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

***CALL/WEBINAR IS TODAY at 11:00am EST***

***Updated Call/Webinar Details Below***



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

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


Call/Webinar Details (*UPDATED*): 

Today’s call will be in a webinar format. Please follow the directions below to view the slides live (note: the slides are only available during the live webinar). The webinar is not compatible with Safari, we recommend using Google Chrome, Firefox or Internet Explorer.  Please contact if you have any questions.


*You can log in 10 minutes before the Webinar begins.


Webinar Log-In Directions:

  1. Go to:
  2. Enter:
  • Conference dial-in number:  or
  • Conference code: 198965#
  • Enter your name
  • Select “Connect Now”

For anonymous Q&A at the end of the call, 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.


Special Conference Call Disclaimer:

CFRA Research is co-hosting this conference call at the invitation of Hedgeye Risk Management.  Both CFRA and Hedgeye are individually responsible for their respective contributions to this conference call; neither CFRA nor Hedgeye has verified the accuracy or completeness of the other’s information.  Opinions expressed by Hedgeye and its employees do not necessarily reflect the opinions of CFRA and its employees, and vice versa.


Both Hedgeye and CFRA have invited their subscribers, clients, and potential clients to participate on this call.  By dialing in to participate on this call, you agree that your name, firm affiliation and contact information may be shared between Hedgeye and CFRA for marketing purposes.  Identifying information will be shared only between Hedgeye and CFRA; as with all Hedgeye calls, participants will not be made aware of each other’s identity.   Live participants are entitled to submit questions during the call.  If you do not wish your identifying information to be shared, please contact your sales representative to arrange to receive a podcast recording.


Hedgeye Risk Management Disclaimer:

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 the work of CFRA and is protected intellectual property.  CFRA, a global leader in forensic accounting research, analytics and advisory services, is offering this presentation by special arrangement with Hedgeye.  Hedgeye has not verified the accuracy or completeness of this presentation.  Opinions and views expressed by CFRA do not necessarily reflect the opinions of Hedgeye, and vice versa.


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

February 26, 2014

February 26, 2014 - 1 


February 26, 2014 - Slide2

February 26, 2014 - Slide3

February 26, 2014 - Slide4

February 26, 2014 - Slide5

February 26, 2014 - Slide6

February 26, 2014 - Slide7

February 26, 2014 - Slide8 


February 26, 2014 - Slide9

February 26, 2014 - 10

February 26, 2014 - Slide11



TODAY’S S&P 500 SET-UP – February 25, 2014

As we look at today's setup for the S&P 500, the range is 35 points or 1.47% downside to 1818 and 0.43% upside to 1853.                










THE HEDGEYE DAILY OUTLOOK - 10                                                                                                                                                                  



  • YIELD CURVE: 2.38 from 2.39
  • VIX closed at 13.67 1 day percent change of -3.94%

MACRO DATA POINTS (Bloomberg Estimates):

  • 7am: MBA Mortgage Applications, Feb. 21 (prior -4.1%)
  • 10am: New Home Sales, Jan., est. 400k (prior 414k)
  • 10:30am: DOE Energy Inventories
  • 12pm: Fed’s Rosengren speaks in Boston
  • 7:30pm: Fed’s Pianalto speaks in Wooster, Ohio


    • 9:30am: Senate Homeland Security panel holds hearing on offshore tax evasion by multinational cos.
    • 10am: FDIC releases Q4 report for insured institutions
    • 10am: House Financial Svcs panel meets on allegations of improper lobbying and obstruction at HUD
    • 10am: House Homeland Security Cmte hears from Homeland Security Secretary Jeh Johnson on agency priorities
    • 10am: House Oversight Cmte holds hearing on surveillance at FDA
    • 2pm: President Obama speaks on economy in St. Paul, Minn.
    • 2:30pm: Senate Armed Svcs panel hears testimony on Defense Dept IT acquisition process
    • Reid opposes wage below $10.10 as some Democrats ready to talk


