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THE HEDGEYE DAILY OUTLOOK

TODAY’S S&P 500 SET-UP – April 17, 2013


As we look at today's setup for the S&P 500, the range is 44 points or 1.12% downside to 1557 and 1.68% upside to 1601.                

                                                                                                               

SECTOR PERFORMANCE


THE HEDGEYE DAILY OUTLOOK - 1

 

THE HEDGEYE DAILY OUTLOOK - 2

 

EQUITY SENTIMENT:


THE HEDGEYE DAILY OUTLOOK - 10A


CREDIT/ECONOMIC MARKET LOOK:

  • YIELD CURVE: 1.50 from 1.50
  • VIX closed at 13.96 1 day percent change of -19.17%

MACRO DATA POINTS (Bloomberg Estimates):

  • 7am: MBA Mortgage Applications, April 12 (prior 4.5%)
  • 9am: Fed’s Stein speaks on banking regulation at IMF
  • 9:30am: Fed’s Bullard speaks in New York
  • 10:30am: DOE Energy Inventories
  • 11am: Fed to purchase $1.25b-$1.75b in 2036-2043 sector
  • 12pm: Fed’s Rosengren speaks in New York
  • 2pm: Fed releases Beige Book

 

GOVERNMENT:

    • 9:30am: House Oversight Cmte hearing Postal Service’s financial situation
    • 9:30am: Defense Sec. Chuck Hagel testifies on Pentagon’s proposed budget before Senate Armed Svcs Cmte
    • 10am: Housing Sec. Shaun Donovan testifies before House Appropriations panel on agency budget
    • 10am: House Armed Svcs Cmte hears from Gen. Joseph Dunford, commander of U.S. forces in Afghanistan, on developments there
    • 2:30pm: Senate Armed Svcs Cmte briefing on Syria
    • 2:30pm: Senate Commerce and Transportation panel hears from Amtrak Chairman Joseph Boardman on future of passenger rail service in Northeast Corridor
    • 2:30pm: Senate Judiciary Cmte hears from Homeland Security Sec. Janet Napolitano on immigration overhaul

WHAT TO WATCH

  • Gold wipes $560b from central banks as equities rally
  • Europe car sales fall with industry heading for 20-year low
  • ING to raise as much as $1.54b in U.S. insurance unit IPO
  • Paulson says Dish proposal for Sprint better than Softbank offer
  • Tesco to exit U.S. after first profit drop in about 20 years
  • Yahoo’s Mayer faces setbacks as sales forecast misses estimates
  • Intel sales may top estimates on demand for server chips
  • Boeing boosts Duberstein duties ahead of investor oversight vote
  • News Corp. plans to call entertainment spinoff 21st Century Fox
  • Macy’s wins temporary bar on some Stewart sales at J.C. Penney
  • FAA near decision on Boeing Dreamliners after tests completed
  • AMC delays sale of ‘Iron Man 3’ tickets in dispute with Disney
  • Former MF global rogue trader gets 5 yrs, must repay $141m
  • Johnson & Johnson wins Chicago jury verdict over hip implant
  • Former Leerink Swann banker pleads guilty to insider trading

 EARNINGS:

    • Huntington Bancshares (HBAN) 5:55am, $0.16
    • Mattel (MAT) 6am, $0.08
    • PNC Financial Services Group (PNC) 6:30am, $1.56
    • Bank of New York Mellon (BK) 6:30am, $0.52
    • Textron (TXT) 6:30am, $0.45
    • Bank of America (BAC) 7am, $0.23
    • Dover (DOV) 7am, $1.08
    • Quest Diagnostics (DGX) 7am, $1.03
    • St Jude Medical (STJ) 7:30am, $0.91
    • Abbott Laboratories (ABT) 7:44am, $0.41
    • Crown Holdings (CCK) 4:01pm, $0.48
    • CYS Investments (CYS) 4:01pm, $0.32
    • Albemarle (ALB) 4:03pm, $1.00
    • American Express Co (AXP) 4:04pm, $1.12
    • Kinder Morgan (KMI) 4:05pm, $0.32
    • Kinder Morgan Energy Partners (KMP) 4:05pm, $0.66
    • SanDisk (SNDK) 4:05pm, $0.79
    • Covanta Holding (CVA) 4:05pm, ($0.12)
    • LaSalle Hotel Properties (LHO) 4:05pm, $0.25
    • El Paso Pipeline Partners (EPB) 4:07pm, $0.55
    • Core Laboratories (CLB) 4:08pm, $1.16
    • EBay (EBAY) 4:15pm, $0.62
    • SLM (SLM) 4:15pm, $0.60
    • East West Bancorp (EWBC) 4:45pm, $0.49
    • Noble (NE) 5pm, $0.51
    • Steel Dynamics (STLD) 6pm, $0.21

