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MPEL: TRADE UPDATE

Today, Keith bought MPEL in the Hedgeye Virtual Portfolio.  The Street is still too low on 3Q and the stock is as cheap as it was at $4.

 

 

Keith bought MPEL in the Virtual Portfolio at $12.70.  According to his model, MPEL has rock solid support at $12.49 (TRADE) and $11.90 (TREND).  Fundamentally, MPEL continues to be a favorite name of ours heading into 3Q earnings for several reasons: 1) Street is ~20-25% too low on 3Q EBITDA; 2) among the Macau names, it is the cheapest (under 8x - same forward multiple as when it was a $4 stock) and has the least downside to trough March 2009 levels; 3) Besides Galaxy, which is feeding off of the opening of Galaxy Macau, it is the only operator to have gained revenue market share since Q2 end; 4) It has 100% exposure to Macau, which is experiencing significant growth.  

 

MPEL: TRADE UPDATE - mpel


Bullish?: SP500 Levels, Refreshed

POSITION: Long Utilities (XLU)

 

Into month end (August 30th), I wrote a note saying I was moving the Hedgeye Portfolio to net short (more SHORTS than LONGS) for the 1st time since June 23rd. I was looking for a correction of the August month-end markup.

 

After seeing the correction in the first 6 days of the September, I’ve now covered my Financials (XLF) and Housing (ITB) short positions and moved the Hedgeye Portfolio to one of its longest (net) positions of the year (13 LONGS, 7 SHORTS).

 

As the math in my process changes, I do. I’m not saying that the SP500 is bullish from an intermediate (TREND) or long-term (TAIL) perspective. I am, however, saying explicitly that the immediate-term TRADE signals here are bullish.

 

Here are the lines that matter: 

  1. TRADE support = 1158-1182 is the range I am highlighting in the chart (attached); those are higher-lows versus the YTD closing low (1119)
  2. TRADE resistance = 1230
  3. TAIL resistance = 1263 

So I have been covering and buying again this morning as the probability has heightened that we see 1230 in the SP500 on the next leg up. Manage your risk around the 1158-1230 range proactively.

KM

 

Keith R. McCullough
Chief Executive Officer

 

Bullish?: SP500 Levels, Refreshed - SPX


THE HBM: GMCR, SBUX, MCD, DRI

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

 

Macro

 

Consumer

 

Initial jobless claims came in at 414k for the week ended September 3rd versus consensus 405k and 412k the week prior.  The chart below shows rolling claims over the past few years.

 

THE HBM: GMCR, SBUX, MCD, DRI - initial claims 98

 

 

Commodities

 

The coffee crop in Brazil may rise to 62 million bags in the 2012-13 season as trees enter the high-yielding half of the two-year cycle, according to Volcafe.

 

 

Subsectors

 

THE HBM: GMCR, SBUX, MCD, DRI - subsectors fbr

 

 

QUICK SERVICE

  • GMCR has been rated “Overweight” with a $117 price target by Piper Jaffray.
  • SBUX’s plans for growth in Asia are not limited to China and increasing Via penetration.  The company also plans to double its store base in Korea.
  • MCD’s remodels in Canada, which we wrote about yesterday, are to include plasma TV’s, fireplaces and completely remodeled exteriors.

 

CASUAL DINING

  • DRI was raised to “Outperform” at Wells Fargo.

 

THE HBM: GMCR, SBUX, MCD, DRI - stocks 98

 

 

Howard Penney

Managing Director

 

Rory Green

Analyst


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INITIAL CLAIMS RISE AHEAD OF OBAMA'S SPEECH

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

 

Initial Claims Rise 5k

Initial jobless claims rose 5k to 414k last week (+2k after the revision to last week's data).  With this week's data point, there is now a clear upward trend in place in rolling claims.  The Labor Department noted that there was little effect on claims from the hurricane.  However, because of the Labor Day holiday, data from several states including California was estimated rather than actual.  This means that revisions next week are likely to be larger than normal, although the revision could go either direction.  

 

INITIAL CLAIMS RISE AHEAD OF OBAMA'S SPEECH - rolling

 

INITIAL CLAIMS RISE AHEAD OF OBAMA'S SPEECH - raaw

 

INITIAL CLAIMS RISE AHEAD OF OBAMA'S SPEECH - sp

 

10-year Declines Put Enormous Pressure on Margins

We presented our Black Book yesterday that analyzes the impact of the current rate environment on NIM.  To summarize, the impact is profound, wiping out substantial swaths of interest income at all the moneycenter banks.  (Contact us if you haven't seen this presentation.)  This week's price action in the 10-yr remained negative for the banks.

 

INITIAL CLAIMS RISE AHEAD OF OBAMA'S SPEECH - 2 10 spread

 

INITIAL CLAIMS RISE AHEAD OF OBAMA'S SPEECH - spreads QoQ

 

Subsector Performance Chart

 

The chart below shows the performance of financial stocks by subsector.

 

INITIAL CLAIMS RISE AHEAD OF OBAMA'S SPEECH - perf

 

Joshua Steiner, CFA

 

Allison Kaptur

 

Having trouble viewing the charts in this email?  Please click the link below to view in your browser.  


