prev

THE M3: JULY CHANGI VISITATION; JOCKEY CLUB; HOTEL SUPPLY; UNEMPLOYMENT

THE MACAU METRO MONITOR, AUGUST 27, 2013

 

 

MONTHLY BREAKDOWN OF PASSENGER MOVEMENTS Changi Airport

Singapore's Changi Airport reported a 4% rise YoY in passenger movement in July 2013.

 

THE M3: JULY CHANGI VISITATION; JOCKEY CLUB; HOTEL SUPPLY; UNEMPLOYMENT - CHANGI

 

LOSS-MAKING JOCKEY CLUB CLOSES FOUR BETTING CENTRES Macau Business

The Macau Jockey Club will close four of its seven off-course betting centres next month.  The club did not offer a reason but the Gaming Inspection and Coordination Bureau told the newspaper: “The Macau Jockey Club has responded to the needs of the community by removing several off-course betting stations away from the residential areas.”  The bureau denied it had ordered the closures.

 

ELEVEN HOTELS UNDER CONSTRUCTION, 27 MORE PLANNED Macau Business

Eleven hotels in Macau were under construction at the end of 2Q 2013, the Lands, Public Works and Transport Bureau says.  The bureau says another 27 hotel projects are pending approval from the government.  The 11 hotels under construction will add another 6,200 rooms to the city’s inventory.  Three of those hotels being built in Cotai will add the bulk of the rooms, some 5,326 rooms.  The 27 hotels at the planning phase would add another 16,700 rooms.

 

MACAU EMPLOYMENT SURVEY FOR MAY-JULY 2013 DSEC

More people were looking for work during the Summer Holiday, causing the unemployment rate for May-July 2013 to increase slightly by 0.1% from April-June, at 1.9%.  Total labor force was 366,000 in May-July 2013 and the labor force participation rate stood at 72.6%.  Total employment reached 359,000, up by 1,900 from the previous period.  Analyzed by industry, employment in the Construction sector posed a marked increase of 1,500.


THE HEDGEYE DAILY OUTLOOK

TODAY’S S&P 500 SET-UP – August 27, 2013


As we look at today's setup for the S&P 500, the range is 27 points or 0.83% downside to 1643 and 0.80% upside to 1670.               

                                                                                                                

SECTOR PERFORMANCE


THE HEDGEYE DAILY OUTLOOK - 1

 

THE HEDGEYE DAILY OUTLOOK - 2

 

EQUITY SENTIMENT:


THE HEDGEYE DAILY OUTLOOK - 10


CREDIT/ECONOMIC MARKET LOOK:

  • YIELD CURVE: 2.40 from 2.42
  • VIX  closed at 14.99 1 day percent change of 7.22%

MACRO DATA POINTS (Bloomberg Estimates):

  • 6:50am: Fed’s Williams speaks on monetary policy in Sweden
  • 9am: S&P/Case Shiller 20 City Home Price Index M/m, June, est. 1% (prior 1.05%)
  • 9am: S&P/CS 20 City Composite Y/y, June, est. 12.1%
  • 10am: Richmond Fed Manuf. Index, Aug., est 0 (prior -11)
  • 10am: Consumer Conf. Index, Aug., est. 79 (prior 80.3)
  • 11am: Fed to buy $4.25b-$5.25b in 2017-2018 sector
  • 11:30am: U.S. to sell 4W bills
  • 1pm: U.S. to sell $34b 2Y notes

GOVERNMENT:

    • CMS, HHS hold 2nd semi-annual meeting of Advisory Panel on Hospital Outpatient Payment, 9am
    • Under Sec. of Commerce for Intl Trade Francisco Sanchez visits Brazil, Uruguay to promote U.S. oil, gas exports

WHAT TO WATCH:

  • Pershing hires Citi to sell entire J.C. Penney stake
    • Ackman’s Pershing sells J.C. Penney stake for $504m
  • U.S. girding for Syria move vows to hold Assad liable
  • Seeks Greek permission for Syria campaign: Kathimerini
  • PetroChina says 3 executives resign amid government probe
  • German Aug. IFO confidence beats ests, at 16-month high
  • India may decide on Mylan’s bid for Strides
  • Daimler to invest $2.7b to expand China production
  • Japan’s ANA to buy stake in Myanmar airline

