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COMMODITY CHARTBOOK

The charts below illustrate some of the important commodity trends for the restaurant industry.

 

Notable Trends:

  • Coffee prices ticked up +1.9% over the past week, but are down -38% on a year-over-year basis and remain a tailwind for SBUX, DNKN, GMCR, KKD, THI and other coffee retailers.  We expect this tailwind to continue for the remainder of the year.
  • Chicken wings are up +0.3% over the past week, as football season enters its nascent stages and MCD is in the process of rolling out Mighty Wings nationwide.
  • Dairy costs are up over the past week.  A continuation of this trend could create some margin pressure for CAKE, TXRH and others with expsoure to dairy costs.
  • Beef prices are down over the past week and have been trending down YTD, offering CMG, WEN, JACK and others reason to be optimistic on COGS over the intermediate-term.
  • Corn and wheat prices continue to provide retailers, restaurants and consumers with lower food costs than a year ago.
  • Gasoline prices fell -0.9% over the past week, but are up +7.5% YTD. We will continue to monitor this trend, as any sustained increase or decrease in gas prices could have a signicant impact on the direction of discretionary spending.

COMMODITY CHARTBOOK - table

COMMODITY CHARTBOOK - Correlationtable

COMMODITY CHARTBOOK - gas long term

COMMODITY CHARTBOOK - gas

COMMODITY CHARTBOOK - crb long term

COMMODITY CHARTBOOK - crb

COMMODITY CHARTBOOK - corn

COMMODITY CHARTBOOK - wheat

COMMODITY CHARTBOOK - soybeans3

COMMODITY CHARTBOOK - rice

COMMODITY CHARTBOOK - cattle

COMMODITY CHARTBOOK - breast

COMMODITY CHARTBOOK - wings

COMMODITY CHARTBOOK - coffee

COMMODITY CHARTBOOK - cheese block

COMMODITY CHARTBOOK - milk

 

 

 

Howard Penney

Managing Director

 


CATALYSTIC BYD

Takeaway: Favorable macro backdrop, margin expansion, and numerous catalysts

It's been awhile since we've seen so many positive catalysts for this sell side whipping boy

 

 

Just A Teaser

I’m in Las Vegas for meetings and wanted to relay at least one highlight before I start day 2.  I’ve come away very positive on Boyd Gaming.  We will expound on our thesis points in upcoming posts but since some of the catalysts are fresh, time is of the essence.

 

We still worry about the regional markets and the declining base of slot players.  However, BYD maintains significant exposure to the Las Vegas locals market, an incremental positive in our opinion given the positive macro offset to tough nationwide casino demographics.  Even in the regional markets where we are less sanguine, BYD seems to have significant room for cost cutting and thus, margin improvement.  In New Jersey, Borgata is spending less and gaining market share.  And speaking of New Jersey, we cannot forget the future, which is in online gaming.  Only a handful of companies can boast of first mover advantages - and they are huge - in the future of federal or multi-state internet poker.  BYD is one of them.

 

So with a return to revenue growth in the LV Locals market and likely margin improvement everywhere, we actually could see earnings upside for the first time in a long time for BYD.  Investment ratings are mostly neutral, leaving plenty of room for upgrades, especially with potentially a positive earnings surprise and higher guidance combined with the reactive nature of many on the sell side.

 

Here are some upcoming catalysts:

 

Catalysts:

  • New Jersey tax court ruling should occur this month
    • It’s not in the numbers or guidance but a favorable property tax adjustment could result in $10m+ in annual EBITDA at Borgata.  Moreover, the last 4 years are being challenged so Borgata could also receive a $40-50m tax rebate.
  • G2E and DB/UBS investor conference in Vegas starting on 9/23
    • We expect BYD to show well and exude optimism
  • Earnings release in late October
    • We believe BYD is on track to beat consensus and provide solid guidance and commentary.
  • November approval for online gaming in New Jersey
    • New Jersey online gaming is a positive for Borgata and a marginal positive for BYD.  More importantly, BYD should have a great head start if and when online gaming rolls out nationally.  Online is the future people.

