• run with the bulls

    get your first month

    of hedgeye free



This report contains some of our thoughts following Darden’s most recent presentation on creating shareholder value.  Overall, the presentation was riddled with disingenuous facts and consistent with what we’d expect from a CEO who is out of touch with reality.  This is the second presentation of this type, making the first one on December 19, 2013 look more like a reactionary response rather than the proactive move the company claims.


Furthermore, we were disappointed to find out the company cancelled its analyst meeting at the end of the month and believe this signals yet another sign of weakness.  It makes sense, however, as the company has been under a lot of public scrutiny – and rightfully so.  Considering these two recent events, we believe Mr. Otis did himself a disservice this past week.  In the end, it makes the case for the activist shareholders stronger.  It has become increasingly clear that they must stop the Red Lobster spinoff and aggressively push for more significant changes.


Click here to access the FULL REPORT



Howard Penney

Managing Director


Nike Grabs the Bull with Johnny Football Deal

Takeaway: Though Nike is no-stranger to athletes causing controversy, Manziel belongs on the upper half of the risk management watchlist.

Johnny Manziel Signs Deal to Be Represented by Nike

Nike Grabs the Bull with Johnny Football Deal - johnny0

  • "Rovell's sources were not able to disclose the financial terms, but they did say the deal—which was negotiated by LeBron James' business partner Maverick Carter and Fenway Sports Group—is a multi-year offer that will be the most expensive for a rookie in this year's class."
  • "Manziel chose Nike over other companies such as Adidas, Under Armour and New Balance's Warrior brand."

Takeaway from Hedgeye’s Brian McGough:

Nike is likely looking at something in the vicinity of $20 million/year for Manziel. But one thing is for sure,


Nike is going to have to babysit this one.


True, they may have 'handlers' for all their high-value athletes, but the sports world knows all too well that things don't always go according to plan. See previous tabloid-rich events like:


1. Kobe Bryant and his sexual assault case (after which his Nike contract was re-written).

2. Tiger Woods and his -- whatever you call it -- case.

3. Lance Armstrong and his pathetic admission of basically lying his whole career.


Athletes -- even those considered squeaky clean -- are high risk assets. Something tells us that Johnny Manziel belongs on the upper half of the risk management watch list.

Join the Hedgeye Revolution.

Charts: EUR and GBP Rocket!

The EUR/USD and GBP/USD have ramped an impressive 1.96% and 2.15%, respectively, in the last month -- the performance is consistent with our Q4 2013 Macro Theme call of #EuroBulls (presented on 10/11/2013) and our bullish outlook on the British Pound since last November

Below we update our outlook on each currency cross:


  • ECB President Mario Draghi kept rates on hold this week (as expected) and did not issue any “new” non-standard measures, adding in its 2014 outlook for GDP to expand +10bps to +1.2%  (vs the previous forecast in December) and inflation to dip -10bps to 1.0%.
  • Broadly, we believe Draghi’s continued posture of “ready and willing to act” (to ensure the survival of the Eurozone at any cost and to keep financial conditions accommodative) will continue to support the common currency and strengthen investor confidence in the equity market #EuroBulls (etf FXE).
  • On the other side of the cross (USD) we expect Fed-head Janet Yellen to likely pull back on the tapering program to a more dovish position in response to our Macro call of  #GrowthSlowing that should weigh on the USD to the downside.
  • EUR strength reflects country/regional strength: Manufacturing and Services PMI continue to remain grounded above the 50 line (expansion). Services hit a 32-month high at 52.6 in February and Manufacturing grinded higher to 53.2.
  • Confidence up: Eurozone Feb Economic Sentiment Indicator rose to 101.2 in February (exp. 100.9) vs 100.9 in January. The Services Sentiment Indicator rose to 3.2 FEB (exp. 2.5) vs 2.3 JAN.
  • The deflation of inflation across the Eurozone (the current reading at 0.8% Y/Y) equates to more consumer purchasing power via lowering the consumption tax.
  • Other Data: Eurozone Retail Sales rose to 1.3% JAN Y/Y (exp. -0.2%) vs -0.4% DEC and the Eurozone Unemployment Rate maintains the 12% level. 
  • We remain marginal European equity bulls over US equities. Our preferred investment in the region is long German and UK equities (EWG and EWU) and long the Pound/USD (FXB).

