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RH: Bullish Thesis Intact

Takeaway: Please join us Monday, February 10th at 1:00pm EST for a Flash Call on RH. ***Call details will be posted morning of 2/10

Please join us on Monday, February 10th at 1:00pm EST for a Flash Call on Restoration Hardware (RH). On the call we will revisit our bullish thesis on RH and address current challenges in the market - real and perceived. 

 

RH: Bullish Thesis Intact - Call details

 

Given all the noise out there in the market, we want to be clear about delineating risk/reward around each of the following three durations:

  • TRADE (3 weeks or less)
    • Sentiment - and the key issues we hear from investors
    • Risk scenarios based on how RH likely fared operationally and financially in 4Q while retailers were dropping like flies
    • Is the Company's guidance at risk, and if so, how much?
    • 'Deferred Revenue' has gotten a lot of attention year-to-date. Is the concern justified, or overblown?
    • How is e-commerce trending?

 

  • TREND (3 months or more)
    • Catalyst calendar throughout CY2014
      • Store opening cadence
      • Category launch
      • Catalog drops, or lack thereof
    • Management transition - life after Carlos

 

  • TAIL (3 years or less)
    • Inflection point(s) in square footage model
    • Impact of larger format stores on the comp
    • Trade-off between in-store vs. direct revenue
    • Gross Margin Opportunity, real or perceived
    • SG&A leverage - or lack thereof?
    • Capital intensity (something no one asks about)

 

CONTACT

The dial-in details and the presentation will be circulated on Monday prior to the call. Please email  for more information.

 


McCullough: No Need to Be a Cowboy on Friday's Jobs Report

Takeaway: Hey Jesse James. Put your gun back in its holster.

I am getting a ton of questions from institutional investors on what I think tomorrow’s January jobs number is going to be.

  1. I have no idea.
  2. The question is being asked because consensus still doesn’t want to miss a big up move.

I'm probably going to go into the print with relatively flat net exposure and low gross. I've covered a lot of shorts on red, so I have a lot to do putting shorts back on.

 

But no need to be a cowboy.

 

Betting on an unpredictable jobs number? That’s cowboy. I’ve been there and done that. And I failed. Unless you've got some inside information, no one has any edge. No one. (Apologies to Mark Zandi, Steve Liesman, etc).

 

McCullough: No Need to Be a Cowboy on Friday's Jobs Report - z 45

 

Moreover, the risk range on the S&P 500 right now is wide at 1735-1803. And the VIX is sitting right in the middle of its risk range of 14.91-20.41 too. So it’s not the spot to play cowboy.

 

Unlike a lot of pundits, we don’t pretend to have any edge on the monthly non-farm payrolls figure. While many market pretenders toss out pie-in-the-sky predictions, we don't. No real pro or analyst will.

 

In other words, unless you’ve got some inside information leaning either way is just a guess.

 

 

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JPM: REMOVING FROM INVESTING IDEAS

Takeaway: We are removing JPMorgan (JPM) from Investing Ideas.

Hedgeye Financials Sector Head Josh Steiner is pulling JPM from Investing Ideas. For now.

 

JPM: REMOVING FROM INVESTING IDEAS - jpm99

 

We still like this name from an intermediate/longer term standpoint for the same reasons we cited when it was added to Investing Ideas. But in the short-term, the growing risks abroad augur poorly for a globally-interconnected bank like JPMorgan.

 

Moreover, the recent trend of softening economic data in the US is also unsupportive.

 

JPM is a name that we can revisit on the long side when the Emerging Market risk profile is in retreat, rather than rising, and when we have better visibility into whether the recent US data is hitting a speed bump or something larger.

 

The S&P 500 is down approximately -3% since JPM was added to Investing Ideas. JPM is essentially flat. 


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INITIAL CLAIMS: SLOWING MODESTLY, BUT STILL IMPROVING

Takeaway: Tomorrow's NFP print will be the main event on the labor front, but we think we already have a pretty clear picture of what's happening.

Editor's note: Below is a detailed breakdown of this morning's jobless claims data from Hedgeye Financials Sector Head Josh Steiner. For more information on how you can subscribe to Hedgeye click here. 

INITIAL CLAIMS: SLOWING MODESTLY, BUT STILL IMPROVING - help wanted

Labor is Slowing, but Only Modestly

The strength of the labor market has cooled off modestly. We key off the year-over-year rate of change in rolling NSA (non-seasonally adjusted) initial jobless claims. This week the data was better by 5.5% vs the same period last year. However, if you compare that with the preceding three weeks of data, it reflects a modest deceleration. The last four prints have been: -8.5%, -7.9%, -7.2% and -5.5%.

 

It's important to remind investors that initial claims tend to hit a frictional resistance around 300,000. As such, the closer we get to 300K, the more we'd expect the rate of improvement to converge toward zero. As such, it's not surprising that the rate of improvement is slowing, but we're more interested in the short-term acceleration/deceleration relative to the trendline rate of change. On that basis, the last four weeks represent a bit more of a slowdown than what the trendline would suggest.