The M3: BLOOMBERRY MGMT CHANGE; CROWN SRI LANKA; LUXURY SALES; HENGQIN LAND; S'PORE UNEMPLOYMENT

THE MACAU METRO MONITOR, SEPTEMBER 13, 2013


 

BLOOMBERRY RESORTS CHANGING CASINO MANAGEMENT BusinessWorldOnline.com

Bloomberry Resorts has terminated its management contract with Global Gaming Philippines LLC (GGAM), alleging a material breach of contract.  According to the disclosure statement, Bloomberry states "GGAM has not spent any material time in attending to the management of Solaire and has failed to perform its obligations and deliverables under the MSA (management service agreement)...However, many members of existing management team are very capable and will continue to manage Solaire effectively without GGAM and its representative."  Bloomberry is now looking to replace Solaire COO Michael French with an "experienced casino hotel executive."  GGAM denied Bloomberry's allegations and stated the termination of the management agreement was a breach of contract. 

 

SRI LANKA APPROVES PACKER'S CROWN CASINO DEAL macaubusiness.com

Lake Leisure Holdings, a joint venture by Crown Ltd and Rank Entertainment Holdings Pvt Ltd., received approval from Sri Lanka's government to develop a two-tower resort for US$350MM.

 

MACAU, HK OFFSET SLOWER RICHEMONT SALES IN CHINA macaubusiness.com

Swiss luxury goods maker Richemont SA reported the annual growth in sales in the Asia-Pacific region slowed to 4% in the first five months of this year from 12% a year earlier. Reduced sales reflected a slowdown in the mainland but was offset by growth in Macau and Hong Kong.

 

REAL ESTATE INVESTORS PLOT BIG RETURNS ON HENGQIN macaubusiness.com

Gemdale Corp has begun selling phase II of a low-density development on Hengqin at "The Doorway" starting at MOP1,037 a square foot.

 

UNEMPLOYMENT REMAINS LOW IN SINGAPORE channelasianews.com

The unemployment remained low, at 2.1% in June 2013, up slightly from 1.9% in March 2013.

 


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Got Summers?

Client Talking Points

GOLD

Per the Japanese press, Larry Summers is in. The US Dollar and #RatesRising both like it. Gold? It hates it. The Great 2013 Gold Crash continues. It's down -22% year-to-date as it moves toward our immediate-term TRADE oversold line of $1307 (within a bearish intermediate-term TREND). Meanwhile, Silver’s losses? They are 2.5x Gold’s this morning, but that’s been the story all year. Gold’s best buddy was Ben Bernanke. Bottom line? #ItsAllOver

OIL

Despite the Russians moving some of their eye-candy into the Mediterranean, Brent is down -0.5% this morning. Our immediate-term TRADE momentum line of resistance on my radar is $114.67. The TAIL risk support is still very much in play down at $108.59. So clearly Barack Obama has some communication tooling to do.

UST 10YR

Witness the well-deserved higher-lows and higher-highs as yesterday’s US Jobless Claims print trumpeted the best in 7 years on a seasonally adjusted basis. Incidentally, it was the best in 13 years on a non-seasonally adjusted basis. But alas, partisan people will keep whining about this, and that, and the next thing. Guess what? That is a very bullish thing (but bearish for Gold and Bonds).

Asset Allocation

CASH 32% US EQUITIES 22%
INTL EQUITIES 20% COMMODITIES 0%
FIXED INCOME 0% INTL CURRENCIES 26%

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.

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.

TROW

Financials sector senior analyst Jonathan Casteleyn continues to carry T. Rowe Price as his highest-conviction long call, based on the long-range reallocation out of bonds with investors continuing to move into stocks.  T Rowe is one of the fastest growing equity asset managers and has consistently had the best performing stock funds over the past ten years.

Three for the Road

TWEET OF THE DAY

TREASURIES: 10yr steady on Larry Summers (he's hawkish for intererest rates) = 2.92% #RatesRIsing

@KeithMcCullough

QUOTE OF THE DAY

In my mind, I'm always the best. If I walk out on the court and I think the next person is better, I've already lost. -Venus Williams

STAT OF THE DAY

According to a recent study, the US is home to about one in every three ultra-high net worth individuals — those with $30 million or more in total assets. At last count, 65,000 U.S. residents possess more than $9 trillion.



CHART OF THE DAY: Economic Weapons of Mass Destruction

 

CHART OF THE DAY: Economic Weapons of Mass Destruction - 10Y vs NSA


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 78.63%
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