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YUM: Plenty To Like

Yum! Brands (YUM), owner of KFC, Taco Bell and Pizza Hut, is one of our best long ideas in Restaurants. We think Yum! is attractive on the long side for 2013 for several reasons: the company is better diversified than Starbucks (SBUX) and McDonald’s (MCD), the recent sell off in the stock makes for a compelling entry point for investors and the company’s improving US business complements strong international unit growth in 2013. Recent news related to a KFC China chicken supplier and its excessive use of antibiotics in its feed has pushed YUM shares lower but we see the most important fundamentals related to the stock as positive from here.

 

YUM: Plenty To Like - yum levels large

 

The chart posted above highlights our macro team's quantitative view of the stocks. Currently, YUM is in a bearish formation with near-term TRADE and intermediate-term TREND resistance at $67.45 and $68.81, respectively.

 

YUM: Plenty To Like - yum index vs cd large


JOBS DATA: Tailwinds Ahoy

This morning’s jobless claims numbers rose 12k to 372k from 360k, which was better than expected. It reflects two weeks of data and after the last report, in which 19 states worth of data was omitted, this is a real positive for the economy. With Hurricane Sandy no longer affecting the data, we’re seeing a continuing trend of improvement in the labor market that we believe will continue through February despite the seasonality distortion (i.e. holiday hiring), which does play into the numbers.

 

JOBS DATA: Tailwinds Ahoy  - jobs1

 

JOBS DATA: Tailwinds Ahoy  - jobs2

 

JOBS DATA: Tailwinds Ahoy  - jobs3


December Snow - Modest Help for Drought Conditions

December was a useful month in terms of snowfall across the Midwest – 68.4% covered by snow with an average depth of 3.2 inches (National Weather Service).   There was no snow cover in November (not a particularly constructive month in terms of remedying drought conditions) and very little in December 2011 as well (2.3% covered by snow), so snow season is better begun than it was last year.

 

While constructive, the December snowfall only represents the equivalent of about ½ inch of rain – snowfall in January and February will have to be measured in feet in order to provide substantial relief to the drought conditions that still linger across much of the United States.

 

We remain bearish on corn fundamentally, and the commodity remains bearish trade and trend on our model. However, the persistent drought conditions bear watching as we progress through the winter.

 

December Snow - Modest Help for Drought Conditions - Drought January1

 

 

Robert  Campagnino

Managing Director

HEDGEYE RISK MANAGEMENT, LLC

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JOSHUA STEINER: INITIAL JOBLESS CLAIMS: LABOR IMPROVEMENT ACCELERATES

Takeaway: The labor market continues to improve, and at a slightly accelerated pace as of this latest week. Expect ongoing tailwinds through February.

Back on Track

This morning's initial jobless claims number is meaningful in that it reflects two weeks of data. The previous week's numbers were estimated due to the omission of 19 states, including California and Texas, due to the holidays. 

 

Importantly, the data is reasonably strong, continuing a trend we've seen since September, adjusting for the one-time effects of Hurricane Sandy. As a reminder, we expect claims will continue to improve through February and should decline to a level in the 340-350k range on a 4-week rolling basis. Then, we would expect tailwinds to reverse to headwinds in March, as has been the case for the last three years. See the first chart below for an illustration of the trend.

 

Recall that to ferret out the noise of seasonality distortions, we look at the annual change in rolling NSA claims. Last week the NSA YOY change was -6%, which compared with -5.9% in the previous week. A larger negative number represents accelerating improvement. 

 

The Numbers

Initial jobless claims rose 12k to 372k from 360k. The prior week's number was revised up by 12k to 362k from 350k. Normally we look at the unrevised vs. unrevised for apples to apples comparisons, but this week, due to the missing states, we're comparing unrevised to revised. Rolling claims rose 0.25k WoW to 360k. 

 

JOSHUA STEINER: INITIAL JOBLESS CLAIMS: LABOR IMPROVEMENT ACCELERATES - 1

 

JOSHUA STEINER: INITIAL JOBLESS CLAIMS: LABOR IMPROVEMENT ACCELERATES - 2

 

JOSHUA STEINER: INITIAL JOBLESS CLAIMS: LABOR IMPROVEMENT ACCELERATES - 3

 

JOSHUA STEINER: INITIAL JOBLESS CLAIMS: LABOR IMPROVEMENT ACCELERATES - 4

 

JOSHUA STEINER: INITIAL JOBLESS CLAIMS: LABOR IMPROVEMENT ACCELERATES - 5

 

JOSHUA STEINER: INITIAL JOBLESS CLAIMS: LABOR IMPROVEMENT ACCELERATES - 6

 

JOSHUA STEINER: INITIAL JOBLESS CLAIMS: LABOR IMPROVEMENT ACCELERATES - 7

 

