HOSPITALS: Healthy lobbying

Lobbying is a tricky game. Everyone in Washington knows this, but don’t worry – the politicians definitely have your best interests at hand.  It could be argued right now that the biggest catalyst in healthcare at the moment is the Affordable Care Act (ACA). The Supreme Court is said to have made a decision on whether to uphold or strike down ACA but that’s just speculation. Regardless, hospitals have much to gain should the ruling come out in the Obama administration’s favor.


Hedgeye Healthcare Sector Head Thomas Tobin has put out a chart showing just how much lobbying has occurred pre and post-ACA. Here’s how Tobin composed the chart:


Below we show total lobbying expenditures by HC industry over the last 5 years.   We’ve combined Hospitals and Health Professionals (which include the AMA and other Physician groups) as their interests are generally aligned on the larger issues.   As can be seen, in combination, Hospitals & Physicians support the largest Lobbying effort with total lobbyists and expenditures averaging some 2K and $190M annually over the last 3 years.”


HOSPITALS: Healthy lobbying - hospital lobbying

PROTECT THIS HOUSE: Putting UA to work

Similar to our view of Nike, we like Under Armour more on a longer-term duration rather than the immediate-term TRADE duration. We added and removed UA from the virtual portfolio due to macro risks but Hedgeye Retail Sector Head Brian McGough remains bullish on the company for a variety of reasons.




First, UA is a great brand with solid recognition.  It basically rolled into the market a decade ago and “punched Nike in the jaw” with its line of compression apparel. The company also has a habit of reinvesting capital back into the business rather than pumping up operating margins.


For the TRADE duration, UA is looking a little too expensive for some. But as far as the TREND and TAIL durations go, we like UA for the long run. Look for a stronger dollar to boost UA’s margins due to the company’s lack of international operations. We also estimate that UA will be pushing out $3 billion in revenue by 2014 compared with $1.5 billion in 2011. 

HedgeyeRetail Visual: BBBY Comp Upside?

Our Home Furnishings index suggests BBBY’s 1Q12 comps should come in +6.5% vs. guidance of +2-4% and consensus expectations of +4.1% when the company reports after the close on Wednesday.


Over the past 12 quarters, BBBY comps have only missed consensus once (in 3Q11, by 40bps) despite coming in slightly above the high end of guidance (+4.1% vs. +2-4%). BBBY did not miss its own comp guidance once over that same time period and bucked the street by an average of 250bps over those 12 quarters. Mind you, however, that this coincided with the period during which it contributed to, and benefitted from the Bankruptcy of Linens ‘N Things.


Now, comp expectations are above the high end of BBBY’s standard +2-4% guidance at +4.1%, and as noted, our model suggests that we’ll see it.  But given our poor outlook for the company longer-term, we’d view any near-term strength as an opportunity to get out.


We see concern over the runway for omni-channel growth given BBBY’s e-commerce penetration has declined over the past 4 years with its exposure to the older spending group increasing. Of the nearly 100 companies we analyzed, BBBY was ranked 9th in terms of exposure to the 55 and up spending demographic which actually increased in 2011 relative to 2010. Finally, with a 93% direct product overlap with, there is additional risk in transitioning current BBBY shoppers from in store to online without remaining vulnerable to attrition from AMZN- BBBY’s competitive advantage is its in store shopping experience, quite the opposite for AMZN.


HedgeyeRetail Visual: BBBY Comp Upside? - Home furnishings index


HedgeyeRetail Visual: BBBY Comp Upside? - BBBY comp guidance history



Daily Trading Ranges

20 Proprietary Risk Ranges

Daily Trading Ranges is designed to help you understand where you’re buying and selling within the risk range and help you make better sales at the top end of the range and purchases at the low end.

Whispers: SP500 Levels, Refreshed

POSITIONS: Long Consumer Staples (XLP); Short Industrials (XLI)


I’ve only heard 4 whispers about different flavors of interventions in the last hour. That’s just got to be good for someone, because it sure can’t be for confidence.


