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TRADE OF THE DAY: EZPW

Today we shorted EZ CORP (EZPW) at $20.15 a share at 3:19 PM EDT in our Real-Time Alerts. Along with Cash America (CSH), EZ CORP will be one of the pawn shop operators affected by gold’s recent downturn. When gold falls, it takes pawns down with it. We remain bearish on the stock through Q1 2013.

 

TRADE OF THE DAY: EZPW - image001

 


MNST - Buying Mispriced Growth

When we initiated coverage of the consumer staples sector a couple of weeks back, we highlighted two "broken" growth stories as being interesting - MJN (+5.9% since 12/17) and MNST (-1.4%).  Admittedly, MJN's market share and pricing issues in China were easier to get comfort with versus the more open-ended spectre of the possible regulation of energy drinks, but we see the outcomes as ultimately being the same - investors will go back to paying a premium multiple for the underlying growth profile in both stories.

 

It is our belief that the FDA has as much business regulating energy drinks as we do - which is to say, right around no business at all.  And while the timing of a likely favorable outcome is unclear, we believe that investors will be rewarded for picking their spots in this name, as we did today.

 

MNST - Buying Mispriced Growth - MNST Mispriced

 

MNST - Buying Mispriced Growth - MNST T T

 

 

Robert  Campagnino

Managing Director

HEDGEYE RISK MANAGEMENT, LLC

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OZM: Leading The Pack

Och-Ziff Capital Management (OZM), one of the few publicly traded hedge funds on the market, crushed December with their Master Fund gaining 1.0% month-over-month, ending 2012 up 11.18%. Their European Master Fund and Asia Master Fund were up 8.62% and 7.07% for 2012, respectively. Compared with the benchmark HFRX Global Hedge Fund Index 2012 return of 3.17%, OZM had a killer year.

 

OZM: Leading The Pack  - OZMchart

 

Though fund flows (money going into the fund) were negative for December by ~$450 million, they were positive for the year at $300 million. We expect more inflows into Och-Ziff in 2013 based on last year’s strong performance numbers. 

 

The stock is one of our top long ideas in financials for 2013. We believe that the market has yet to recognize the value of OZM’s incentive fee business and now that the fiscal cliff is behind us, we see that there is no damaging regulation that will affect asset management firms save for the small bump in long-term capital gains rates. It’s also worth noting that alternative asset managers like hedge funds do well in times of quantitative easing and we are well into our third round of QE.


SIZING UP ASIA & LATIN AMERICA FOR 2013

Takeaway: By modeling each economy from a full-year G/I/P perspective, we are better able to contextualize country-specific risks and opportunities.

SUMMARY BULLETS:

 

  • To kick-start the new year, we invite you deep into our process as we model each of the economies we follow across Asia and Latin America from a comprehensive GROWTH/INFLATION/POLICY perspective.
  • From there, we compare the mid-points of our 2013 forecast ranges for both GROWTH and INFLATION with current Bloomberg consensus forecasts, calling out any meaningful deviations between the our numbers and the Street. In short, we currently hold a variant outlook versus the Street in the following countries:
    • China: INFLATION
    • Hong Kong: INFLATION
    • Indonesia: INFLATION
    • Japan: GROWTH and INFLATION
    • New Zealand: GROWTH and INFLATION
    • Philippines: GROWTH
    • Singapore: GROWTH
    • Taiwan: GROWTH
    • Thailand: GROWTH
    • Brazil: GROWTH
    • Chile: GROWTH and INFLATION
    • Colombia: INFLATION
    • Mexico: INFLATION
    • Peru: GROWTH
    • Venezuela: GROWTH and INFLATION
  • Lastly, we provide color on each country’s financial market performance in 2012, as well as update you on our active fundamental investment ideas for each country. If we do not currently hold a high-conviction thesis, we flag any country-specific asset classes that are currently screening as a LONG or SHORT idea at first glance.
  • To dialogue further on anything you see below or to drill into country-specific catalysts, etc., please email us at .

 

METHODOLOGY

As a reminder, all of our country-specific estimates are being driven by our proprietary predictive tracking algorithm – a clear differentiator from traditional sell-side econometric models that tend to be, at best, late at flagging critical deltas in economic fundamentals. 

