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THE WEEK AHEAD

The Economic Data calendar for the week of the 17th of June through the 21st is full of critical releases and events.  Attached below is a snapshot of some (though far from all) of the headline numbers that we will be focused on.

 

THE WEEK AHEAD - WeekAhead


Top-7 Tweets to Keith Today

Takeaway: It was another lively day on Twitter. Here's a look at some of the top tweets to Keith.

Twitter war going on between @KeithMcCullough and @jimcramer should get really interesting, have to side with @KeithMcCullough right now

@manufan96 4:17 PM

 

Top-7 Tweets to Keith Today - tweet2

 

what I wouldn't give to hear Howard Cosell scream "Down Goes Cramer!"

@yoshfriedman 4:15 PM

 

$LINE is down 18% since @KeithMcCullough called it a Short on 3/22 #toptrade

@MadFastStreet 1:33 PM

 

Have to say, you were particularly uncanny in your calls this week - you'd better treat the staff tonight!

@rraydar 4:02 PM

 

Keith - you're either a psychic or you are controlling the computers at the NYSE . Either way you are the ultimate SPY Ax !

@bdlefan 10:50 AM

 

@KeithMcCullough needs to be investigated by the SEC how can he be so right

@FreemanGanyo 11:03 AM

 

actually, the Hedgeye team is not always right they are just less wrong than most on Wall St., a good thing

@jacobmiller860 11:42 AM


Trade of the Day: IGT

Takeaway: We sold International Game Technology (IGT) at 10:17 AM at $17.59.

We locked in the 8% gain here. IGT is immediate-term TRADE overbought, within a bullish TREND. It’s more of a market (beta) call in selling this than anything fundamental from Hedgeye’s Todd Jordan. For the record: Jordan is batting 87% all-time (long and short) in IGT. He's made 23 calls on the stock in the last 5 years. Impressive? We’ll let you be the judge.

 

Trade of the Day: IGT - IGT


Daily Trading Ranges

20 Proprietary Risk Ranges

Daily Trading Ranges is designed to help you understand where you’re buying and selling within the risk range and help you make better sales at the top end of the range and purchases at the low end.

Stock Report: Nationstar Mortgage Holdings, Inc. (NSM)

Stock Report: Nationstar Mortgage Holdings, Inc. (NSM)  - HE II NSM 6 14 13

THE HEDGEYE EDGE

There are three things NSM needs to do to grow. First, it needs to continue to acquire its share of the outstanding pipeline of servicing assets. We think the risk to execution here is low, as NSM has the infrastructure and backing (Newcastle & Fortress) to be able to execute on significant further volume.

 

Second, it needs to improve its servicing profit margins. Mortgage servicing is a scale business, and the company will grow its servicing book meaningfully in the coming 12-24 months. As the servicing business grows, we expect to see significant servicing margin improvement.

 

Third, the company needs to continue to grow its mortgage origination platform. The volume of this business should grow alongside the servicing business; however, one wildcard is gain-on-sale margins. Gain on sale margins depend on factors outside Nationstar’s control, and are currently wider (larger) than their historic norms.

 

Mean reversion seems like a reasonable assumption, which will put some pressure going forward on this portion of the business, but we think it can be more than offset by volume growth.

 

TIMESPAN

INTERMEDIATE TERM (the next 3 months or more)

Over the intermediate term, we expect NSM to announce further portfolio acquisitions and a continued expansion of its mortgage origination platform. Historically, acquisition announcements have been positive catalysts for the stock, and the company has indicated that it has a $300 billion UPB pipeline of acquisitions as of the end of 1Q13.

 

LONG-TERM (the next 3 years or less)

Over the longer-term, we think banks will continue to sell high-touch, specialty mortgage servicing to a select group of non-bank servicers that includes NSM, OCN and WAC. This industry should remain in a high-growth phase throughout 2013/2014.

 

ONE-YEAR TRAILING CHART

Stock Report: Nationstar Mortgage Holdings, Inc. (NSM)  - HE II NSM chart 6 14 13

 


Fear & Loathing (and Greed) on Wall St

Takeaway: With the Official Meddlers in high gear, market volatility is on a tear.