  • JPMorgan, Goldman, 16 others to end some analyst surveys
  • Credit Suisse said to face SEC probe over accounting moves
  • Credit Suisse helped clients hide billions, U.S. Senate says
  • GE takes $1.7b charge in accord to end Shinsei liability
  • Morgan Stanley agrees to pay $275m to resolve SEC probe
  • BofA cuts deal with Buffett on preferred stake to boost capital
  • J. Crew said to be talking with banks about IPO later this yr
  • Facebook-WhatsApp deal risks sparking privacy probes across EU
  • AB InBev sees improving beer market trends in U.S., Brazil
  • Airbus predicts profit gain as it boosts A320 jet production
  • Mt. Gox shutdown triggers Bitcoin industry damage control
  • Trade leads U.K. economy to growth as recovery broadens
  • DreamWorks Animation tumbles as "Turbo" leads to rev. drop
  • Honda to end production of Insight hybrid as sales trail Prius
  • Delta plans major rewrite of frequent-flier rules: WSJ


    • Abercrombie & Fitch (ANF) 7am, $1.04 - Preview
    • AES (AES) 6am, $0.29
    • Ares Capital (ARCC) 8am, $0.41
    • Barnes & Noble (BKS) 8:30am, $0.51
    • Cablevision Systems (CVC) 8:30am, $0.09 - Preview
    • CenterPoint Energy (CNP) 8:15am, $0.28
    • Chesapeake Energy (CHK) 7:01am, $0.40 - Preview
    • Dollar Tree (DLTR) 7:31am, $1.05 - Preview
    • First Majestic Silver (FR CN) 7am, $0.11
    • Lowe’s (LOW) 6am, $0.31 - Preview
    • Royal Bank of Canada (RY CN) 6am, C$1.45 - Preview
    • Target (TGT) 7:30am, $1.24 - Preview
    • Taser Intl (TASR) 7:30am, $0.08
    • TJX (TJX) 8:28am, $0.83 - Preview


    • American Water Works (AWK) 4:05pm, $0.46
    • Antero Resources (AR) 4:05pm, $0.25
    • Assured Guaranty (AGO) 5:26pm, $0.65
    • Autodesk (ADSK) 4:01pm, $0.34
    • Continental Resources (CLR) 6:12pm, $1.31
    • Darling Intl (DAR) 4:30pm, $0.28
    • Gulfport Energy (GPOR) 4:05pm, $0.18
    • Halcon Resources (HK) 4:15pm, $0.05
    • Infoblox (BLOX) 4:05pm, $0.11
    • J.C. Penney (JCP) 4pm, $(0.86) - Preview
    • L Brands (LB) 4pm, $1.61
    • Nektar Therapeutics (NKTR) 4:15pm, $(0.37)
    • Pembina Pipeline (PPL CN) 4:05pm, C$0.30
    • TiVo (TIVO) 4:01pm, $0.04
    • Transocean (RIG) 4:39pm, $0.72
    • Whiting Petroleum (WLL) 4pm, $0.88
    • Workday (WDAY) 4:02pm, $(0.16)


  • WTI Crude Trades Near Week Low on U.S. Stockpiles; Brent Stable
  • Bird Flu Brings More Pain for Feed Sellers in China Hurt by Hogs
  • Soybeans Drop From Five-Month High as Global Supply Seen Ample
  • Credit Agricole Says Easy Money Shorting Gold Over as China Buys
  • Tin Reaches Four-Month High as Indonesian Exchange Sets Minimum
  • Sugar Falls as Traders Take Profit on Rain Return; Coffee Slides
  • Tin Floor Price Set by Indonesia Bourse to Help Mining Companies
  • U.S. Natural Gas Poised for Biggest Three-Day Loss Since 2007
  • Winter Warmth Seen Flooding Asia With Japanese Kerosene: Energy
  • Oil-by-Rail Disasters Prompt U.S. Crackdown on Risky Shipments
  • Investors Mount Attack on Norway in $20 Billion Oil, Gas Row
  • Singapore Bids for Asia’s LNG Hub Role With Second Terminal
  • Agrium Forecasts Higher U.S. Corn Cash Margin, Lower Soy in 2014
  • Gold Reaches 17-Week High on U.S. Data as SPDR Holdings Expand


























The Hedgeye Macro Team














We Are Short US Growth

This note was originally published at 8am on February 12, 2014 for Hedgeye subscribers.

“We don’t see things as they are, we see them as we are.”

-Anais Nin


We are short the consumption growth components of the US stock market. And that means we were wrong yesterday. It’s ok to say it that way – we see the real-time score for what it is, not what we want it to be.