 

The main drawback to our approach is that because of the model’s heavy reliance on recently-reported trends in the underlying data series, the forecasting error tends to widen dramatically as estimates track further and further away from the latest reported data point. That being said, we are purposefully sacrificing long-term accuracy for near-term precision, as most long-term predictions tend to be wildly inaccurate anyway.

 

It's also important to note that the output(s) of our predictive tracking algorithm is a band of probable outcomes, rather than a singular forecast. We take the median of these ranges to artificially produce comparable full-year estimates to the pin-the-tail-on-the-donkey-style estimates of the Old Wall.

 

Lastly, our forecasts are inherently fluid in nature and are likely to adjust throughout the course of the year as incremental data is reported – particularly in the event(s) of forecast variance. For now, we offer up what the model is currently signaling to us for each country.

 

 

ASIA

 

Australia

  • 2012 Equity Market Performance: +13.5% vs. a regional median gain of +17.7%
  • 2012 FX Performance (vs. USD): +1.8% vs. a regional median gain of +2.6%
  • 2012 Sovereign Debt Performance (10YR tenor, local currency): -40bps to 3.27%
  • Full-Year 2013 G/I/P Outlook: Quad #3 (slower GROWTH; faster INFLATION)
  • Key Callout for 2013: N/A
  • Active Fundamental Investment Ideas: We have held a bearish bias on the Aussie dollar (TAIL) and the Aussie equity market (TAIL) since JUN 5, 2012. While our timing has been off here, we continue to view the Australian economy as among the next shoes to drop amid the popping of Bubble #3 (commodities) and China’s economic rebalancing agenda.

SIZING UP ASIA & LATIN AMERICA FOR 2013 - AUSTRALIA

 

China

  • 2012 Equity Market Performance: +3.2% vs. a regional median gain of +17.7%
  • 2012 FX Performance (vs. USD): +1.1% vs. a regional median gain of +2.6%
  • 2012 Sovereign Debt Performance (10YR tenor, local currency): +15bps to 3.59%
  • Full-Year 2013 G/I/P Outlook: Quad #2 (faster GROWTH; faster INFLATION)
  • Key Callout for 2013: Our outlook for INFLATION in China is currently a bit hawkish relative to consensus at the present juncture.
  • Active Fundamental Investment Ideas: We have held a bullish bias on Chinese consumer stocks (TREND) since DEC 10, 2012.

SIZING UP ASIA & LATIN AMERICA FOR 2013 - CHINA

 

Hong Kong

  • 2012 Equity Market Performance: +22.9% vs. a regional median gain of +17.7%
  • 2012 FX Performance (vs. USD): +0.2% vs. a regional median gain of +2.6%
  • 2012 Sovereign Debt Performance (10YR tenor, local currency): -89bps to 0.63%
  • Full-Year 2013 G/I/P Outlook: Quad #1 (faster GROWTH; slower INFLATION)
  • Key Callout for 2013: Our outlook for INFLATION in Hong Kong is currently well shy of consensus at the present juncture.
  • Active Fundamental Investment Ideas: We have held a bullish bias on the Hong Kong equity market (TREND) since NOV 16, 2012.

SIZING UP ASIA & LATIN AMERICA FOR 2013 - HONG KONG

 

India

  • 2012 Equity Market Performance: +25.7% vs. a regional median gain of +17.7%
  • 2012 FX Performance (vs. USD): -3.1% vs. a regional median gain of +2.6%
  • 2012 Sovereign Debt Performance (10YR tenor, local currency): -52bps to 8.05%
  • Full-Year 2013 G/I/P Outlook: Quad #2 (faster GROWTH; faster INFLATION)
  • Key Callout for 2013: N/A
  • Active Fundamental Investment Ideas: N/A

SIZING UP ASIA & LATIN AMERICA FOR 2013 - INDIA

 

Indonesia

  • 2012 Equity Market Performance: +12.9% vs. a regional median gain of +17.7%
  • 2012 FX Performance (vs. USD): -5.5% vs. a regional median gain of +2.6%
  • 2012 Sovereign Debt Performance (10YR tenor, local currency): -84bps to 5.19%
  • Full-Year 2013 G/I/P Outlook: Quad #3 (slower GROWTH; faster INFLATION)
  • Key Callout for 2013: Our outlook for INFLATION in Indonesia is currently a bit dovish relative to consensus at the present juncture.
  • Active Fundamental Investment Ideas: N/A

SIZING UP ASIA & LATIN AMERICA FOR 2013 - INDONESIA

 

