The Economic Data calendar for the week of the 2nd of December through the 6th 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.
Takeaway: Current Investing Ideas: BNNY, CCL, FDX, FXB, GHL, HCA, MD, NKE, RH, SBUX, TROW and WWW
In light of the holiday shortened trading week, we have chosen to highlight three timely, topical and potentially profitable investment ideas below that we sent out recently to our institutional clients. We will resume our usual stock updates next week.
We would like to take a moment to thank you for making all that we have set out to achieve here at Hedgeye possible. We’re going on 6 years since the founding of our firm. You have helped us create 50 jobs in America. More to come. For that we are grateful.
Enjoy your holiday weekend.
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Right now may be a bit early, but gold is shaping up to be a compelling long idea heading into 2014 according to Hedgeye's Macro Team. Since the start of November, Keith has been trading gold with a bullish bias in our Real-Time Alerts signaling product. This is a marked shift from having traded gold with a largely bearish bias since late 2011. All told, we think a waning threat of tapering, at the margins, is likely to serve as a positive catalyst for the price of gold.
We continue to express great excitement in the growth prospects for the e-cigs, despite its current diminutive size (~ 1% of the $800B global tobacco market). We expect consumer interest in and investment behind e-cigs to grow, especially following “Big Tobacco’s” entrance into the category. We think e-cigs demonstrate truly disruptive and compelling innovation and are bullish on the U.S. and global runways for the category.
Our Financials Sector Team led by Josh Steiner and Jonathan Casteleyn present their latest thinking about rate sensitivity across the Financials sector. Rates will be your best friend or worst enemy. Steiner and Casteleyn look across the FIG sector for the names with the most quantified exposure, + or -, to rates.
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Takeaway: USD and EUR currencies wars suggest the Pound is the relative winner.
This note was originally published November 14, 2013 at 13:58 in Macro
Long GBP/USD (via the etf FXB)
Our bullish call on the British Pound remains, an anchor of our Q4 2013 Macro theme of #EuroBulls presented on 10/11/13. (Click here for our previous note “Get Long the Pound”)
We’re buyers of the cross above our TREND support line of $1.58 and long term TAIL support line of $1.56. We could see the cross heading to the $1.65 - $1.70 range over the intermediate term.
In short, we expect currency wars to devalue the USD and EUR, and expect the British Pound to be the relative winner across both crosses. Here are some updated developments since the ECB unexpectedly decided last Thursday (11/7) to cut the main interest rate by 25bps to 0.25% that we think will boost our #PoundBullish call:
In contrast, we expect sober hawkish policy from the BOE. The UK was the first to issue austerity, which we think will continue to boost its growth profile above most of its European peers. Improving economic data (more below) continues to confirm this position. On policy, we expect interest rates to be on hold over the medium term, with expectation for a hike over the longer term, and the asset purchase program target (QE) to remain unchanged. Both positions should strengthen the GBP/USD and GBP/EUR.
Improving UK Data This Week:
BOE’s Inflation Report-
High Frequency Data-
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With a good majority of consumer staples companies having reported their quarterly results, below we give a round-up of our highest conviction ideas on the long and short sides over the intermediate term TREND.
Looking back at the quarter it’s interesting to note that while some things changed versus Q2 most remained the same. Here’s our update:
As a point of reference, directly below we’ve included the price performance of our highest conviction stocks following last quarter’s reported results (Q2). The price performance is somewhat arbitrary, as the entry price reflects the date of this report’s release last quarter (8/14/13) and not our specific entry point targets (the closing reports are based on yesterday’s close), however the numbers provide a reference point for our calls.
Q2 Top Longs: LO (43.52 – 51.54, +18.4%), HSY (96.09 – 97.72, +1.7%), TSN (31.80 – 31.65, -0.5%), SAM (211.70 – 246.20, +16.3%)
Q2 Top Shorts: PM (88.18 – 85.50, +3.0%), DPS (45.86 – 48.47, -5.7%), CCE (38.37 – 42.16, -9.9%), K (65.42 – 60.88, +6.9%), KMB (96.78 – 108.22, -11.8%)
Highest Conviction Stocks Following Reported Q3 2013 Results
Our quantitative real-time set-up for Consumer Staples (etf: XLP) is bullish, trading above its intermediate term TREND line.
While the day after Thanksgiving is historically the lowest volume trading day of the year, there has actually been some important data out over the last 24 hours including: 1) Euro-area unemployment dropping to 12.1% from 12.2% in October and Eurozone flash CPI coming in at a anemic 0.9% (but higher versus last month’s 0.7%). Also, German retail sales came in at -0.8% month-over-month versus and estimate of +0.5%. These big macro data points don't point to any reason for European policy makers to change their views. If anything, there's only increased support for the current extremely dovish policies that are in place.
Last week we encouraged investors to consider taking off the Abenomics trade. As our analyst Darius Dale pointed out, there are a number of reasons to consider booking gains.
|FIXED INCOME||8%||INTL CURRENCIES||26%|
Our bullish call on the British Pound was borne out of our Q4 Macro themes call. We believe the health of a nation’s economy is reflected in its currency. We remain bullish on the regime change at the BOE, replacing Governor Mervyn King with Mark Carney. In its October meeting, the Bank of England voted unanimously (9-0) to keep rates on hold and the asset purchase program unchanged. If we look at the GBP/USD cross, we believe the UK’s hawkish monetary and fiscal policy should appreciate the GBP, as Bernanke/Yellen continue to burn the USD via delaying the call to taper.
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.
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.
Just keep moving out there and take what these bubbles are going to give you. Don't get piggy. @KeithMcCullough
"Everyone thinks of changing the world, but no one thinks of changing himself." - Leo Tolstoy
Americans consume approximately 46 million turkeys on Thanksgiving Day compared to 22 million at Christmas and 19 million at Easter. 88% of Americans ate turkey this year. (Benzinga)
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