 

To be clear, we're not overly concerned here, but in light of the weak ISM print and elevated overseas concerns, it's important to keep tabs on whether we're in the early days of a real slowdown or just a short, counter-trend speed bump.

 

The Numbers

Prior to revision, initial jobless claims fell 17k to 331k from 348k WoW, as the prior week's number was revised up by 3k to 351k.

 

The headline (unrevised) number shows claims were lower by 20k WoW. Meanwhile, the 4-week rolling average of seasonally-adjusted claims rose 0.75k WoW to 333.25k.

 

The 4-week rolling average of NSA claims, which we consider a more accurate representation of the underlying labor market trend, was -5.5% lower YoY, which is a sequential deterioration versus the previous week's YoY change of -7.2%

 

INITIAL CLAIMS: SLOWING MODESTLY, BUT STILL IMPROVING - stein1

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This Thunder Bay Bear Loves His Shorts (and Jorts)

Takeaway: Year-to-date Hedgeye CEO Keith McCullough is batting 25 of 29 in his short calls in Real-Time Alerts. That’s an 86% success rate.

Despite a 1% move higher today, the S&P 500 is still down over 4% year-to-date. US #GrowthSlowing and #InflationAccelerating (on the margin) will do that to you.

 

We don’t run from bears here at Hedgeye. We love them. In fact, we warned our subscribers and called this latest move down. It's time-stamped.

 

This Thunder Bay Bear Loves His Shorts (and Jorts) - so cute bears

 

In Real-Time Alerts (one of our four core products designed for individual investors), Hedgeye CEO Keith "Mucker" McCullough has amassed an impressive all-time career batting average just shy of 79% on the short side. Better yet, year-to-date he’s batting 25 of 29 in his short calls. That’s an 86% success rate.

 

Here’s a look at our recent trades in Real-Time Alerts to give you some perspective.

 

This Thunder Bay Bear Loves His Shorts (and Jorts) - km6

 

Hedgeye's affinity for the bear may have something to do with “Mucker” hailing from the mean streets forests of Thunder Bay, Canada. That of course is where bearded men are unafraid to sport the jorts and rock out to Bryan Adams ... and where bears roam free. The jury is still out.

 

Bottom line. Does it pay to be a Real-Time Alerts subscriber? We’ll let you be the judge.


INITIAL CLAIMS: SLOWING MODESTLY, BUT STILL IMPROVING

Takeaway: Tomorrow's NFP print will be the main event on the labor front, but we think we already have a pretty clear picture of what's happening.

Below is the detailed breakdown of this morning's claims data from the Hedgeye Financials led by Joshua Steiner. If you would like to setup a call with Josh or Jonathan or trial their research, please contact 

 

 

Labor is Slowing, but Only Modestly

The strength of the labor market has cooled off modestly. We key off the year-over-year rate of change in rolling NSA (non-seasonally adjusted) initial jobless claims. This week the data was better by 5.5% vs the same period last year. However, if you compare that with the preceding three weeks of data, it reflects a modest deceleration. The last four prints have been: -8.5%, -7.9%, -7.2% and -5.5%.

 

It's important to remind investors that initial claims tend to hit a frictional resistance around 300k. As such, the closer we get to 300k the more we'd expect the rate of improvement to converge toward zero. As such, it's not surprising that the rate of improvement is slowing, but we're more interested in the short-term acceleration/deceleration relative to the trendline rate of change. On that basis, the last four weeks represent a bit more of a slowdown than what the trendline would suggest.

 

To be clear, we're not overly concerned here, but in light of the weak ISM print and the elevated overseas concerns it's important to keep tabs on whether we're in the early days of a real slow down or just a short, counter-trend speedbump.

 

The Numbers

Prior to revision, initial jobless claims fell 17k to 331k from 348k WoW, as the prior week's number was revised up by 3k to 351k.

 

The headline (unrevised) number shows claims were lower by 20k WoW. Meanwhile, the 4-week rolling average of seasonally-adjusted claims rose 0.75k WoW to 333.25k.

 

The 4-week rolling average of NSA claims, which we consider a more accurate representation of the underlying labor market trend, was -5.5% lower YoY, which is a sequential deterioration versus the previous week's YoY change of -7.2%

 

INITIAL CLAIMS: SLOWING MODESTLY, BUT STILL IMPROVING - JS 1

 

INITIAL CLAIMS: SLOWING MODESTLY, BUT STILL IMPROVING - JS 2

 

INITIAL CLAIMS: SLOWING MODESTLY, BUT STILL IMPROVING - JS 3

 

INITIAL CLAIMS: SLOWING MODESTLY, BUT STILL IMPROVING - JS 4

 

INITIAL CLAIMS: SLOWING MODESTLY, BUT STILL IMPROVING - JS 5

 

 

 

Joshua Steiner, CFA

 

Jonathan Casteleyn, CFA, CMT

 


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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