Ellen Langer uses the aforementioned quote in a #behavioral psych book I just finished called Counterclockwise. Her concept of “mindfulness” fits how I see things in macro (on the margin). “Noticing differences is the essence of mindfulness. Don’t imagine, however, that all this needs to be exhausting… mindfulness is actually energizing, not enervating.” (pg 52)


Being wrong for a few days is a little different than being wrong for a few months (or years). When I was younger and wrong, I’d get mad. Now that I am less young, being wrong energizes me – especially when I notice something that isn’t consensus.


Back to the Global Macro Grind


To be clear, I’m not the only one who has noticed that Janet Yellen is re-opening Pandora’s real-world inflation box with another Federal Reserve ideological “innovation” (the #untapering). Mr. Macro Market has been front-running her for 6 weeks:

  1. Dollar Down
  2. Rates Down
  3. Inflation Expectations Up

That, of course, is fantastic for slow-growth-yield-chasing asset prices like:

  1. Gold +7.1% YTD
  2. MSCI REIT Index +6.3% YTD
  3. Utilities (XLU) +3.5% YTD

Not to be confused with US #GrowthAccelerating asset prices like:

  1. Consumer Discretionary (XLY) -4.1% YTD
  2. Consumer Staples (XLP) -3.3% YTD
  3. Russell2000 -3.0% YTD

Alongside Boehner waiving the debt limit last night (without conditions!), what we have here is another Big Government policy investing-style shift towards #InflationAccelerating. This isn’t new. It’s what happened to the Dollar in both Q1 of 2008 and 2011. Inflation is a tax.


The inflationary concept that zero isn’t zero is what the Fed calls “policy innovation.” Happy #Darwin Day! #1806


In Q1 of 2008, Bernanke whispered to his boys that he was going to do the “shock and awe” thing and cut to zero; so, while demand was slowing, Oil prices ripped humanity a new one by the summer time ($150/barrel), perpetuating US #GrowthSlowing.


In Q1 of 2011, Bernanke continued to send sweet nothings down his communication pipes that zero really wasn’t zero – it was zero minus whatever # of QE’s he damn well wanted. The CRB Commodities Index, Gold, etc. ripped to all-time highs, US consumption growth slowed, and Utilities (XLU) closed the year +14.8%.


In Q1 of now, zero still really isn’t zero because you have to:

  1. Subtract 2 tapers from the 0 minus 3-4 QE’s
  2. Then add expectations of un-tapering to the 2 tapers…
  3. And add a minus taper to a real-rates # … and you get a dovish Dollar

Or something like that.


The Fed, of course, doesn’t see it this way. But no matter how they want to see their theoretical world, market expectations and prices see them the way the real-world is.


While I am sure this will all end well, can the US stock market continue higher? Obviously the answer to that is yes. But what parts of the market will lead? Will they be food/energy inflations, real-estate inflations, and/or some of those beauty MLPs?


I don’t know anything about nothing, but I am certain that everything that you eat, put in your car, and pay for from a housing perspective has nothing to do with inflation or your cost of living.


In other news, as both the British Pound and Euro gain strength versus Yellen’s Burning Buck, both the UK and German governments are taking up their GDP growth estimates for 2014 (British Pound remains our favorite currency vs USD).


How that #StrongCurrency correlation to growth thing works is cool. It’s too bad that un-elected and unaccountable US central planners aren’t paid to see the history of currency appreciation, real-purchasing power, and consumption growth for what it is.


Our immediate-term Macro Risk Ranges are now (all 12 macro ranges are in our Daily Trading Range product):


SPX 1730-1828

VIX 13.21-17.61

Pound 1.63-1.65

Brent 107.84-110.03

Nat Gas 4.57-5.34

Gold 1260-1291


Best of luck out there today,



Keith R. McCullough
Chief Executive Officer


We Are Short US Growth - Chart of the Day


We Are Short US Growth - Virtual Portfolio

[video] 3 Stocks Set to Gain from M&A Breakout

KATE: Bill Leaves a Powerful Thesis Behind

Takeaway: McComb might be moving on, but this story remains a rarity in retail. We liked it at $4 and like it at $34. Price targets are way too low.

