• run with the bulls

    get your first month

    of hedgeye free


Retail Sales Soar Higher

The latest reading from the International Council of Shopping Centers (ICSC) is the strongest we've seen in nearly 15 years. Despite dismal weather in late March, the week leading up to Easter showed positive data that indicates shoppers are out there willing to spend money at retail chain stores.


We're bullish on retail in general despite the risk of peak margins and increase capital spending; top-line growth is what's in play right now. We like Nike (NKE), Urban Outfitters (URBN) and Walmart (WMT) as long ideas. The names to look for right now are companies that have higher sales and aren't blowing through a ton of cash.


Retail Sales Soar Higher - icsc1

'Long Retail' Is an Out of Consensus Call

Takeaway: If you can find 'higher sales, lower capital intensity' we think that's where you want to be. Short the inverse -- now more than ever.

This morning’s ICSC retail sales reading (out of a sample of 80 retailers) was the strongest we’ve seen in nearly 15-years. There was some noise due to weather and the calendar shift (week leading up Easter helped), but the data is telling us that we’re seeing higher highs and higher lows.


The out-of-consensus call right now is to be bullish on retail. As much as we find it difficult to get there given peak margins and increased levels of capital spending and SG&A (both of which would erode returns and multiples), we need to be open to the potential for outsized top-line growth that could drive the group higher. At a minimum, it seems like there’s a story of have’s and have nots, like Nike and Urban Outfitters showing strength, and others like Guess? And Carter’s showing incremental sales weakness.


If you can find something that exhibits 'higher sales, lower capital intensity' we think that's where you want to be. Short the inverse -- now more than ever. 


Longs: NKE, RH, RL, FNP, FL, KORS, URBN, WMT, and for those with a high risk tolerance and longer duration, JCP.




'Long Retail' Is an Out of Consensus Call - icsc1

Still Bullish: SP500 Levels, Refreshed

Takeaway: Don’t expect me to join the Professional Top Calling #PTC Committee.



Bullish is as bullish does. Higher-lows holding all lines of support on no-volume down days combined with higher-highs on rallies – that’s bullish.


#StrongDollar continues to have causal impact on both Commodity Deflation (good for US Consumption Growth) and the SP500’s return. On a 60-day basis the correlation between the US Dollar Index and the SP500 is now +0.81. That’s really bullish.


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


  1. Immediate-term TRADE resistance = 1576 (higher-highs)
  2. Immediate-term TRADE support = 1557 (higher-lows)
  3. Intermediate-term TREND support = 1501


In other words, when higher-highs are A) probable and B) within the context of all-time highs, don’t expect me to join the Professional Top Calling #PTC Committee.




Keith R. McCullough
Chief Executive Officer


Still Bullish: SP500 Levels, Refreshed - SPX

the macro show

what smart investors watch to win

Hosted by Hedgeye CEO Keith McCullough at 9:00am ET, this special online broadcast offers smart investors and traders of all stripes the sharpest insights and clearest market analysis available on Wall Street.

Meaningful Medicare?

Medicare is big business, so when companies like UnitedHealth Group (UNH) and its peers see improvement on the rates they're paid by the government to insure people on Medicare, people pay attention. But what's more important than a change in Medicare rates is that uptick in physician utilization (i.e. people going to the doctor's office). Our Healthcare team has forecast an increase a recovery in utilization for some time, as outlined in the charts below. A revision to medicare rates is irrelevant if the commercial business begins to deteriorate meaningfully this year.



Meaningful Medicare? - healthcarechart1



After a bounce in 2011 and a slowdown in 2012, 2013 is surprising everyone as utilization accelerates meaningfully. A number of factors have influenced the increase, including the worst flu season in years. accelerating maternity and cardio costs for hospitals, and premium growth continues to decelerate to multi-year lows.


Meaningful Medicare? - healthcarechart2


Please find the monthly table market shares and average daily table metrics below.  Total March GGR (including slots) increased 25.4% YoY to HK$30.4 billion, in-line with recently raised expectations but well above projections given prior to the first week of March.  We don’t yet have the full property detail so it remains to be seen how much hold contributed to the outstanding and record month.  Anecdotally, we’ve heard that VIP hold was high but that volumes were also very strong.  We believe volume growth played the majority role in the YoY growth. 


MACAU UP 25% YOY - 1


With the exception of SJM and MGM, the concessionaires posted shares almost exactly in-line with trend.  SJM’s 110bp increase in share over recent trend was pulled almost directly from MGM. 


MACAU UP 25% YOY - 2

Morning Reads From Our Sector Heads

Todd Jordan (GLL):


Maryland raising stakes in casino wars with Delaware and West Virginia (via Washington Post)


Kevin Kaiser (Energy):


LINN Energy Response to Another Round of Short Seller Comments (via LINN Energy)


Tom Tobin (Healthcare):


Humana Rises as U.S. Reverses Medicare Rate Cut Decision (via Bloomberg)


Jay Van Sciver (Industrials):


Raw-Material Bull Market Fading as Supply Expands: Commodities (via Bloomberg)


Rob Campagnino (Consumer Staples):


Anheuser-Busch InBev's 30 job cuts are in St. Louis (via St. Louis Business Journal)


Howard Penney (Restaurants):


Why an Australian town is fighting McDonald's (via KSAT)


Brian McGough (Retail):


J.C. Penney Elevating Jewelry With Bijoux Bar (via WWD)

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.