THE HEDGEYE DAILY OUTLOOK

TODAY’S S&P 500 SET-UP - September 8, 2011

 

As we look at today’s set up for the S&P 500, the range is 59 points or -4.22% downside to 1148 and 0.70% upside to 1207.

 

 

SECTOR AND GLOBAL PERFORMANCE

 

<CHART2>

 

THE HEDGEYE DAILY OUTLOOK - global performance

 

 

EQUITY SENTIMENT:

  • ADVANCE/DECLINE LINE: 2420 (-2155)
  • VOLUME: NYSE 954.50 (-15.15%)
  • VIX:  33.38 -9.78% YTD PERFORMANCE: +88.1%
  • SPX PUT/CALL RATIO: 1.99 from 1.85

 

CREDIT/ECONOMIC MARKET LOOK:

  • TED SPREAD: 32.15
  • 3-MONTH T-BILL YIELD: 0.0153
  • 10-Year: 2.05 from 1.98
  • YIELD CURVE: 1.84 from 1.77

 

MACRO DATA POINTS (Bloomberg Estimates):

  • 8:30 a.m.: Trade balance, est. (-51.0b), prior (-53.1b)
  • 8:30 a.m.: Jobless claims, est. 405k, prior 409k
  • 9 a.m.: Corelogic June foreclosures
  • 9:45 a.m.: Bloomberg consumer comfort, prior (-49.1)
  • 10:30 a.m.: EIA Natural Gas storage change
  • 11 a.m.: DoE inventories
  • 1:30 p.m.: Fed’s Bernanke speaks to economics club in Minn.
  • 3 p.m.: Consumer credit, est. $6b, prior (-$15.5b)

 

WHAT TO WATCH:

  • Fed Chairman Ben Bernanke scheduled to speak in Minnesota today on the economic outlook, 1:30 p.m. ET
  • Monsanto and 10 other cos. may win challenge against French measures banning use of strain of genetically modified corn if govt. can’t show fulfilled correct procedures, EU’s highest court said earlier
  • Congress’s deficit-reduction supercommittee holds first meeting today in effort to find $1.5t in cuts
  • JNJ/Bayer: FDA advisory committee on Xarelto (rivaroxaban)
  • Yahoo board may hire advisers within two weeks, with Allen & Co., JPMorgan and UBS among those likely to be chosen: WSJ
  • HTC surged to highest in 3 weeks in Taipei after filing infringement claims against Apple yesterday, using patents bought from Google last week
  • Labor Dept. said to be investigating pay practices of some home building cos. including Pulte, Lennar, D.R. Horton, KB Home: WSJ
  • Ranbaxy Laboratories headed for biggest close in 3 months after parent Daiichi Sankyo said aims to start selling generic version of Pfizer’s cholesterol pill Lipitor on schedule
  • ACE agreed to buy Penn Millers for $20.50 cash per share
  • NFL season begins tonight
  • No IPOs expected to price today

 

COMMODITY/GROWTH EXPECTATION

 

THE HEDGEYE DAILY OUTLOOK - daily commodity view

 

 

MOST POPULAR COMMODITY HEADLINES FROM BLOOMBERG:

  • Gold Gains in New York as Two-Day Slump From Record Lures Buyers
  • Monsanto May Win Appeal of French GM Maize Ban, EU Court Says
  • Cotton Climbs Most in Two Months as China May Build Stockpiles
  • Coffee Falls as Slowing Economies May Dent Demand; Cocoa Drops
  • Copper Declines 0.5% to $9,044 a Ton on London Metal Exchange
  • Corn May Rise on Speculation U.S. Harvest Will Miss Estimates
  • Tropical Storm Nate Forecast to Strengthen in Mexican Waters
  • Corn Imports by China to Surge, Tightening Global Supply
  • South Korea to List Exchange-Traded Fund for Physical Copper
  • Hayward to Spark Oil Fight in Iraqi ‘Last Great Frontier’
  • Toyota Boosts Japan Ship Lines Amid Slump: Freight Markets
  • Sweet Oil Filling Libya Gap to Stay Near Record: Energy Markets

 

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

 

 



THE M3: SJM COTAI; GAMING CONCESSIONS; CHINESE TRAVEL

The Macau Metro Monitor, September 8, 2011

 

 

SJM UNVEIL ITS COTAI PROJECT IN A RESEARCH REPORT Macau Daily News

According to a report by BoC International, SJM's Cotai project would need 15,000 workers, which is a barrier to the project's schedule.  SJM expects to obtain government approval by the end of 2011.  The project is expected to be completed within 36 months from receiving approval.

 

NO TIMETABLE YET FOR RENEWAL OF GAMING CONCESSIONS: GOVT Macau Daily Times

The Macau government doesn’t have a calendar yet to start the gaming concession renewal process.  Casino concessions in Macau will begin to expire in 2020.  These worries are likely to make it harder for operators to borrow to pay for their projects in Cotai.  

 

MORE TRAVELING FOR CHINESE IN UPCOMING HOLIDAYS Xinhua News

It is projected that some 300MM Chinese will be traveling during the upcoming Mid‐ Autumn Festival and National Day holidays this year, representing a 20% increase YoY.  And some 2.2MM are expected to travel to overseas destinations such as the Maldives, Phuket, Bali, Hong Kong, and South Korea, spending approximately US$2.1BN on international trips.


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