EARNINGS:

    • Avago Tech (AVGO) 4:05pm, $0.66
    • Bank of Montreal (BMO CN) 6:30am, $1.53 - Preview
    • Bank of Nova Scotia (BNS CN) 7:30am, $1.31 - Preview
    • Brown Shoe (BWS) 7am, $0.22
    • Donaldson (DCI) 7am, $0.45
    • DSW (DSW) 7am, $0.79
    • Heico (HEI) 5:12pm, $0.47
    • Regis (RGS) 6am, $0.12
    • Sanderson Farms (SAFM) 6:30am, $2.66
    • Tiffany & Co (TIF) 7am, $0.74
    • TiVo (TIVO) 4:01pm, $(0.10)
    • Wet Seal (WTSLA) 4:05pm, $0.01
    • WMS Industries (WMS) 4pm, $0.31
    • Workday (WDAY) 4:05pm, $(0.18)

COMMODITY/GROWTH EXPECTATION (HEADLINES FROM BLOOMBERG)

  • Garry Jones Named as Chief Executive of London Metal Exchange
  • Coffee Reserves Seen at 2000 Low on Indonesian Rain: Commodities
  • Brent Rises to Five-Month High on Syria Clash, Libya Supply Loss
  • Gold Climbs to Two-Month High on ETP Holdings, Syrian Tensions
  • Money Managers Boost Cocoa Net Long to 54,382 Contracts Aug. 20
  • Copper Declines After Biggest Gain in Stockpiles in Two Months
  • Russia, Kazakhstan Boost Gold Reserves as Mexico Sells, IMF Says
  • Robusta Coffee Rises as Reserves May Decline; White Sugar Gains
  • Copper’s 340,000 Metric Ton Surplus an Overhang on Market, Price
  • Rebar Climbs as Industrial Profits Strengthen Economic Outlook
  • China Boosts Rapeseed Imports as Global Oilseed Output Rises
  • Shell South African Shale Drive Riles Farmers Over Water: Energy
  • Grain-Carrier Rates Rising as Crop Cargoes Near Record: Freight
  • Record Gold in India Seen Hurting Jewelry Demand as Rupee Slumps

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

 

 

 

 

 

 

 

 

 

 

 

 



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 80.33%
  • SHORT SIGNALS 78.51%

Disorderly Risks

“What they lacked was a science of disorder and randomness.”

-George Gilder

 

Gilder could have been writing about adults making life decisions inasmuch as he was alluding to both Keynesian and Hayekian policy makers who still don’t get the core chaos theory concept of non-linearity. If you don’t know what I am talking about, have kids.

 

Both life and market risks are grounded in uncertainty. You can take whatever precautions you want; you can be as proactively prepared as you think you can be – but it’s always the surprise of new information that drives decision making.

 

You cannot learn how to embrace uncertainty in a textbook. You have to learn this game by playing it. Since disorder and randomness typify markets, your risk management process should attempt to absorb that dynamism.

 

Back to the Global Macro Grind

 

Three big macro things have really changed in the last 3 months:

  1. Bond Yields in the USA, Germany, and the UK have been rising alongside their respective stock markets #surprise
  2. Growth Stocks (Low Dividend Yield, High EPS Growth, High Short Interest) have been crushing Slow-Growth Stocks
  3. Asian Emerging Market stocks have been dramatically underperforming US Growth Stocks

That sounds a little disorderly, no?

 

If you are bullish on “growth” doesn’t your local pie chart “diversification” manufacturer have you buying “Emerging Markets”? Or are they re-positioning that bad asset allocation decision to you now as something that looks “cheap.” #ThesisDrift

 

In Hedgeye-Jedi speak, “cheap” gets cheaper when:

 

A)     Country Inflation (or costs in the case of a company) Accelerates

B)      Real (inflation adjusted) Growth Slows

 

Back-test it with Apple (AAPL) and you’ll get my point. It doesn’t matter how “good” a company is if it’s about to see:

 

A)     Revenue Growth Slow (versus peak)

B)      Margins Compress (versus peak)

 

When you get A + B, you get multiple compression.

