prev

KSS Idea Alert

Takeaway: We’re looking for stocks where our analysts are bearish yet are immediate-term overbought. KSS hits on both accounts.

We’re adding KSS to our #Real Time Alerts on the short side. We’re looking for stocks where our analysts are bearish fundamentally yet are immediate-term overbought on top of a bearish formation. KSS hits the trifecta.

 

One of the best ways we can explain away our concern around KSS is in the market share dispersion chart below.  JCP ceded $2.7bn in share in the first three quarters of the year, and is on track to clock in at about $4bn for the year. How much of that is KSS winning? Less than 0.3%. That’s flat-out embarrassing.

 

We’re consistently told by KSS bulls that the KSS and JCP customers are different given that KSS is off-mall. But we can’t get over KSS’ sheer inability to execute on this once in a lifetime opportunity.  We need to remind everyone that JCP is within one month of when it starts to go against -20%+ comps from a year ago. It won’t comp positive. But the delta will definitely get more difficult for KSS.

 

KSS Idea Alert - kss

 

KSS Idea Alert - kss2


Replay: Q1 2013 Macro Themes Call

To listen to the Q1 2013 Macro Themes Conference Call hosted earlier today by the Hedgeye Macro Team, led by CEO Keith McCullough, please CLICK HERE (in order to access the replay you will need your hedgeye.com login information.) To view the presentation that accompanied today's call  CLICK HERE.

 

If you are having trouble accessing this replay or would like more information contact .

 

 

TOPICS INCLUDED:

 

1) #GrowthStabilizing: 

Both our research and risk management indicators are signaling a shift away from #GrowthSlowing and have a bullish read-through for equities as fund flows move out of bonds. The risk of the U.S. Debt Ceiling remains a factor; however, we expect a rebound from the consumer as Bernanke's Commodity Bubble continues to deflate. 

 

2) #HousingsHammer: 

Housing market fundamentals continue to strengthen and are expected to maintain and possibly accelerate their momentum through 2013. We see changes in key housing metrics driving further upside that includes inventory levels, pricing and household formation.       

 

3) #QuadrillYen:

With the recent election of prime minster Shinzo Abe and his appointment of Taro Aso as finance minster, Japan looks to dominate the macroeconomic news flow out of Asia in Q1 as it pursues a variety of unconventional monetary and fiscal policies. Still our favorite short in all of Global Macro, we believe the yen will continue its descent vis-a-vis the U.S. dollar and the euro, imposing a variety of spillover risks for Japanese and international financial markets.  

 


"Smart" Money Offside on Corn

Based on data provided by the CFTC (Commodity Futures Trading Commission), it appears that non-commercial players (read: hedge funds) were caught offside with respect to the recent upward move in corn prices.  Long positions in corn have declined from a recent peak of 433,003 contracts (10/23/12) to 345,549 contracts in the most recent data (1/8/13).  At the same time, short positions have increased from 99,344 contracts to 124,689.  Basically, hedge funds spent the winter getting less long corn.

 

"Smart" Money Offside on Corn - Weekly change

 

Looking back further, the data suggests that the actions of non-commercial players don’t necessarily reflect well upon their reputations as “smart” money – peaks in bullish position as measured by net long positions as a percentage of net short positions coincide startlingly well with peaks in corn prices.  Admittedly, speculation may be driving some of the moves in the commodity, but it doesn’t appear to us as if hedge funds do a very good job of making money trading corn futures.

 

"Smart" Money Offside on Corn - Bullish bets

 

Our bias is to get short corn at these levels, as we move into a relatively quiet data period over the next couple of months and into U.S. planting intentions.  Meanwhile, we will be watching to see what the "smart" money does and, if history is any indication, be prepared to move in the opposite direction.

 

- Rob


Robert  Campagnino

Managing Director

HEDGEYE RISK MANAGEMENT, LLC

E:

P:

 


Attention Students...

Get The Macro Show and the Early Look now for only $29.95/month – a savings of 57% – with the Hedgeye Student Discount! In addition to those daily macro insights, you'll receive exclusive content tailor-made to augment what you learn in the classroom. Must be a current college or university student to qualify.

Commodities: Crude Mood

Commodities took a nose dive after the September “Bernanke Top” and have yet to fully recover. Some commodities, such as gold, are still depressed in price while others have shown moderate gains and recovery. The price of crude oil, which is a huge growth catalyst, remains relatively high around $112 a barrel (Brent) having shot up since December while the CRB Commodities Index’s growth is stagnant. If oil hits $130 a barrel again, we can easily go back to #GrowthSlowing from #GrowthStabilizing.