Japan

  • 2012 Equity Market Performance: +22.9% vs. a regional median gain of +17.7%
  • 2012 FX Performance (vs. USD): -11.3% vs. a regional median gain of +2.6%
  • 2012 Sovereign Debt Performance (10YR tenor, local currency): -20bps to 0.79%
  • Full-Year 2013 G/I/P Outlook: Quad #3 (slower GROWTH; faster INFLATION)
  • Key Callout for 2013: Our outlooks for GROWTH and INFLATION in Japan are both currently well above consensus at the present juncture.
  • Active Fundamental Investment Ideas: We have held a bearish bias on the Japanese yen (TREND, TAIL) since SEP 27, 2012.

SIZING UP ASIA & LATIN AMERICA FOR 2013 - JAPAN

 

Malaysia

  • 2012 Equity Market Performance: +10.3% vs. a regional median gain of +17.7%
  • 2012 FX Performance (vs. USD): +3.6% vs. a regional median gain of +2.6%
  • 2012 Sovereign Debt Performance (10YR tenor, local currency): -20bps to 3.5%
  • Full-Year 2013 G/I/P Outlook: Quad #2-3
  • Key Callout for 2013: N/A
  • Active Fundamental Investment Ideas: N/A

SIZING UP ASIA & LATIN AMERICA FOR 2013 - MALAYSIA

 

New Zealand

  • 2012 Equity Market Performance: +20.9% vs. a regional median gain of +17.7%
  • 2012 FX Performance (vs. USD): +6.6% vs. a regional median gain of +2.6%
  • 2012 Sovereign Debt Performance (10YR tenor, local currency): -30bps to 3.52%
  • Full-Year 2013 G/I/P Outlook: Quad #3 (slower GROWTH; faster INFLATION)
  • Key Callout for 2013: Our outlooks for GROWTH and INFLATION in New Zealand are both currently well shy of consensus at the present juncture.
  • Active Fundamental Investment Ideas: N/A, though the New Zealand dollar is currently screening as a candidate on the SHORT side.

SIZING UP ASIA & LATIN AMERICA FOR 2013 - NEW ZEALAND

 

Philippines

  • 2012 Equity Market Performance: +33% vs. a regional median gain of +17.7%
  • 2012 FX Performance (vs. USD): +6.8% vs. a regional median gain of +2.6%
  • 2012 Sovereign Debt Performance (10YR tenor, local currency): -101bps to 4.4%
  • Full-Year 2013 G/I/P Outlook: Quad #3 (slower GROWTH; faster INFLATION)
  • Key Callout for 2013: Our outlook for GROWTH in the Philippines is currently well above consensus at the present juncture.
  • Active Fundamental Investment Ideas: N/A; while Filipino stock market remains a long-term TAIL favorite of ours as a result of its prudent POLICY and robust GROWTH outlook, we are strategically on the sidelines for now.

SIZING UP ASIA & LATIN AMERICA FOR 2013 - PHILIPPINES

 

Singapore

  • 2012 Equity Market Performance: +19.7% vs. a regional median gain of +17.7%
  • 2012 FX Performance (vs. USD): +6.2% vs. a regional median gain of +2.6%
  • 2012 Sovereign Debt Performance (10YR tenor, local currency): -33bps to 1.3%
  • Full-Year 2013 G/I/P Outlook: Quad #1 (faster GROWTH; slower INFLATION)
  • Key Callout for 2013: Our outlook for GROWTH in Singapore is currently well above consensus at the present juncture.
  • Active Fundamental Investment Ideas: We have held a bullish bias on the Singaporean equity market (TREND) since DEC 21, 2012.

SIZING UP ASIA & LATIN AMERICA FOR 2013 - SINGAPORE

 

South Korea

  • 2012 Equity Market Performance: +9.4% vs. a regional median gain of +17.7%
  • 2012 FX Performance (vs. USD): +9.1% vs. a regional median gain of +2.6%
  • 2012 Sovereign Debt Performance (10YR tenor, local currency): -63bps to 3.16%
  • Full-Year 2013 G/I/P Outlook: Quad #2 (faster GROWTH; faster INFLATION)
  • Key Callout for 2013: N/A
  • Active Fundamental Investment Ideas: We have held a bullish bias on the South Korean won (TREND) since NOV 1, 2012 and a bullish bias on the South Korean equity market (TREND) since DEC 27, 2012.