 

Conversely, in our proprietary GIP Model (Growth, Inflation, Policy), when a country:

 

A)     Sees Growth go from slowing to stabilizing to accelerating … and

B)      Is the recipient of inflation slowing via currency appreciation…

 

You get equity market multiple expansion. Look at the chart of any raging “growth” stock that is USA centric (SBUX, TSLA, DDD, NFLX, OPEN, SODA, etc.) and you’ll get what I mean.

 

Simple, right? Even a hockey player can do it.

 

Yes, in hindsight, most things macro are easier to see looking backwards. It’s in observing the chaotic system of colliding global macro market trends (where Growth and Inflation patterns develop) that you get an edge. It’s a grind.

 

Let’s go back to explaining why the aforementioned point #3 (#AsianContagion) has come to be. What’s happening this morning was as obvious in June as it is today:

  1. Indonesia’s Rupiah continues to crash; down big this morning -4.3% (for a currency, that is a lot!)
  2. India’s Rupee continues to crash as well, down another -1.9% this morning

As a country’s currency gets crushed, #InflationAccelerates and #GrowthSlows – then you get:

  1. Indonesia’s stock market down another -4% overnight (down -15% for the month-to-date)
  2. India’s stocks market down another -3.1% overnight (-11.5% since July 23rd)

Sure, it may seem disorderly and random that Asian “growth” markets can dislocate from US domestic growth stocks. It may appear random to the Macro Tourist who doesn’t stare at the matrix of currency and correlation risk like we do all day too.

 

But the other big point about disorder and randomness embedded in chaos theory is that there is a deep simplicity to it all, in hindsight.

 

Our immediate-term Risk Ranges are now as follows (we have 12 Big Macro risk ranges in our Daily Trading Range product now too):

 

UST 10yr Yield 2.71-2.93%

SPX 1

EEM 32.07-38.99

VIX 13.03-15.44

USD 80.93-81.80

Copper 3.30-3.39

 

Best of luck out there today,

KM

 

Keith R. McCullough
Chief Executive Officer

 

Disorderly Risks - chart

Disorderly Risks - vp


Consensus Wrong on #RatesRising

Consensus has been telling you over and over again that our top Q3 Macro Theme #RatesRising is going to kill the US stock market for about 9 months now. Well, it's certainly killing bonds, Emerging Markets, and slow-growth, high yielding, stocks maybe, but not US growth stocks.

 

Consensus Wrong on #RatesRising - Sector Performance

 

That style factor is why the Nasdaq and Russell 2000 outperformed the Dow again last week. It's 2.82% on the 10-year now with no resistance to 2.95%. This Hedgeye Q3 Macro Theme remains firmly intact.


BEST IDEAS UPDATE

Starbucks (SBUX)


Starbucks has been on the Hedgeye Real Time Alerts list since 4/21/09, when we added it as a LONG.

 

SBUX continues to be the best run company that we follow and the long-term TAIL seems unlimited.  Impressive FY3Q13 results only enhance this view.  Despite the stock trading at the high end of its historical consensus forward earnings and cash flow multiples, we believe there is more upside in store.  The three bullish factors we remain focused on include rapid unit growth in China, expansion into new segments of the global food and beverage industry and a commodity tailwind that we anticipate will continue well into FY15. 

 

At 15.1x EV/EBITDA, SBUX is trading significantly above its QSR peer group at 12.4x EV/EBITDA, but we believe this premium is warranted.  Sentiment on the street is high, and this, along with the development of La Boulange are two of our main concerns.  While we can argue that the street is not bullish enough on SBUX, we cannot brand La Boulange a success just yet.

 

BEST IDEAS UPDATE - SBUX US

 

BEST IDEAS UPDATE - SBUX EMEA

 

BEST IDEAS UPDATE - china

 


The Cheesecake Factory (CAKE)


We added CAKE to the Hedgeye Best Ideas list on 2/11/13 as a LONG.   

