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Client Talking Points

UST 10YR

Get this: 10-year yields had their largest percentage increase quarter-over-quarter in more than a decade.  And while 10-year yields have broken out, they remain well below the mean yield since 1989 of 5.21%. Meanwhile, the Barclay’s Aggregate Bond Index is set for its first loss in 14-years and only third loss since 1990.  We are already starting to see generational losses in bonds. So while gentleman may prefer bonds, they don’t prefer losses. Our immediate-term Risk Ranges for UST 10YR is 2.57-2.74%.

SPY

Stick with the game plan that's working. Long growth, short fear. Look, we're bearish on plenty of things that are actually going down - but U.S. stock bears have been mauled and have missed this epic move in equities for the better part of the year. As money continues to flow from the bond market to avoid losses, equities will be awaiting the capital exodus with open arms. Our immediate-term Risk Range for the S&P 500 is 1680-1714. 

Asset Allocation

CASH 33% US EQUITIES 25%
INTL EQUITIES 20% COMMODITIES 0%
FIXED INCOME 0% INTL CURRENCIES 22%

Top Long Ideas

Company Ticker Sector Duration
WWW

WWW is one of the best managed and most consistent companies in retail. We’re rarely fans of acquisitions, but the recent addition of Sperry, Saucony, Keds and Stride Rite (known as PLG) gives WWW a multi-year platform from which to grow. We think that the prevailing bearish view is very backward looking and leaves out a big piece of the WWW story, which is that integration of these brands into the WWW portfolio will allow the former PLG group to achieve what it could not under its former owner (most notably – international growth, and leverage a more diverse selling infrastructure in the US). Furthermore it will grow without needing to add the capital we’d otherwise expect as a stand-alone company – especially given WWW’s consolidation from four divisions into three -- which improves asset turns and financial returns.

MPEL

Gaming, Leisure & Lodging sector head Todd Jordan says Melco International Entertainment stands to benefit from a major new European casino rollout.  An MPEL controlling entity, Melco International Development, is eyeing participation in a US$1 billion gaming project in Barcelona.  The new project, to be called “BCN World,” will start with a single resort with 1,100 hotel beds, a casino, and a theater.  Longer term, the objective is for BCN World to have six resorts.  The first property is scheduled to open for business in 2016. 

HCA

Health Care sector head Tom Tobin has identified a number of tailwinds in the near and longer term that act as tailwinds to the hospital industry, and HCA in particular. This includes: Utilization, Maternity Trends as well as Pent-Up Demand and Acuity. The demographic shift towards more health care – driven by a gradually improving economy, improving employment trends, and accelerating new household formation and births – is a meaningful Macro factor and likely to lead to improving revenue and volume trends moving forward.  Near-term market mayhem should not hamper this  trend, even if it means slightly higher borrowing costs for hospitals down the road. 

Three for the Road

TWEET OF THE DAY

Cumulative construction shortfall since start of 2011 is ~3 million. Imbalance is supportive of both rising home prices and financials $XLF. @HedgeyeFIG

QUOTE OF THE DAY

“An economist is an expert who will know tomorrow why the things he predicted yesterday didn't happen today.” - Laurence J. Peter

STAT OF THE DAY

Is Best Buy the best comeback stock story of 2013? BBY up +158% in 2013 after falling -49% in 2012.