel. In his usual ‘take no prisoners’ approach to the business, Kevin Plank very quickly addressed UA’s fulfillment problem.   

 

As for Wayne Marino, let’s not forget that he is a CFO by trade. After doing such a solid job seeing UA through the IPO process, he essentially built the finance organization that exists today. But unfortunately, in a strong sign of the Peter Principle at work, he was elevated to a role (COO) where he was simply ‘average’ as opposed to ‘great.’  He is sticking around for six months for transition purposes. Clearly, this is not a ‘clear your desk and security will escort you out’ situation.

 

We continue to think that there are few businesses in US retail that have the kind of Blue Sky growth that UA has ahead of it. But before we see things like Footwear, International, Retail and Women’s succeed, we’re going to need either more time, capital, and more likely – both.

 

For the long-term holders who own this name because they think it will triple in another 5-years, then check the box and move on – everything is fine and on-track. But the upside/downside risk here for anyone with a shorter duration clearly favors the downside.

 

 

Brian P. McGough

Managing Director

 

 


THE HBM: DNKN, SBUX, DIN

THE HEDGEYE BREAKFAST MENU


Notable macro data points, news items, and price action pertaining to the restaurant space.

 

MACRO

 

Commodities

 

Over the last few months, in particular, foodstuffs have seen prices hold steady while the overall commodity index, as represented in the chart below by the CRB Commodity Index, has declined.

 

THE HBM: DNKN, SBUX, DIN - food vs comd

 

 

QUICK SERVICE

  • DNKN was initiated “Sell” at Goldman Sachs with a price target of $23.
  • DNKN was initiated “Equal-Weight” at Morgan Stanley with a price target of $29.
  • DNKN was initiated “Neutral” at BofA with a price target of $29.
  • DNKN was initiated “Equal Weight” at Barclays with a price target of $27.
  • DNKN was initiated “Buy” at Stifel Nicolaus with a price target of $33.
  • DNKN was initiated “Market Perform” at Wells Fargo.
  • DNKN was initiated “Outperform” at William Blair.
  • SBUX plans on tripling its China store base by 2015 and step up growth in other markets like South Korea, Indonesia, Malaysia, Singapore, Thailand, and Australia by introducing Via Ready Brew.

CASUAL DINING

  • DIN has named Tom Emrey as CFO.  Mr. Emrey joins DineEquity from Universal Studios Home Entertainment.  Prior to Universal Studios Home Entertainment, Mr. Emrey held a number of senior finance positions at Nestle USA.

THE HBM: DNKN, SBUX, DIN - stocks 96

 

 

Howard Penney

Managing Director

 

Rory Green

Analyst


THE M3: SANDS INCREASE LOAN TARGET; MPEL MANILA INTEREST; RECRUITMENT; WYNN COTAI; INDIA

The Macau Metro Monitor, September 6, 2011

 

 

SANDS' CHINA UNIT SAID TO INCREASE LOAN BY $200 MILLION TO $3.7 BILLION Bloomberg

Sands China has increased its loan target to US$3.7BN from US$3.5BN.  As well as using the proceeds to refinance debt, Sands China will use the money to fund the completion of the construction of two phases of Sands Cotai Central.  The facility is expected to close at the end of Sept 2011.  About 10% of the loan was sold in general syndication to around 16 banks.

 

PACKER, HO MAY INVEST $1 BILLION IN MANILA CASINO, GAMBLING REGULATOR SAYS Bloomberg

According to Cristino Naguiat, Chairman of PAGCOR (Philippine Amusement & Gaming Corp), James Packer and Lawrence Ho may invest US$1BN in a Manila casino project.  "Discussions are still ongoing with MPEL. I think they're serious," said Naguiat.  

 

The Philippines awarded four gambling licenses in 2008 and 2009.  Each Philippine licensee agreed to invest $1BN over five years.  Three of the four that were given licenses in 2008 to 2009 were a venture between Genting Malaysia and Alliance Global Group Inc., Philippine property developer Belle Corp, and Philippine ports magnate Enrique Razon’s Bloombury Investments Holding Inc.  The 4th licensee may be Universal Entertainment Corp, a Japanese maker of pachinko pinball machines, who started building its project in June and plans to open by 2014, according to Kazuma Ishioka, a Tokyo-based spokesman.

 

Belle and Bloombury have started construction while the rest will begin by 1Q 2012, Naguiat added.

 

SANDS CHINA LOOKING FOR STAFF Macau Business

According to Sands China, around 1,300 job seekers attended Sands' latest recruitment fair in late August.  The August recruitment fair is the second from Sands China this summer, having completed their first in July.  A new recruitment fair is already scheduled for September 28 and 29.

