On January 22nd, Hedgeye hosted The Pitch, a popular webcast where six analysts shared their top stock ideas. Hedgeye CEO Keith McCullough, a former hedge fund manager, reviewed each idea live.
The event offered not only actionable investment ideas, but also a rare look at Hedgeye’s stock-picking process.
1. Long Warby Parker (WRBY)
“This is a consumer brand that has better growth potential than any I’ve seen in my career.” – Brian McGough, Hedgeye Retail Analyst |
McGough views Warby Parker as a strong consumer brand with room to grow. The company is shifting to lower-cost store locations, which better suit its customer base and improve profitability.
Key Points:
- Store rent costs dropped from $150 to $20 per square foot.
- Plans to expand to 3,000 stores globally.
- Improved return on invested capital due to cost-saving measures.
Coaching Notes:
Keith McCullough agreed with the growth story and addressed common investor concerns:
- On Valuation: “Expensive gets more expensive when you double your margins.”
- On Wall Street Pushback: Keith noted that many investors overlook growth potential by focusing solely on valuation, calling this approach “the old way of picking stocks.”
- Macro Fit: He emphasized that Warby Parker’s setup fits well within the current market environment, making it a strong small-cap pick.
2. Short Informatica (INFA)
“This is a mature software company that’s barely earning its cost of capital.” – Andrew Freedman, Hedgeye Communications Analyst |
Freedman views Informatica as a company falling behind in enterprise technology, with outdated middleware solutions and a shrinking customer base limiting its growth potential.
Key Points:
- Middleware technology is becoming obsolete as customers move to API-driven solutions.
- A saturated customer base limits opportunities for new business growth.
- Revenue growth is projected to slow sharply in 2025 amid rising competition.
Coaching Notes:
Keith McCullough backed the bearish view, highlighting Informatica’s weak fundamentals and negative Risk Range Signals.
- On Revenue Deceleration: “If your revenue growth is slowing, your stock’s going down. It’s as simple as that.”
- On Technical Setup: Keith highlighted that the risk range and trend signals are firmly bearish, calling this one of the most unfavorable setups in the market.
- On Valuation Pushback: “Value buyers don’t realize this is a value trap. Cheap gets cheaper when fundamentals deteriorate.”
3. Long Papa John’s (PZZA)
“This is a conservative double, if not a triple, by 2027.” – Bennett Cheer, Hedgeye Restaurants Analyst |
Cheer sees Papa John’s as a turnaround story led by new CEO Todd Pendergast, who is simplifying operations and refocusing the brand on its core strengths.
Key Points:
- Simplified menu and operations enhances efficiency.
- Investments in technology and marketing drive regional growth.
- Favorable setup for 2025 with easier comparisons and improved margins.
Coaching Notes:
Keith McCullough highlighted the technical and sentiment factors supporting the bullish case:
- On Short Interest: “The first way you make money is when the shorts start losing money. At 11% short interest, this is primed for a squeeze.”
- On Price Levels: Keith outlined critical trading levels that will indicate bullish momentum, noting: “Above $41, it’s bullish trade. Above $43, it’s bullish trend.”
- On Investor Sentiment: “This stock has deep negativity baked in, which makes it a compelling turnaround opportunity.”
4. Short Moderna (MRNA)
“This is a one-hit-wonder company likely heading close to zero.” – Emily Evans, Hedgeye Health Policy Analyst |
Evans views Moderna as a company heavily dependent on its mRNA vaccine technology, struggling with growing regulatory scrutiny and declining public trust.
Key Points:
- Pipeline relies too heavily on mRNA, with little diversification.
- Vaccine uptake is declining, and skepticism about safety is rising.
- Strategic reviews and cost-cutting highlight broader challenges.
Coaching Notes:
Keith McCullough agreed with the bearish setup, emphasizing the structural risks in Moderna’s business model:
- On Risk Range: “The most bearish setup you can have is when the top end of your risk range is inside the trend.”
- On Passive Ownership: Keith pointed out that a significant portion of the stock is held by passive investors, which could exacerbate selloffs as fundamentals deteriorate.
- On Sentiment: “The market’s good at identifying zeros, and Moderna has all the makings of one.”
5. Long Coinbase (COIN)
“Coinbase is leading the adoption of digital assets and stands to benefit massively.” – Ishmael Asad, Hedgeye Digital Assets Analyst |
Coinbase’s diversified revenue streams, such as interest income from USDC (a widely used digital dollar) and transaction fees from Base (a platform for faster, cheaper Ethereum transactions), are fueling sustainable growth.
Key Points:
- Q4 revenue growth is tracking at 66% quarter-over-quarter, exceeding street expectations.
- Revenue diversification includes Base (Ethereum Layer 2) and stablecoin interest income.
- Well-positioned to capitalize on growing crypto adoption and clearer regulations.
Coaching Notes:
Keith McCullough highlighted Coinbase’s strong setup in a favorable macro environment:
- On Signal Strength: “When the signal says it’s bullish, you don’t ignore it—especially with revenue growth this strong.”
- On Market Sentiment: Keith emphasized the lack of “smart shareholder concentration” as an opportunity, with room for institutional ownership to grow.
- On Macro Tailwinds: “This setup aligns perfectly with Quad 2, making it a strong pick for growth investors.”
6. Long Range Resources (RRC)
“This is one of the best-run natural gas operators, with a clear path to growth.” – Fernando Valle, Hedgeye Energy Analyst |
Valle identifies Range Resources as a leading choice in the natural gas sector, driven by weather-related demand, shrinking inventories, and long-term growth trends.
Key Points:
- Declining natural gas inventories in the U.S. and Europe are driving higher prices.
- Long-term growth factors include LNG exports, power generation, and electrification.
- A strong balance sheet and extensive inventory support sustained growth.
Coaching Notes:
Keith McCullough highlighted the strong technical setup and long-term growth potential of Range Resources:
- On Fractal Patterns: “This is one of the most bullish fractal patterns, with higher highs and higher lows signaling continued upside.”
- On Market Sentiment: Keith noted that natural gas often scares investors, creating opportunities for those willing to look beyond the noise.
- On Macro Fit: “This is a textbook Quad 2 growth stock, and the market believes it—even if investors are hesitant.”
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