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12/07/12 10:30AM EST
Burning Down The House

It seems like the housing crisis was only a few months ago and yet it’s been nearly six years since it first started. Since then, the housing market has slowly but surely recovered. We have a long way to go before everything is “right” again but we’re seeing data that’s positive to say the least. Inventory is declining, prices have increased and mortgage rates are low. CoreLogic data indicates that home prices rose 6.3% in October on a year-over-year basis. We believe that this positive momentum is accelerating and will cover this on our 11:00 AM call with Hedgeye Financials Sector Head Josh Steiner titled “Could Housing’s Recovery Go Parabolic in 2013?” We encourage you to listen and if you don’t have access, please email us at for more information.

New unit openings in China and strength in YRI and US should offset China weakness in 1H13. China SRS growth is sensitive to the economy but new unit growth and ROIIC are likely to be supported by continuing growth of the consuming class in China. Looking at operating income by geography for YUM/MCD/SBUX, we can see that YUM is the most geographically diverse. This is manifest in YUM’s more stable EPS growth and price performance over the last 10 years.

Uncertainty in US from a macro perspective (jobless claims uptick) gives us pause from TRADE perspective although coffee prices will serve as a tailwind going forward. Company is becoming more complex, taking on risk as it acquires new brands. Longer-term, we view Starbucks, along with YUM, as one of the most attractive global growth stories in our space.

We believe ASCA is greatly undervalued due to its potential to follow a OPCO/PROPCO model like PENN in two years or so. A high FCF yield and a healthy balance sheet make this gamer an attractive investment.

“Bill Gross said the investment company may reduce its risk profile in 2013 after posting higher-than-average returns this year.” -@MrTopStep

“There is no stigma attached to recognizing a bad decision in time to install a better one.” -Laurence J. Peter

Non-Farm Payrolls rise by 146,000, exceeding estimates. Unemployment falls to 7.7% in November.

  • CASH: 52
  • US EQUITIES: 12
  • INTL EQUITIES: 6
  • COMMODITIES: 0
  • FIXED INCOME: 18
  • INTL CURRENCIES: 12
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