 

Commodities: Crude Mood  - CRBoil


Housing: Let The Tailwinds Blow

The recovery in the housing market continues with the latest data from Corelogic showing home prices rose in November 7.4% year-over-year, a noticeable acceleration from October’s growth of 6.3% year-over-year. Corelogic's advance reading on December shows prices rising 7.9% year-over-year. Their distressed-excluded home price index is estimated to have risen by 8.4% in December.

 

 

Housing: Let The Tailwinds Blow - Corelogic 2

 

 

An important note: the Consumer Financial Protection Bureau (CFPB) recently laid out its definition of a qualified mortgage (QM). Lenders and financial institutions alike were worried about a QM being too restrictive. It appears that nearly everyone is pleased with the final definition laid out, which includes restrictions involving a borrower’s “ability to repay”, income and assets, and debt-to-income ratio. It also protects borrowers from predatory loans and exotic mortgages. 

 

One important note, highlighted by Hedgeye Financials Sector Head Josh Steiner is as follows: “Any loan that isn’t considered a QM now becomes a subprime loan, and many banks will be unwilling to lend to non-qualified borrowers.”

 

"Ultimately, the CFPB’s new rules strike the right balance between responsible lending and mortgage availability but should have little impact on the current housing market. Potential borrowers that were unable to get loans in the past should still be unable," said Steiner.

 

 

Housing: Let The Tailwinds Blow - Corelogic YoY


RESTAURANTS THOUGHTS AHEAD OF ICR

Below we highlight three topics, for each company, that we are hoping to gain insight into from this week’s ICR conference. 

 

We list the companies we care about in order of appearance at the conference.

 

Wendy’s is a work in progress

  1. The focus will be on marketing with the value menu getting a lot of attention as it poses real competition versus McDonald’s $1 menu
  2. Has the company lined up capital for franchisee conversions?
  3. The pipeline of new products for 2013 will be another key focus

 

Jack In The Box remains a Hedgeye favorite

  1. Any indication of current trends following MCD’s move to value will be helpful
  2. Investors will seek to learn management’s view of beef prices
  3. Any commentary on margins at Qdoba will be keenly received by a skeptical investment community

 

Texas Roadhouse is one of our least favorite names in casual dining

  1. New unit performance and returns are the key issues for this stock
  2. Commentary on the company’s commodity basket inflation expectations will be valuable
  3. Sales trends in what has become an increasingly competitive sub-category

 

BJ’s Restaurants’ shares need a catalyst

  1. We will be trying to discern how much of an impact Chili’s is impacting their top line
  2. Will the company provide incremental color on its testing of TV advertising
  3. With ROIIC trending negative, we will be hoping to get a finalized picture of CapEx for 2013

 

Burger King’s shares not appealing in 2013 but TAST is a better way to play the story

  1. Are franchisees being won over to the reimaging program?
  2. How are sales trends looking in January?
  3. What are full year expectations for same-restaurant sales

 

Ruth’s Chris is a boring company and a boring stock

  1. Might the company go private?  We think it should
  2. What are the company’s beef inflation expectations
  3. What makes the company believe that it has additional pricing power above the current 2.4% of pricing

 

Cracker Barrel seems to have played out

  1. Is there any leverage in the business model?
  2. The activist attack is unrelenting; what is management’s stance
  3. Can the concept garner appeal outside of the core consumer base

 

Ruby Tuesday’s new CEO has his plate full

  1. What size is the Ruby Tuesday system going to be in five years?
  2. How is the brand going to position itself under new leadership?
  3. What is the new CEO’s legacy going to be

 

Bloomin’ Brands has top line momentum but consensus is tough to get to

  1. Consensus is baking in very high leverage in the P&L and we do not think it is justified
  2. Same-restaurant sales trends, particularly at lunch, will be a primary focus for investors and analysts at ICR
  3. When will the PE firms unload stock in 2013?

 

 Domino’s is one of the best-managed companies in the restaurant space

  1. We will be looking for commentary on international growth opportunities
  2. More specificity on the outlook for commodities, in particular cheese, would be helpful
  3. Investors will likely press management on growth in the domestic market also

 

Chipotle’s management team will likely enjoy another ICR lovefest, we think the bottoming process will take time

  1. Sales trends, obviously, are front-and-center
  2. What is the company’s outlook for pricing?
  3. How are new unit volumes trending?  Will unit growth expectations be slowed?

 

 

Howard Penney

Managing Director

 

Rory Green

Senior Analyst

e

 


get free cartoon of the day!

Start receiving Hedgeye's Cartoon of the Day, an exclusive and humourous take on the market and the economy, delivered every morning to your inbox

By joining our email marketing list you agree to receive marketing emails from Hedgeye. You may unsubscribe at any time by clicking the unsubscribe link in one of the emails.

next