SIZING UP ASIA & LATIN AMERICA FOR 2013 - SOUTH KOREA

 

Taiwan

  • 2012 Equity Market Performance: +8.9% vs. a regional median gain of +17.7%
  • 2012 FX Performance (vs. USD): +4.3% vs. a regional median gain of +2.6%
  • 2012 Sovereign Debt Performance (10YR tenor, local currency): -12bps to 1.17%
  • Full-Year 2013 G/I/P Outlook: Quad #1 (faster GROWTH; slower INFLATION)
  • Key Callout for 2013: Our outlook GROWTH in Taiwan is currently a bit shy of consensus at the present juncture.
  • Active Fundamental Investment Ideas: N/A

SIZING UP ASIA & LATIN AMERICA FOR 2013 - TAIWAN

 

Thailand

  • 2012 Equity Market Performance: +35.8% vs. a regional median gain of +17.7%
  • 2012 FX Performance (vs. USD): +3.2% vs. a regional median gain of +2.6%
  • 2012 Sovereign Debt Performance (10YR tenor, local currency): +22bps to 3.51%
  • Full-Year 2013 G/I/P Outlook: Quad #2 (faster GROWTH; faster INFLATION)
  • Key Callout for 2013: Out outlook for GROWTH in Thailand is currently well above consensus at the present juncture.
  • Active Fundamental Investment Ideas: N/A

SIZING UP ASIA & LATIN AMERICA FOR 2013 - THAILAND

 

Vietnam

  • 2012 Equity Market Performance: +17.7% vs. a regional median gain of +17.7%
  • 2012 FX Performance (vs. USD): +1% vs. a regional median gain of +2.6%
  • 2012 Sovereign Debt Performance (10YR tenor, local currency): -230bps to 10.2%
  • Full-Year 2013 G/I/P Outlook: N/A, due to non-standard data reporting
  • Key Callout for 2013: N/A
  • Active Fundamental Investment Ideas: N/A

 

LATIN AMERICA

 

Argentina

  • 2012 Equity Market Performance: +15.9% vs. a regional median gain of +11.7%
  • 2012 FX Performance (vs. USD): -12.4% vs. a regional median gain of +7%
  • 2012 Sovereign Debt Performance (10YR tenor, local currency): N/A
  • Full-Year 2013 G/I/P Outlook: Quad #2 (faster GROWTH; faster INFLATION)
  • Key Callout for 2013: N/A
  • Active Fundamental Investment Ideas: We have held a bearish bias on the Argentine peso (TAIL) and the Argentine equity market (TAIL) since NOV 4, 2010. While we continue to view the Argentine economy as a clear loser amid the popping of Bubble #3 (commodities) and China’s economic rebalancing agenda, we are increasingly inclined to strategically suspend our bearish bias on Argentina’s equity market in the near term, as a 2013 currency devaluation may spur Venezuelan-like stock market gains.

SIZING UP ASIA & LATIN AMERICA FOR 2013 - ARGENTINA

 

Brazil

  • 2012 Equity Market Performance: +7.4% vs. a regional median gain of +11.7%
  • 2012 FX Performance (vs. USD): -9.1% vs. a regional median gain of +7%
  • 2012 Sovereign Debt Performance (10YR tenor, local currency): -212bps to 9.17%
  • Full-Year 2013 G/I/P Outlook: Quad #2 (faster GROWTH; faster INFLATION)
  • Key Callout for 2013: Our outlook for GROWTH in Brazil is a bit higher than consensus at the present juncture.
  • Active Fundamental Investment Ideas: We have held a bullish bias on Brazilian consumer and industrial stocks (TREND) since DEC 5, 2012.

SIZING UP ASIA & LATIN AMERICA FOR 2013 - BRAZIL

 

Chile

  • 2012 Equity Market Performance: +3% vs. a regional median gain of +11.7%
  • 2012 FX Performance (vs. USD): +8.5% vs. a regional median gain of +7%
  • 2012 Sovereign Debt Performance (10YR tenor, local currency): N/A
  • Full-Year 2013 G/I/P Outlook: Quad #4 (slower GROWTH; slower INFLATION)
  • Key Callout for 2013: Our outlook for GROWTH in Chile is well above consensus at the present juncture. Our outlook for INFLATION in Chile is a bit dovish relative to consensus at the present juncture.
  • Active Fundamental Investment Ideas: N/A