 

WYNN SUBSIDIARY TO PAY LOCAL FIRM US$50 MILLION FOR COTAI LAND Macau News

According to Wynn Macau's interim report, the Wynn subsidiary associated with the Cotai land agreement is Palo Real Estate Co. Ltd., who is subject to a 10% voting interest by Macau businessman Wong Chi Seng in Wynn Macau. The interim report also said that the company was finalizing its Cotai project's scope and budget. 

 

LOCAL FIRMS MULLS INDIA CASINOS Macau Daily Times

According to a Mumbai-based developer, gaming operators from Macau, Singapore and Las Vegas have shown interest in the technology, branding, marketing or even running the gaming operations of his off-shore Casino Royale, based in the state of Goa.  The revenue of Goa casinos has been growing 50% a year since 2008.  Goa and Sikkim are the only two Indian states that allow live gaming.


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TUESDAY MORNING RISK MONITOR: SPAIN, ITALY, AND FRANCE SOVEREIGN SWAPS UP SHARPLY

How Low Will Moneycenter Margins & Earnings Go in 2H11 and 2012?

*** Tune in for our conference call TOMORROW at 11 am***

  • Quantifying the profound extent of net interest margin pressure from the current rate environment for BAC, JPM, WFC & C 
  • Pinpointing precise timing of that pressure 
  • Layering on the enormous earnings headwinds from credit renormalization - impact and timing

Having trouble viewing the charts in this email?  Please click the link at the bottom of the note to view in your browser.

 

This week's notable callouts include tightening in US and European bank swaps WoW, as of Friday, and increased sovereign swaps.  


Financial Risk Monitor Summary (Across 3 Durations):

  • Short-term (WoW): Positive / 6 of 11 improved / 2 out of 11 worsened / 3 of 11 unchanged
  • Intermediate-term (MoM): Negative / 1 of 11 improved / 8 of 11 worsened / 2 of 11 unchanged
  • Long-term (150 DMA): Negative / 1 of 11 improved / 7 of 11 worsened / 3 of 11 unchanged

 

TUESDAY MORNING RISK MONITOR: SPAIN, ITALY, AND FRANCE SOVEREIGN SWAPS UP SHARPLY - summary

 

1. US Financials CDS Monitor – Swaps tightened across all 28 major domestic financials in our table last week.  In contrast, only two companies (ACE and ALL) have tighter swaps compared to one month ago. 

Tightened the most vs last week: ALL, CB, XL

Tightened the least vs last week: BAC, WFC, MS

Widened the most vs last month: BAC, LNC, HIG

Tightened the most/widened the least vs last month: ACE, ALL, CB

 

TUESDAY MORNING RISK MONITOR: SPAIN, ITALY, AND FRANCE SOVEREIGN SWAPS UP SHARPLY - us cds

 

2. European Financials CDS Monitor – Banks swaps also tightened in Europe last week.  37 of the 39 swaps were tighter and 2 widened.   The average tightening was 10%, or 47 bps, and the median tightening was 7%. 

 

TUESDAY MORNING RISK MONITOR: SPAIN, ITALY, AND FRANCE SOVEREIGN SWAPS UP SHARPLY - euro cds

 

3. European Sovereign CDS – European sovereign swaps were wider week over week across the continent. We are keeping a close eye on France, which is critical to the EFSF, and where swaps widened by 19 bps to 184 bps week over week. We believe the CDS market is currently pricing in decreased hedge effectiveness in addition to improvement in sentiment around sovereign solvency.  Judging by the Greek bailout, regulators are making a concerted effort to design a bailout that does not trigger CDS.

 

TUESDAY MORNING RISK MONITOR: SPAIN, ITALY, AND FRANCE SOVEREIGN SWAPS UP SHARPLY - sov 1

 

TUESDAY MORNING RISK MONITOR: SPAIN, ITALY, AND FRANCE SOVEREIGN SWAPS UP SHARPLY - sov 2

 

4. High Yield (YTM) Monitor – High Yield rates fell 38 bps last week, ending at 7.69 versus 8.13 the prior week.

 

TUESDAY MORNING RISK MONITOR: SPAIN, ITALY, AND FRANCE SOVEREIGN SWAPS UP SHARPLY - high yield

 

5. Leveraged Loan Index Monitor – The Leveraged Loan Index rose 36 points last week, ending at 1536. 

 

TUESDAY MORNING RISK MONITOR: SPAIN, ITALY, AND FRANCE SOVEREIGN SWAPS UP SHARPLY - lev loan

 

6. TED Spread Monitor – The TED spread backed off slightly from its YTD high, ending the week at 31.5 versus 32.8 the prior week.