No trust; no volume. That’s the market you have to risk manage right now. Equity outflows remain a paramount factor when we get to the top end of either my immediate or intermediate-term range.


Across risk management durations, here are the lines that matter most: 

  1. Intermediate-term TREND resistance = 1365
  2. Immediate-term TRADE resistance = 1347
  3. Immediate-term TRADE support = 1319 

In other words, keep managing the risk of the range. It’s somewhat predictable. So are the whispers.



Just make sure to have a large cash position for that day when the whispering stops,



Keith R. McCullough
Chief Executive Officer


Whispers: SP500 Levels, Refreshed  - SPX

European Banking Monitor: Chaos Delayed

Below are key European banking risk monitors, which are included as part of Josh Steiner and the Financial team's "Monday Morning Risk Monitor".  If you'd like to receive the work of the Financials team or request a trial please email .


Key Takeaways:


* The Greek election. New Democracy, the pro-bailout/pro-austerity party, received the plurality of the vote on Sunday with 29.7%, eclipsing Syriza by roughly 2.5%. PASOK, the center-left party, took 12.3% of the total vote, which means New Democracy and PASOK together should be able to clear the 151-seat hurdle necessary to hold a majority of the legislature. Recall that in the May 6 election they fell short of the 151-vote threshold by 2 votes. As such, a Greek exit of the Eurozone has been delayed, and some measure of relief rally should be expected.


That said, Spanish and Italian CDS widened, rising 5.3% (+31 bps) and 3.0% (+16 bps), respectively. So, while Greece's election was viewed as a potential downside catalyst, it hasn't changed the negative reality facing either Spain or Italy's economy, or Greece's for that matter. While expectations are now high for austerity terms on Greece to be eased, the current rate of contraction in the Greek economy will make it all but impossible to comply with even reduced terms in the intermediate to long-term. 


If you’d like to discuss recent developments in Europe, from the political to financial to social, please let me know and we can set up a call.


Matthew Hedrick

Senior Analyst




European Financials CDS Monitor – 26 of the 39 reference entities we track showed spreads widening across Europe last week. To be clear, these results are from last Friday, a few days before the Greek Election.  


European Banking Monitor: Chaos Delayed  - aaa. banks


Euribor-OIS spread – The Euribor-OIS spread (the difference between the euro interbank lending rate and overnight indexed swaps) measures bank counterparty risk in the Eurozone. The OIS is analogous to the effective Fed Funds rate in the United States.  Banks lending at the OIS do not swap principal, so counterparty risk in the OIS is minimal.  By contrast, the Euribor rate is the rate offered for unsecured interbank lending.  Thus, the spread between the two isolates counterparty risk. The Euribor-OIS spread widened by 2 bps to 41 bps.


European Banking Monitor: Chaos Delayed  - aaa. euribor


ECB Liquidity Recourse to the Deposit Facility – The ECB Liquidity Recourse to the Deposit Facility measures banks’ overnight deposits with the ECB.  Taken in conjunction with excess reserves, the ECB deposit facility measures excess liquidity in the Euro banking system.  An increase in this metric shows that banks are borrowing from the ECB.  In other words, the deposit facility measures one element of the ECB response to the crisis.  The latest overnight reading is €741.2B.


European Banking Monitor: Chaos Delayed  - aaa. facility


Security Market Program – For the fourteenth straight week the ECB's secondary sovereign bond purchasing program, the Securities Market Program (SMP), purchased no sovereign paper for the latest week ended 6/15, to take the total program to €210.5 Billion.


European Banking Monitor: Chaos Delayed  - aaa. SMP


June GGR forecast of 17-22% YoY growth



Macau had another strong week, generating average daily table revenues of HK$756 million.  Our full month June forecast is now for GGR of HK$23.5-24.5 billion or 17-22%.  We believe YoY growth at this level should inspire investors following the single digit growth of May.




As we expected, LVS continues to gain market share.  While 19.8% might not be sustainable over the near-term, it is representative of the longer term share we expect out of the company and certainly better than the 17% generated in the months prior and after the opening of Sands Cotai Central.  



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