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There are some unusually severe moves today across the sector – it strikes us as being partially driven by HF capitulation as lower multiple, lower quality names that are the usual targets for short sellers are outperforming the bulk of staples today.



Similarly, we are also seeing some modest outperformance in the higher multiple names, suggesting some additional short covering in what may be valuation shorts.

 

What’s Going on in Staples Today? - 2.19 Forward PE v perform today



However, short covering doesn’t seem to be the sole determinant of today’s stock price movements as seen below.  Nor are we seeing any meaningful disparity in performance based on beta.



What’s Going on in Staples Today? - 2.19 SI ratio v perform today

 

What’s Going on in Staples Today? - 2.19 Beta v perform today



Bottom line, it seems as if the HNZ transaction and the continued resilience of the market have caught some HFs offside, and we are seeing scrambling and associated “odd” moves as investors take down/take up exposure or reposition their books to reflect a more bullish stance.

 

Call with questions.

 

Rob

 

Robert  Campagnino

Managing Director

HEDGEYE RISK MANAGEMENT, LLC

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Matt Hedrick

Senior Analyst