Conclusion: KATE remains one of our top ideas. We continue to believe that earnings power will rise from just $(0.15) in this (investment) year, to better than $3 per share over 3-5 years as the Kate Spade brand fills out its footprint, grows productivity, and takes up margins. We think that this story is unique in that it’s not just about a company that’s adding a bunch of stores, or a brand that found a niche and is growing it accordingly. This is brand that built a strategy around selling product across multiple categories (handbags, accessories and apparel, etc…), to multiple affluent consumers (Kate Spade, KS Saturday, and Jack Spade) in several channels of distribution (wholesale, retail,, and concessions) in several regions of the world. These characteristics might be expected from a multi-billion dollar company. But keep in mind that KATE is less than $800mm in sales. Never in 20 years have we seen a consumer brand be so broad in its reach and yet so concentrated in its focus. We’ve been fans of KATE/FNP/LIZ since it was at $4. We’re often asked when we’re going to get off the story. The simple answer is…not yet. Not until the financial model ceases to work for us. Based on everything we see, this will be a name to stick with for some time to come. Revenue streams that go from $800mm to $3bn are tough to find.



This was a solid quarter – though the market is already making that point clear.  We think it was a fitting curtain call for outgoing CEO Bill McComb. Let’s face it, the guy was arguably one of the least popular CEOs in retail 2-3 years ago. The Street couldn’t stand the guy. But the reality is that behind the scenes, he was doing all the heavy lifting that ultimately created so much value for some of the very people who criticized him. He sold Mexx – easily the worst Paul Charron (former CEO) acquisition we’ve seen – and there were many. He punted the stodgy department store Brands, got rid of Juicy, and finished off with a sale of Lucky. Maybe not the best economic terms for all of the deals, but he got it done. Period. And all while growing the crown jewel. Congrats Bill. We wish there were more like you.



All that said, we put back on our analyst hat and wonder what could go wrong now that McComb is gone. Regardless of our high opinion of the ‘new’ management team, we need to respect the reality that whenever there’s change in a complex organization, things can go wrong. We can’t point to any obvious stress points right now, however. The reality is that Craig Leavitt was being groomed to be the next CEO for the past 18 months. They kept it quiet, but it’s the truth. Any major business planning meetings (even for non Kate brands) – Craig was there. CEO-level customer calls – Bill and Craig. Organizational decisions – you guessed it…he was part of them.  On top of that, the fact that George Carerra – who has always been a very operational-focused CFO – was elevated to COO makes perfect sense. George will prove to be a big crutch for Craig in key areas where Craig quite frankly should not be focusing his time. The punchline is that this whole management transition started long before anyone thought it did, and we think that the company covered most of its bases.  



The reality is that there’s really no change to our thesis. This quarter gave us further ammo supporting our bull thesis. But there were a few things that stood out…

  1. We’re seeing an acceleration in store openings, and the quality is high. Out of Juicy’s 120 stores, about 30 will make their way into KATE’s fleet. They’re only converting the highest quality properties. The company has about 215 stores today, and will add about 90 in 2014 – that’s about 42% growth in units.
  2. In addition to the unit growth, we’re starting to see a far greater proportion of units come into the comp base. Only 60% of the current fleet is in the comp base today, or about 130 stores. We should see another 100 added by the end of 2015 – something that we think will be weighted toward 1H15.
  3. Let’s address the comp guidance of 10-13% for the year. The reality is that in his new role, Leavitt does not want to miss a comp – ever. We think that 10-13% is a slam dunk for a few reasons. First off, as noted in the point above, as we see more stores added to the comp base, it is a natural lift to y/y sales comps. More specifically, as the stores start to approach the ‘sweet spot’ of the comp curve of roughly 3-4 years, it provides an added lift – which bolsters our model in 2015 and 2016. Lastly, productivity at Kate was only $1265 this quarter, and while impressive, it’s still a far cry from the high teens and $2000+ rate being realized by US luxury competitors.
  4. Kate’s EBITDA margins were up for the first time this year, despite investment in Kate Spade Saturday. The company did its best to keep margin expectations grounded for 2014, and they probably succeeded in keeping them up no more than 100bp. Our numbers assume twice that rate.
  5. Adelington: The division isn’t really worthy of real estate in a research note, but there were a few notables that relate to other retailers. A) the QVC license is underperforming, which hurt revenue, B) The conclusion of the Dana Buchman/KSS partnership dinged the top line, but on the flip side C) Since the change in JCP’s promotional strategy, KATE has seen more positive trends in its Jewelry business.


KATE: Bill Leaves a Powerful Thesis Behind - 2 25 2014 1 57 13 PM

the macro show

what smart investors watch to win

Hosted by Hedgeye CEO Keith McCullough at 9:00am ET, this special online broadcast offers smart investors and traders of all stripes the sharpest insights and clearest market analysis available on Wall Street.