 

Despite reporting disappointing 2Q13 results, the underlying fundamentals of the company remain strong.  We expect 3Q13 to be a challenging quarter for all casual dining companies and CAKE is no exception, as the company faces slowing industry trends and a tough comp.  However, we believe sales will rebound strongly in 4Q13 and carry on into 2014. 

 

At 8.7x EV/EBITA, CAKE is valued in line with its Casual Dining peer group trading at an 8.8x multiple.  While short interest is currently 11.09% of the float, we believe the international story is underappreciated by the street.  International locations have exceeded expectations and management plans to open another three Middle East stores this year.  For each Middle Eastern restaurant that is open for a full-year, we expect $0.01 in incremental annual earnings per share.

 

BEST IDEAS UPDATE - CAKE RIHANNA

 

 

Panera Bread (PNRA)


We added PNRA to the Hedgeye Best Ideas list on 4/5/13 as a SHORT.  

 

Reflected in 2Q13 results, PNRA is facing a bevy of issues.  The company’s position as a healthy QSR option that is relatively free of competitors is gradually changing.  An increasing number of Casual Dining chains are now offering lower price points and other QSR chains are upgrading their menus.  These menu upgrades include items that are being competitively marketed as healthy eating options and are cheaper than PNRA’s core offering.  This means one thing for PNRA: more competition.

 

But this isn’t the only issue that PNRA is facing.  The company has admitted to having numerous and varying operational issues, ranging from a lack of kitchen equipment to a lack of seating.  Capacity issues have dampened lunch time transactions and management has struggled to drive peak hour throughput.  Therefore, we believe the labor line favorability the company has seen lately will wane, as PNRA will have to invest increased labor in some of its cafes in 2H13.

 

The aforementioned issues are manifesting themselves in the components of comparable sales growth as PNRA traffic trends have shown weakness lately.  At 9.8x EV/EBITDA, the stock currently trades at a discount to its QSR peer group at a 12.4x EV/EBITDA.  We believe this discount is justified and expect PNRA to have another rough outing in 3Q13.

 

BEST IDEAS UPDATE - PNRA system

 

BEST IDEAS UPDATE - PNRA COMPANY

 

 

McDonald’s (MCD)


We added MCD to the Hedgeye Best Ideas list on 4.25 as a SHORT.  

 

July sales numbers recently reported by MCD confirm that the company continues to struggles amidst a difficult macro and increasingly difficult competitive environment.  The company has a lot of work to do in order to improve its operational performance and we fail to see any indication that this will transpire soon.  We previously laid out our thoughts on the path management must take in order to generate sustainable revenue and operating growth in our note titled, “MCD – Difficult Decisions Looming?” 

 

Management’s Plan to Win strategy has proven stale, as new products are not working and operational throughput issues persist.  We believe MCD’s attempts to diversify away from core competencies have, to some degree, brought about these issues.  In addition to operational problems, the company faces three near-term issues: flat-to-declining markets, a lack of pricing flexibility and increasing competition.  To touch on the latter, companies like Wendy’s, Chipotle and even Taco Bell have been pressuring McDonald’s sales as they have been able to successfully do what McDonald’s has not: appeal to Millenials.  As the competitive landscape continues to change, MCD must figure out how to appeal to this cohort.

 

Short interest is only 0.92% of the float and at 10x EV/EBITDA, MCD is trading significantly below its QSR peer group at 12.4x EV/EBITDA.  We believe the aforementioned operational and near-term issues validate this discount.

 

BEST IDEAS UPDATE - global

 

BEST IDEAS UPDATE - MCD USA

 

BEST IDEAS UPDATE - MCD EUR FINAL

 

BEST IDEAS UPDATE - MCD APMEA FINALL

 

 

 

Howard Penney

Managing Director

 


real-time alerts

real edge in real-time

This indispensable trading tool is based on a risk management signaling process Hedgeye CEO Keith McCullough developed during his years as a hedge fund manager and continues to refine. Nearly every trading day, you’ll receive Keith’s latest signals - buy, sell, short or cover.

next