 

TUESDAY MORNING RISK MONITOR: SPAIN, ITALY, AND FRANCE SOVEREIGN SWAPS UP SHARPLY - ted spr

 

7. Journal of Commerce Commodity Price Index – Last week, the JOC index rose slightly to -1.9.

 

TUESDAY MORNING RISK MONITOR: SPAIN, ITALY, AND FRANCE SOVEREIGN SWAPS UP SHARPLY - joc

 

8. Greek Bond Yields Monitor – We chart the 10-year yield on Greek bonds.  Last week yields hit another new all-time high, ending Monday at 1931.

 

TUESDAY MORNING RISK MONITOR: SPAIN, ITALY, AND FRANCE SOVEREIGN SWAPS UP SHARPLY - greek bonds

 

9. Markit MCDX Index Monitor – The Markit MCDX is a measure of municipal credit default swaps.  We believe this index is a useful indicator of pressure in state and local governments.  Markit publishes index values daily on six 5-year tenor baskets including 50 reference entities each. Each basket includes a diversified pool of revenue and GO bonds from a broad array of states. We track the 14-V1.  After bottoming in April, the index has been moving higher.  Last Friday, spreads fell 13 bps and closed at 150 bps.

 

TUESDAY MORNING RISK MONITOR: SPAIN, ITALY, AND FRANCE SOVEREIGN SWAPS UP SHARPLY - mcdx

 

10. Baltic Dry Index – The Baltic Dry Index measures international shipping rates of dry bulk cargo, mostly commodities used for industrial production.  Higher demand for such goods, as manifested in higher shipping rates, indicates economic expansion.  Last week the index rose sharply off a low level, climbing 199 points to 1740.

 

TUESDAY MORNING RISK MONITOR: SPAIN, ITALY, AND FRANCE SOVEREIGN SWAPS UP SHARPLY - baltic dry

 

11. 2-10 Spread – We track the 2-10 spread as an indicator of bank margin pressure.  Last week the 10-year yield fell to 1.99, pushing the 2-10 spread to 178 bps.   

 

TUESDAY MORNING RISK MONITOR: SPAIN, ITALY, AND FRANCE SOVEREIGN SWAPS UP SHARPLY - 2 10 spread

 

12. XLF Macro Quantitative Setup – Our Macro team’s quantitative setup in the XLF shows the following:  8.2% upside to TRADE resistance, 2.6% downside to TRADE support.

 

TUESDAY MORNING RISK MONITOR: SPAIN, ITALY, AND FRANCE SOVEREIGN SWAPS UP SHARPLY - xlf

 

Margin Debt Flat in July

We publish NYSE Margin Debt every month when it’s released.  This chart shows the S&P 500, inflation adjusted back to 1997, along with the inflation-adjusted level of margin debt (expressed as standard deviations from the long-run mean).  As the chart demonstrates, higher levels of margin debt are associated with increased risk in the equity market.  Our analysis shows that more than 1.5 standard deviations above the average level is the point where things start to get dangerous.  In July, margin debt held close to flat at $306B.  On a standard deviation basis, margin debt fell to 1.21 standard deviations above the long-run average.

 

One limitation of this series is that it is reported on a lag.  The chart shows data through July.

 

TUESDAY MORNING RISK MONITOR: SPAIN, ITALY, AND FRANCE SOVEREIGN SWAPS UP SHARPLY - margin debt

 

Joshua Steiner, CFA

 

Allison Kaptur

 

 


THE HEDGEYE DAILY OUTLOOK


TODAY’S S&P 500 SET-UP - September 2, 2011

 

Friday was not good. After trying valiantly to close up for a second consecutive week, the SP500 closed down for the fifth week in the last six and is down -13.9% from the April 2011 high, confirming the bearish TREND in US Equities.

 

As we look at today’s set up for the S&P 500, the range is 48 points or -2.47% downside to 1145 and 1.62% upside to 1193.

