Starboard Value announced in a 13D filing this morning that it has retained former Olive Garden President Brad Blum to serve as an advisor in its battle against Darden Restaurants.  Starboard will pay $50,000 in cash to Mr. Blum who will, in turn, use the proceeds to purchase Darden stock.


We view this as a favorable development and continue to believe there is the potential for significant shareholder value creation.  I have known Brad since his days at Olive Garden.  In all my conversations about DRI I have made no secret of the fact that I consider Brad uniquely qualified to head up a restructuring and turnaround at the company.  I believe his expertise and experience make him an extremely valuable asset.  A large part of our thesis revolves around the company’s ability to fix the crown jewel: Olive Garden.  We think Mr. Blum could play a critical role in this turnaround and, apparently, Starboard does as well. 


We’ve been publishing extensively on Darden over the past year, including a research note titled “DRI: A Generational Opportunity.”  We continue to believe there is significant upside in DRI as the stock is still trading at a notable discount to its underlying asset value.  The activists recognize this and we believe Starboard’s agreement with Mr. Blum is very bullish for Darden shareholders. 



Howard Penney

Managing Director


Thought Leader Discussion: What’s the Matter with MLP Non-GAAP Metrics?


Julie Hilt Hannink, CFA, Head of Energy Research, CFRA Research

Kevin Kaiser, Managing Director, Energy Sector, Hedgeye Risk Management


Call Details:

Wednesday, February 26th at 11am EST

Participant Dial-In:

Participant Code: 198965#

For anonymous Q&A, send questions to  and 


About the Call:

Julie Hilt Hannink, CFA, of CFRA Research will join Kevin Kaiser of Hedgeye Risk Management for an in-depth discussion of key accounting and regulatory topics in the Master Limited Partnership (MLP) sector: the use and purpose of common non-GAAP metrics (for example, “distributable cash flow” and “maintenance CapEx”); the focus of the SEC’s new Financial Reporting and Audit Task Force, and how it might impact MLPs; the Incentive Distribution Right (IDR) and IDR “forgiveness”; corporate governance issues; and more… 


About Julie Hilt Hannink:

Ms. Julie Hilt Hannink is the Head of Energy Research for CFRA. In this capacity, she is responsible for CFRA’s research and screening on independent oil and gas producers, master limited partnerships, integrated oil companies, refiners and oil services. Ms. Hannink brings more than 25 years of experience in financial and fundamental research and analysis to CFRA. Prior to her tenure at CFRA she was the Director-Oil and Gas at Medley Global Advisors and a Managing Director at J.P. Morgan Asset Management where she was the senior North American oil & gas analyst.  Ms. Hannink holds a BS in Commerce (concentration Accounting) from the University of Virginia.


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Hedgeye Risk Management is a registered investment advisor, registered with the State of Connecticut. Hedgeye Risk Management is not a broker dealer and does not make investment recommendations. This research does not constitute an offer to sell, or a solicitation of an offer to buy any security. This research is presented without regard to individual investment preferences or risk parameters; it is general information and does not constitute specific investment advice. This presentation is based on information from sources believed to be reliable. Hedgeye Risk Management is not responsible for errors, inaccuracies or omissions of information. The opinions and conclusions expressed by Hedgeye Risk Management are those of Hedgeye Risk Management, and are intended solely for the use of participants of this call. In reaching these opinions and conclusions, Hedgeye Risk Management and its employees have relied upon research conducted by Hedgeye Risk Management’s employees, which is based upon sources considered credible and reliable within the industry. Hedgeye Risk Management is not responsible for the validity or authenticity of the information upon which it has relied.


CFRA Research Disclaimer:

The content and opinions expressed by CFRA are those of CFRA. Analysis provided by CFRA has not been submitted to, nor  received approval from, the United States Securities and Exchange Commission or any other regulatory body. While CFRA exercised due care in compiling its analysis, CFRA AND ALL RELATED ENTITIES SPECIFICALLY  DISCLAIM  ALL WARRANTIES, EXPRESS OR IMPLIED, regarding the accuracy, completeness or usefulness of this information. and assumes no  liability with respect to the consequences of relying  on this information for investment or other purposes. In particular, the research provided is not intended to constitute an offer, solicitation or advice to buy or sell securities. CFRA, CFRA Accounting Lens, CFRA Legal Edge, CFRA Score, and all other CFRA product names are the trademarks, registered trademarks, or service marks of CFRA or its affiliates in  the United States and other jurisdictions. 

Initial Claims: Two Steps Back, One Step Forward...

Takeaway: The labor market catches its breath this week with modest sequential improvement.

Editor's note: This is a complimentary excerpt from a research note written by Hedgeye's Financials team. For more information on how Hedgeye can help you click here or ping

Recent Pressure Abates

Labor market data had been deteriorating steadily for the last 4 weeks in a row. This week it got slightly better. The year-over-year rate of improvement in rolling NSA initial jobless claims accelerated to -5.5% from -5.1%, marking an inflection from the decelerating trend we had been seeing for the previous month. On a one-week basis, the rate of improvement was fairly impressive at -7.9% vs -0.9% the week prior. As a reminder, we monitor deviations from the trendline rate of improvement in claims as the best real-time indicator for labor market turning points. It's important to remember that claims hit a frictional support level of ~300k, so as the data approaches 300k the rate of improvement should be expected to converge towards zero. We're mindful of this, which is why we look for trendline deviations.


Initial Claims: Two Steps Back, One Step Forward... - stein2

The Numbers

Initial jobless claims (SA) fell 3k to 336k from 339k WoW, as the prior week's number was unrevised. Meanwhile, the 4-week rolling average of seasonally-adjusted claims rose 2.5k WoW to 338.5k.