(Editor's note: The sneak-peak excerpt which follows below is from Hedgeye's popular "Investing Ideas" newsletter that is sent out every Saturday morning. Investing Ideas is for the savvy, longer-term self directed investor looking for fresh, long-only opportunities.This week we focus on seven of our high-conviction stock ideas.  It also features macro commentary like the excerpt below. With your subscription, you'll know immediately when one of our award-winning analysts uncovers a new Idea or changes a current one. Click here to sign up.)

Fear & Loathing (and Greed) on Wall St - fearloathing

Fear & Loathing (and Greed) on Wall Street

With the Official Meddlers in high gear, market volatility is on a tear.  Pundits expect a protracted period of turbulence – possibly running through year end, or even into Q1 of 2014 – as the Fed pretends to decide what policy steps it will take, aided and abetted by their partners in crime at the European Central Bank and the Japanese policy to out-print the US Treasury.  The “Fear & Greed” index maintained by CNN Money was registering Extreme Greed just one month ago.  It now reads Extreme Fear.  It’s “Risk-On” worldwide.

 

Hedgeye CEO Keith McCullough, who reminds us that Risk is always “On,” says our sentiment analysis since the end of 2012 “has indicated you want to be long fear – everyone is looking for a crisis that didn’t come."

 

Did it finally come this week?


Hedgeye remains firmly bullish on US economic growth.  This is not the same as being bullish on the stock market, which is easy to overlook with the indexes at all-time highs.  The Fear Factor is so overpowering in the short term that people always lose sight of the longer term.  As we have observed, highs are made in the markets when Greed overpowers Fear, as note the recent all-time highs in the stock market indexes, that coincided with the CNN index’ “Extreme Greed” reading.  And conversely – no surprise here – when Fear is in the ascendant, markets make lows. 

 

This week’s gapping-down openings in the S&P 500 have been seen as nothing short as a sign that Life-As-We-Know-It is coming to an end.

 


Stock Report: HCA Holdings, Inc. (HCA)

Stock Report: HCA Holdings, Inc. (HCA)  - HE II HCA 6 14 13

THE HEDGEYE EDGE

We have forecasts of physician office visits, maternity trends, and a deep understanding of the positives and negatives of Obamacare.  In addition we think we understand the long term drivers of volume, pricing, and costs for the Hospital industry.  HCA stands to benefit across all of them.

 

TIMESPAN

INTERMEDIATE TERM (the next 3 months or more)

We have identified a number of drivers in the near term and longer term that act as tailwinds to the hospital industry, and HCA in particular.

  1. Utilization:  Based on our analysis of the historical data around demographics, labor trends, confidence, pent up demand created by the Great Recession, insurance coverage, policy, and many other factors, we have built a regression forecast for medical utilization.   We believe medical utilization is improving and will drive improving admission trends among hospital operators including HCA.
  2. Maternity:  The worst decline in births in the last 40 years appears over.  At 25% of Hospital inpatient admissions, accelerating maternity trends will have a very positive impact on volumes and profits.
  3. Pent up demand and Acuity: Many people avoided medical costs over the last several years.  With unemployment claims falling, employment rising, we expect deferred care returns.  In addition, because some have waited, many untreated conditions have likely worsened, meaning patient acuity in the rebound is likely to be higher as well, which means a higher revenue per case for hospitals. 

LONG-TERM (the next 3 years or less)

  1. Consolidation among hospitals will provide pricing power and purchasing power. 
  2. Affordable Care Act will insure and pay for patients who were formerly  treated, but were considered charity care, and their bills written off as bad debt.  We expect an additional 8-13% of EBITDA growth for HCA from this tailwind alone.  There may be additional patient volume from individuals who are getting insurance given the huge gap in utilization between the uninsured, which is near zero, and the insured.

 

ONE-YEAR TRAILING CHART

Stock Report: HCA Holdings, Inc. (HCA)  - HE II HCA chart 6 14 13

 


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