 

 

SECTOR AND GLOBAL PERFORMANCE

 

THE HEDGEYE DAILY OUTLOOK - levels 96

 

THE HEDGEYE DAILY OUTLOOK - daily sector view

 

THE HEDGEYE DAILY OUTLOOK - global performance

 

 

EQUITY SENTIMENT:

  • ADVANCE/DECLINE LINE: -2155 (-1433)  
  • VOLUME: NYSE 975.06 (-4.21%)
  • VIX:  33.92 +6.60% YTD PERFORMANCE: +91.1%
  • SPX PUT/CALL RATIO: 2.02 from 1.64 +23.17%

 

CREDIT/ECONOMIC MARKET LOOK:

  • TED SPREAD: 31.75
  • 3-MONTH T-BILL YIELD: 0.02%
  • 10-Year: 1.97 from1.99    
  • YIELD CURVE: 1.75 from 1.79

 

MACRO DATA POINTS (Bloomberg Estimates):

  • 10 a.m.: ISM Non-Manuf., est. 51.0, prior 52.7
  • 11:30 a.m.: U.S. to sell $29b 3-mo., $27b 6-mo. bills
  • 11:30 a.m.: U.S. to sell $15b 8-day cash mgmt bills
  • 1:10 p.m.: Fed’s Kocherlakota speaks at UMinnesota
  • 1:30 p.m.: Donald Kohn, former vice chairman Fed, speaks at London School of Economics
  • Note ICSC/Redbook weekly sales, API inventories being released tomorrow

 

WHAT TO WATCH:

  • Swiss central bank set minimum exchange rate of 1.20 francs per euro, and said it’s “prepared to buy foreign currency in unlimited quantities”
  • U.S. 10-yr yield hit a record low of 1.91% earlier
  • ISM’s non-manufacturing index probably fell to 51 last month, the lowest level since Jan. 2010, economists’ forecast
  • Euro-area 2Q consumption, investment, spending miss estimates after figures revised from first release; 2Q GDP up 0.2%, in line with Aug. 16 est., losing momentum from previous 0.8% growth as govts. imposed austerity measures
  • PepsiCo expected to announce 10-year extension of their sponsorship deal with NFL today: WSJ
  • Toshiba fell to lowest in more than 2 years in Tokyo after WSJ reported co. may buy Shaw Group’s stake in Westinghouse Electric
  • JNJ/Bayer: FDA releases briefing docs for Sept. 8 advisory panel on Xarelto
  • Gulf of Mexico production resuming after Tropical Storm Lee shut 61% of oil, 46% of natural gas output
  • Global regulators may ease new bank rules that require lenders to hold more liquid assets, FT says
  • Ministers from Germany, Finland and the Netherlands meet today to discuss Finnish demand for collateral in bailout for Greece
  • Italian Senate expected to debate EU45.5b ($64b) austerity plan amid strike today after bond yields surged on concern govt. may backslide on the plan
  • WTO yesterday rejected China’s appeal of ruling that backed U.S. duties on tire imports
  • Ralcorp Holdings should explain why they rejected ConAgra Foods’s most recent $5.18b takeover bid, ISS said
  • No IPOs expected to price today

 

COMMODITY/GROWTH EXPECTATION

 

THE HEDGEYE DAILY OUTLOOK - daily commodity view

 

 

MOST POPULAR COMMODITY HEADLINES FROM BLOOMBERG:

  • Gold Falls From Record in London as SNB Imposes Franc Ceiling
  • Commodities Fall to One-Week Low as Europe Debt Concerns Deepen
  • Brent Oil Snaps Three-Day Drop as SNB Pledge Weakens Dollar
  • Corn, Wheat Fall as European Debt Crisis Stokes Demand Concern
  • Gold Not in a Bubble as Central Banks Print Cash, Faber Says
  • Copper May Rise in London on Freeport Strikes, Chilean Output
  • Coffee Falls as Vietnam, Latin America Supply Rises; Cocoa Drops
  • Fertilizer Imports by India May Slump Most in a Decade on Price
  • Coffee Peaking as Latin American Cargoes Surge: Freight Markets
  • Capacity Crunch Looms at Asia Container Ports: Chart of the Day
  • Brazil’s Sugar Output May Rebound Only From 2013 on Weather
  • China, India Target Colombia Coal Deposits as Demand Rises
  • Corn, Soybeans May Rise as Adverse Weather Threatens U.S. Yields
  • Indonesia ‘Life-or-Death’ Coal Law to Cut Sales: Energy Markets
  • Corn Shipments Slump as U.S. Loses to Russia: Chart of the Day
  • Top Copper Producer Chile Sees Output Drop as China Demand Grows
  • Gasoline Tracks European Oil With WTI Collapse: Chart of the Day

 

CURRENCIES

 

THE HEDGEYE DAILY OUTLOOK - daily currency view

 

 

EUROPEAN MARKETS

 

THE HEDGEYE DAILY OUTLOOK - euro performance

 

 

ASIAN MARKETS

 

THE HEDGEYE DAILY OUTLOOK - asia performance

 

 

MIDDLE EAST

 

THE HEDGEYE DAILY OUTLOOK - MIDEAST PERFORMANCE

 

 

Howard Penney

Managing Director

 

 



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