COMMODITY/GROWTH EXPECTATION (HEADLINES FROM BLOOMBERG)

  • Gold Climbs for Second Day as Plunge Lures Buyers; Futures Drop
  • Hog Glut Gains as U.S. Exports Drop Most in Decade: Commodities
  • Cyprus Finance Minister Sees Gold Sale Within Next Few Months
  • WTI Crude Trades Near Four-Month Low Before U.S. Inventory Data
  • Copper Declines on Indications Demand Will Take Time to Revive
  • Wheat Seen Gaining as Cold Weather Threatens Crops; Corn Drops
  • Cocoa Swings in New York as Europe Processing Dips; Sugar Drops
  • Gold Wipes $560 Billion From Central Banks as Equities Rally
  • Rebar Retreats to Lowest in Four Months as Iron Ore Declines
  • Gold’s Slump to Two-Year Low Roils Forecasters: Chart of the Day
  • Energy as Dirty as 20 Years Ago on Slow Climate Effort, IEA Says
  • Shell Shut Out as Africa’s Gas Trove Lures Asian States: Energy
  • Bird Flu Panic in China Leads CP to Warn Over Chicken Sales
  • Gold Slump Spurs Surge in Business at Australia’s Perth Mint

THE HEDGEYE DAILY OUTLOOK - 5

 

CURRENCIES


THE HEDGEYE DAILY OUTLOOK - 6

 

GLOBAL PERFORMANCE

 

THE HEDGEYE DAILY OUTLOOK - 3

 

THE HEDGEYE DAILY OUTLOOK - 4

 

EUROPEAN MARKETS


THE HEDGEYE DAILY OUTLOOK - 7

 

ASIAN MARKETS


THE HEDGEYE DAILY OUTLOOK - 8

 

MIDDLE EAST


THE HEDGEYE DAILY OUTLOOK - 9

 

 

The Hedgeye Macro Team

 

 

 

 

 

 

 

 

 

 


VIDEO: Trading The Commodity Bubble

 

After falling as much as 14% yesterday, gold was on every investor’s mind today as the metal staged a comeback of sorts, bouncing from $1300/oz to $1372/oz. Hedgeye CEO Keith McCullough co-hosted CNBC’s Fast Money this evening and argued that gold has yet to fully bottom and is capable of declining in price even further. Keith reiterates how he wants to be long consumption stocks when commodities are having a fire sale like they did yesterday. The commodity bubble brought on by the Federal Reserve’s monetary policy has provided an opportunity to take the other side of the short commodities trade; getting long Starbucks (SBUX) is just one example of doing just that.

 

Skip ahead to 5:10 in the video embedded above for Keith’s full take on the markets.

 


TRADE OF THE DAY: HCA

Today we bought HCA Holdings (HCA) at $36.07 a share at 10:18 AM EDT in our Real-Time Alerts. Coming back to the long side of US Consumption/Utilization (Hospitals) here. Hedgeye Healthcare Sector Head Tom Tobin thinks the HCA quarter is a lagging indicator. Seeing bullish sequential accelerations in births, ortho, cardio, and outpatient). 

 

TRADE OF THE DAY: HCA - TOTD


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 80.65%
  • SHORT SIGNALS 78.64%

Crushing Commodities

Commodity prices have been under pressure since the beginning of the year. The rise of the value of the US dollar has contributed greatly to the decline in prices across the board. On Monday, gold, oil and other commodities sold off en masse as investors fled the asset class and liquidated their positions. Gold fell anywhere between -10% intraday to -7.5% at the close. The CRB Commodity Index, which measures 19 different types of commodities, took a big hit on top of an already difficult year yesterday. You can see the decline in the chart below.