SIZING UP ASIA & LATIN AMERICA FOR 2013 - CHILE

 

Colombia

  • 2012 Equity Market Performance: +16.2% vs. a regional median gain of +11.7%
  • 2012 FX Performance (vs. USD): +9.7% vs. a regional median gain of +7%
  • 2012 Sovereign Debt Performance (10YR tenor, local currency): -191bps to 5.47%
  • Full-Year 2013 G/I/P Outlook: Quad #1 (faster GROWTH; slower INFLATION)
  • Key Callout for 2013: Our outlook for INFLATION in Colombia is a bit dovish relative to consensus at the present juncture.
  • Active Fundamental Investment Ideas: N/A, though the Colombian equity market is currently screening as a candidate on the LONG side.

SIZING UP ASIA & LATIN AMERICA FOR 2013 - COLOMBIA

 

Mexico

  • 2012 Equity Market Performance: +17.9% vs. a regional median gain of +11.7%
  • 2012 FX Performance (vs. USD): +8.5% vs. a regional median gain of +7%
  • 2012 Sovereign Debt Performance (10YR tenor, local currency): -113bps to 5.38%
  • Full-Year 2013 G/I/P Outlook: Quad #2 (faster GROWTH; faster INFLATION)
  • Key Callout for 2013: Our outlook for INFLATION in Mexico is a bit hawkish relative to consensus at the present juncture.
  • Active Fundamental Investment Ideas: N/A, though we continue to expect further gains in the Mexican equity market in anticipation of meaningful economic and fiscal reform.

SIZING UP ASIA & LATIN AMERICA FOR 2013 - MEXICO

 

Peru

  • 2012 Equity Market Performance: +5.9% vs. a regional median gain of +11.7%
  • 2012 FX Performance (vs. USD): +5.4% vs. a regional median gain of +7%
  • 2012 Sovereign Debt Performance (10YR tenor, local currency): N/A
  • Full-Year 2013 G/I/P Outlook: Quad #1 (faster GROWTH; slower INFLATION)
  • Key Callout for 2013: Our outlook for GROWTH in Peru is well above consensus at the present juncture.
  • Active Fundamental Investment Ideas: We have held a bullish bias on the Peruvian equity market (TREND) since DEC 31, 2012.

SIZING UP ASIA & LATIN AMERICA FOR 2013 - PERU

 

Venezuela

  • 2012 Equity Market Performance: +302.8% vs. a regional median gain of +11.7%
  • 2012 FX Performance (vs. USD): N/A
  • 2012 Sovereign Debt Performance (10YR tenor, local currency): N/A
  • Full-Year 2013 G/I/P Outlook: Quad #3 (slower GROWTH; faster INFLATION)
  • Key Callout for 2013: Our outlook for GROWTH in Venezuela is well shy of consensus at the present juncture. Our outlook for INFLATION in Venezuela is well above consensus at the present juncture.
  • Active Fundamental Investment Ideas: N/A, though we continue to see heightened risk of a material devaluation of the Venezuelan bolivar over the intermediate term.

SIZING UP ASIA & LATIN AMERICA FOR 2013 - VENEZUELA

 

Darius Dale

Senior Analyst


Bullish: SP500 Levels, Refreshed

Takeaway: After yesterday’s monster move, for this market to be flat on the day is saying something.

POSITIONS: 11 LONGS, 7 SHORTS

 

After yesterday’s monster move, for this market to be flat on the day is saying something.

 

It either means tomorrow’s jobs print is going to surprise on the upside, or people are about to get run over again on the long side – either way, we’ll have a big move!

 

I respect the signals above the noise – and both our research and risk management signals are telling me that there’s an increasing probability that headline employment trends continue to improve.

 

Yes, that would be bad for bonds; bad for gold, relative to stocks (2 of my 7 SHORTS are GLD and GDX).

 

Across our core risk management durations, here are the lines that matter to me most:

 

  1. Immediate-term TRADE resistance = 1474
  2. Immediate-term TRADE support = 1449
  3. Intermediate-term TREND support = 1419

 

In other words, the SP500 is in a Bullish Formation (bullish TRADE, TREND, and TAIL), and the research signal on #GrowthStabilizing confirms that risk management signal.

 

KM

 

Keith R. McCullough
Chief Executive Officer

 

Bullish: SP500 Levels, Refreshed - SPX


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