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 improvement versus the previous week's YoY change of -5.1%


Initial Claims: Two Steps Back, One Step Forward... - stein1

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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 80.45%
  • SHORT SIGNALS 78.38%


Conservative Guidance, Bullish Commentary - stronger corporate group pace plus strengthening rate = upside leverage to the cycle




  • Protea:  will close April 1 2014; paid 10x EBITDA
  • Transactions to date:  completed London Edition (netted $240MM), Renaissance Barcelona sales (netted $60MM, closed in Jan 2014)
  • US supply grew <1% in 2013
  • STR US 2014 supply forecast:  +1.2%
  • AC brand:  1st opening in early 2015
  • MOXY - have 12 in pipeline and 15 in discussion; expect 150 MOXY hotels in Europe in a decade
  • China:  economic growth has moderated; aggressively pursing domestic leisure market  
  • Worldwide STR REVPAR for MAR brand:  increased 1% full point in 2013
  • In last 7 wks, did $880MM in transactions
  • Expect $1.25-1.5BN in share repurchases in 2014
  • All Marriot branded hotels (500) will be available for mobile check-in in 2014
  • Unit growth is sustainable in developed and developing world, including US
  • Q4 Fee revs strong -  better REVPAR in international markets and strengthening group business in NA
  • Better branding fees and profit from leased hotels added $0.02
  • G&A:  $0.06 unfavorable from certain items
  • Tax line helped 4Q by 3 cents due to several discrete items
  • NA
    • Strong REVPAR in San Fran, Houston and Miami
    • NY had tough comps due to Hurricane Sandy
  • Bookings pace for MAR brand was up 4% for 2014 - similar to what they reported in 3Q.  Corporate group pace at 10%.  Since corp demand is quite short-term, the trend is very encouraging for 2014 
  • Group performance outperformed competitiors in 2013
  • 4Q Europe REVPAR:  +3% 
    • UK: +6%; Germany: +9%, Caribbean/Latin America:  +4% (constant currency), ME&A: -9%, Asia-Pacific:  +5%, Greater China: +3%
  • NA incentive fees: +34%; outside NA incentive fees:  -2%
  • FY 2013 worldwide incentive fees: 39% (32-33% in 2012)
  • 2014 REVPAR outlook:  Mid-single digit in Asia/ME; low single digit in Europe; high single digit in Caribbean/Latin America
  • 2014 incentive fees growth:  Low double digit rate
  • Outlook reflects lower termination fees, slightly higher preopening expenses, stronger profits from owned/leased and affinity credit cards
  • 1% REVPAR 2014 outlook sensitivtiy:  $20MM in fees, $5MM owned/leased line pre-tax
  • Plan to renovate several owned hotels; build the Fairfield Inn in  Brazil to launch that brand and to complete Protea acquisition
  • Sept 8 Analyst Day Washington DC Marquis hotel

Q & A

  • 2014 looking a lot like 2013
  • About 3,000 hotels in US;  expect DC to continue to be weak
  • MAR Marquis DC:  not likely to be terribly impactful
  • D&A changes - more transparency and better comparability
    • Contract amortization line broken out in CF statement
  • 4Q G&A unusual items:  Through 3Q, 33,000 signed rooms. By end of year, had 67k rooms; the record quarter signings drove more legal costs ($8MM), transaction costs related to Protea ($10MM), writeoff/impairments ($6MM)
    • Ex items, about $3-5MM of G&A above previous 4Q guidance
  • 2014 Group trends (does not include new DC hotel):  first 3Qs (+6%), 4Q weaker
  • Great December period for 2014 bookings
  • 2014 Non-room revenues will grow a few tenths of a % faster than REVPAR
  • Full-service/select-service:   full service doing better than select service - partly due to distribution and strong group business.  Residence Inn may be at lower end of REVPAR guidance.
  • Brand growth:  top-end brands + Courtyard
  • EDITION sales:  long list of bids for London
  • NY EDITION:  will open 1Q 2015 (about $350MM)
  • Miami EBITION will close for $200-230MM in late 2014.
  • European REVPAR guidance conservative?  Well, last year, Euro REVPAR was only up 1.5% YoY.  3%ish guidance is about right. 
  • Possibly more Courtyard sales in Europe:  $20-30MM each
  • 2014 REVPAR will be driven by rate
  • Group business always lags
  • There is more growth opportunities in US

The Most Important Macro Theme Right Now

Takeaway: We're banging this drum loud and hard. For good reason.

#InflationAccelerating remains our  #1 non-consensus Macro Theme.


The Most Important Macro Theme Right Now - hair


Check out the CRB Index which closed up another +1.1% yesterday. It’s now up almost +8% year-to-date (and it’s still only February). Compare that with the S&P 500 which fell -0.65% yesterday and is down -1.1% YTD.


Gold? It rose another +0.2% to over +9% YTD.


What's that? Consumer Discretionary has fallen -3.2% YTD? Exactly. There’s no question that inflation is a tax on U.S. consumption expectations. 


The Most Important Macro Theme Right Now - XLF 10Y

Keep a close eye on the Financials (XLF). As the US Dollar and Rates go, so goes the Financials (they were down -1.4% yesterday) and the market. The long-end of the yield curve needs to rise for the XLF to work – not get “rate guided” down by un-elected bureaucrats in Washington.


Got US #GrowthSlowing yet?

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[video] Keith's Macro Notebook 2/20: #INFLATIONACCELERATING YEN XLF

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