 

Crushing Commodities - image001


Momentum Continues Behind Spirits

Taking a quick look at Louis Vuitton Moet Hennessy’s (LVMH) results presentation from this morning, we see that the momentum in spirits brands continues, displaying strength on strength.  Lapping a +15.5% constant currency comp in Q1 2012, the company posted a +7.0% result.  For the spirits companies, the results improve as a lateral when breaking out Champagne and Wines versus Cognac and Spirits.  Champagne and Wines grew only +0.3% (reported) versus a 12.2% comp while Cognac and Spirits were +9.0% (reported) versus a very difficult comp, +27.9% reported in Q1 2012.

 

In terms of geography, Asia was +12.0%, the U.S. +9% and Japan +7.0%.  These results augur well for the spirits companies in our coverage (Brown Forman and Beam) whose valuations are becoming more interesting as the stocks lag and the rest of the staples group grinds higher.



Valuation has been our stumbling block with respect to the spirits names, not business momentum. So, as most of the staples group rushes head long in the race for most absurd valuation, the spirits names get incrementally more interesting as those companies might not have the most “attractive” valuations in staples, but at least there is something to warrant a premium valuation.

 

Rob


Robert  Campagnino

Managing Director

HEDGEYE RISK MANAGEMENT, LLC

E:

P:

 

Matt Hedrick

Senior Analyst


ADJUST YOUR FOCUS TO HOLD-ADJUSTED EBITDA

MPEL held poorly but still should beat the Street.  Here are the details.

 

 

As we wrote about in our Macau preview notes (“MACAU: A PREVIEW OF THE PREVIEW”, 4/9/13) and (INVESTABLE MPEL”, 03/21/13), MPEL remains our favorite name in the space with the catalyst of a terrific Q1 earnings release looming.  More importantly, the valuation continues to linger at a big discount relative to most Macau names and could be ripe for a 2-3 multiple turn increase in its EV/EBITDA valuation.  MPEL should transition from a trading vehicle to a core long-term holding for many long only investors which should help inflate the multiple to something more realistic:  11-12x (post-opening of MSC).

   

We are projecting that MPEL will report $1,119MM of net revenue and $267MM of EBITDA, 3% and 5% ahead of consensus, respectively.  More importantly, on a hold-adjusted basis (using each property's historical hold rate), our EBITDA estimate goes to $285 million.  Another strong quarter should bring the company closer to gaining the respect that it deserves from the investment community.

 

 

Q1 DETAIL

 

We estimate that City of Dreams will report $826MM of net revenues and $240MM in EBITDA; 4% ahead of consensus despite low hold at the property.

  • Our net casino win projection is $810MM
    • VIP net win of $425MM
      • Assuming 17.5% direct play we estimate $25BN of RC volume (up 11% YoY) and a hold rate of 2.6%
      • Using CoD’s historical hold rate of 2.88%, EBITDA would be $18MM higher and net revenues would be $67MM higher
    • $340MM of mass win, up 36% YoY - a record for CoD.  Mass revenues reached a record $127MM in March, and have remained above the $100MM mark for the past 5 consecutive months
    • $44MM of slot win
  • $17MM of net non-gaming revenue
    • $25MM of room revenue
    • $17MM of F&B revenue
    • $20MM of retail, entertainment and other revenue
    • $45MMM of promotional allowances or 73% of gross non-gaming revenue or 5.5% of net gaming revenue
  • $464MM of variable operating expenses
    • $404MM of taxes
    • $46MM of gaming promoter commissions in addition to the rebate rate of 90bps (we assume an all-in commission rate of 1.08%)
  • $24MM of non-gaming expenses
  • $98MM of fixed operating expenses up 7% YoY and $2MM QoQ

We project $259MM of net revenues and $40MM in EBITDA for Altira, 7% below the Street

  • We estimate net casino win $270MM
    • VIP net win of $257MM
      • $11.9BN of RC volume (flat YoY) and a hold rate of 2.92%, which is in-line with the property’s historical hold rate
    • $22MM of mass win, down 13% YoY
  • $3MM of net non-gaming revenue
  • $184MM of variable operating expenses
    • $144MM of taxes
    • $37MM of gaming promoter commissions in addition to the rebate rate of 95.5bps (we assume an all-in commission rate of 1.26%)
  • $3MM of non-gaming expenses
  • $32MM of fixed operating expenses

Other stuff:

  • Mocha slots revenue and EBITDA of $34MM and $8MM, respectively
  • D&A:  $95MM (guidance of $90-95MM)
  • Interest expense:  $31MM (guidance of $38-40MM)
  • Corporate expense:  $21MM (guidance of $20-22MM)

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