JOSHUA STEINER: INITIAL JOBLESS CLAIMS: LABOR IMPROVEMENT ACCELERATES - 8
 

JOSHUA STEINER: INITIAL JOBLESS CLAIMS: LABOR IMPROVEMENT ACCELERATES - 9

 

JOSHUA STEINER: INITIAL JOBLESS CLAIMS: LABOR IMPROVEMENT ACCELERATES - 10

 

JOSHUA STEINER: INITIAL JOBLESS CLAIMS: LABOR IMPROVEMENT ACCELERATES - 11

 

 

Joshua Steiner, CFA

 

Robert Belsky


INITIAL JOBLESS CLAIMS: LABOR IMPROVEMENT ACCELERATES

Takeaway: The labor market continues to improve, and at a slightly accelerated pace as of this latest week. Expect ongoing tailwinds through February.

Back on Track

This morning's initial jobless claims number is meaningful in that it reflects two weeks of data. The previous week's numbers were estimated due to the omission of 19 states, including California and Texas, due to the holidays. 

 

Importantly, the data is reasonably strong, continuing a trend we've seen since September, adjusting for the one-time effects of Hurricane Sandy. As a reminder, we expect claims will continue to improve February and should decline to a level in the 340-350k range on a 4-week rolling basis. Then, we would expect tailwinds to reverse to headwinds in March, as has been the case for the last three years. See the first chart below for an illustration of the trend.

 

Recall that to ferret out the noise of seasonality distortions, we look at the annual change in rolling NSA claims. Last week the NSA YOY change was -6%, which compared with -5.9% in the previous week. A larger negative number represents accelerating improvement. 

 

The Numbers

Initial jobless claims rose 12k to 372k from 360k. The prior week's number was revised up by 12k to 362k from 350k. Normally we look at the unrevised vs. unrevised for apples to apples comparisons, but this week, due to the missing states, we're comparing unrevised to revised. Rolling claims rose 0.25k WoW to 360k. 

 

INITIAL JOBLESS CLAIMS: LABOR IMPROVEMENT ACCELERATES  - seasonality

 

INITIAL JOBLESS CLAIMS: LABOR IMPROVEMENT ACCELERATES  - Rolling NSA

 

INITIAL JOBLESS CLAIMS: LABOR IMPROVEMENT ACCELERATES  - Raw

 

INITIAL JOBLESS CLAIMS: LABOR IMPROVEMENT ACCELERATES  - Rolling

 

INITIAL JOBLESS CLAIMS: LABOR IMPROVEMENT ACCELERATES  - NSA

 

INITIAL JOBLESS CLAIMS: LABOR IMPROVEMENT ACCELERATES  - rolling nsa 2

 

INITIAL JOBLESS CLAIMS: LABOR IMPROVEMENT ACCELERATES  - S P

 

INITIAL JOBLESS CLAIMS: LABOR IMPROVEMENT ACCELERATES  - FED

 

INITIAL JOBLESS CLAIMS: LABOR IMPROVEMENT ACCELERATES  - Recessions

 

INITIAL JOBLESS CLAIMS: LABOR IMPROVEMENT ACCELERATES  - linear

 

INITIAL JOBLESS CLAIMS: LABOR IMPROVEMENT ACCELERATES  - YoY NSA

 

Yield Spreads - 4Q12 Was 6 bps Better QoQ

The 2-10 spread rose 7.4 basis points WoW to 157 bps. The fourth quarter of 2012 saw the 2-10 spread average 143 bps, which was +6 bps higher than 3Q12.

 

INITIAL JOBLESS CLAIMS: LABOR IMPROVEMENT ACCELERATES  - 2 10

 

INITIAL JOBLESS CLAIMS: LABOR IMPROVEMENT ACCELERATES  - 2 10 QoQ

 

Financial Subsector Performance

The table below shows the stock performance of each Financial subsector over multiple durations.

 

INITIAL JOBLESS CLAIMS: LABOR IMPROVEMENT ACCELERATES  - Subsector performance

 

INITIAL JOBLESS CLAIMS: LABOR IMPROVEMENT ACCELERATES  - Companies

 

Joshua Steiner, CFA

 

Robert Belsky


CHART[S] DU JOUR: COTAI VS PENINSULA

Divergence continues – but only in Mass

 

  • New Cotai properties have driven considerable divergence in YoY growth in both Mass and VIP
  • However, the VIP divergence has been short-lived.  Peninsula VIP volume growth is approaching Cotai VIP volume growth despite the fact that the market will not lap the opening of Sands Cotai until April 2013
  • New properties are still driving engine behind the Mass market growing above mid teens

 

CHART[S] DU JOUR: COTAI VS PENINSULA - v

 

CHART[S] DU JOUR: COTAI VS PENINSULA - c2


Hedgeye Statistics

The total percentage of successful long and short trading signals since the inception of Real-Time Alerts in August of 2008.

  • LONG SIGNALS 80.64%
  • SHORT SIGNALS 78.57%
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