Charts: EUR and GBP Rocket! - zzzz. eurrroooo



  • We remain bullish on the British Pound versus the US Dollar (etf FXB), a position supported over the intermediate term TREND by prudent management of interest rate policy from Mark Carney at the BOE (oriented towards hiking rather than cutting as conditions improve).
  • The Bank maintaining the base interest rate at 0.50% this week along with its asset purchase program target (QE) 375B GBP.
  • UK high frequency data continues to offer evidence of emergent strength in the economy, and in many cases the data is outperforming that of its western European peers. In the BOE’s Quarterly Inflation Report (in February) 2014 GDP was revised higher to 3.4% from 2.8% previously forecast.
  • PMIs remain one highlight: Manufacturing in February came in at 56.9 versus expectations of 56.8 and Services recorded 58.2 versus expectations of 58.0.
  • CPI has also moderated in recent months, currently at  1.9% in January Y/Y – we expect this cut in the consumption tax to continue to boost business and consumer confidence and with it consumption
  • The British Pound is holding its Bullish Formation, trading above its intermediate term TREND and long term TAIL levels of support.

Charts: EUR and GBP Rocket! - zz. Pound


Matthew Hedrick


investing ideas

Risk Managed Long Term Investing for Pros

Hedgeye CEO Keith McCullough handpicks the “best of the best” long and short ideas delivered to him by our team of over 30 research analysts across myriad sectors.

VIDEO | Keith's Macro Notebook 3/7: EURO GOLD INDIA

VIDEO | McCullough: What's Worrying Our Customers from California to NYC

Be Careful

Client Talking Points


The Euro is ripping versus the US Dollar. Both US fiscal and monetary policy dovish versus ECB President Mario Draghi who is starting to understand that a #StrongEuro means Consumption Tax Cut. That is driving stronger European growth. Risk range is signaling a higher-high of $1.39 now. #EuroBulls


That shiny, yellow metal called Gold loves it when inflation slows real US growth. At +12.1% year-to-date, Gold is beating the inflating CRB Index which is currently up +10.1% YTD. #InflationAccelerating in the USA is crystal clear now.


Dr Raj (who raised rates to fight inflation) gets it big time. And now, India’s stock market is starting to get it too. It has risen +1.9% overnight to lead what was a wet Kleenex session for anything China. Sensex is up +3.7% year-to-date and is on Hedgeye’s bullish TREND list.

Asset Allocation


Top Long Ideas

Company Ticker Sector Duration

We remain bullish on the British Pound versus the US Dollar, a position supported over the intermediate term TREND by prudent management of interest rate policy from Mark Carney at the BOE (oriented towards hiking rather than cutting as conditions improve) and the Bank maintaining its existing asset purchase program (QE). UK high frequency data continues to offer evidence of emergent strength in the economy, and in many cases the data is outperforming that of its western European peers, which should provide further strength to the currency. In short, we believe a strengthening UK economy coupled with the comparative hawkishness of the BOE (vs. Yellen et al.) will further perpetuate #StrongPound over the intermediate term.


Las Vegas Sands has transformed into that rare stock that should appeal to “Growth,” “Value”, and “Dividend/Cash Flow” investors alike. The stock now yields higher than the S&P 500 (43% sequential quarterly dividend increase), and the company is buying back $200 million + in stock a quarter, yet still retains a pristine balance sheet. The significant capital deployment opportunities can be funded out of annual free cash flow of nearly $4 billion. Management has indicated they are willing to raise leverage 1.5x which would still keep them well below industry average and if directed toward dividends, would result in a yield of over 6%. And we haven’t gotten to the $10-14 billion in mall assets that could be monetized. We know of no other stocks in consumer land that provide this combination of cash flow, growth, cash return to shareholders, and value levers.


Darden is the world’s largest full service restaurant company. The company operates +2000 restaurants in the U.S. and Canada, including Olive Garden, Red Lobster, LongHorn and Capital Grille. Management has been under a firestorm of criticism for poor performance. Hedgeye's Howard Penney has been at the forefront of this activist movement since early 2013, when he first identified the potential for unleashing significant value creation for Darden shareholders. Less than a year later, it looks like Penney’s plan is coming to fruition. Penney (who thinks DRI is grossly mismanaged and in need of a major overhaul) believes activists will drive material change at Darden. This would obviously be extremely bullish for shareholders and could happen fairly soon driving shares materially higher.

Three for the Road


COMMODITIES: continue to rip humanity a new one, +10% CRB Index YTD #InflationAccelerating @KeithMcCullough


"To conquer fear is the beginning of wisdom." - Bertrand Russell


Boeing has frozen defined-benefit pensions for 68,000 employees, including management and executives. From January 2016, the funds paid out by new Boeing pensions will be market-dependent. The switch affects non-unionised employees and follows a pension deal struck with unions in January. Boeing said the move would curb the "unsustainable growth" of its long-term pension liability. (BBC)

Attention Students...

Get The Macro Show and the Early Look now for only $29.95/month – a savings of 57% – with the Hedgeye Student Discount! In addition to those daily macro insights, you'll receive exclusive content tailor-made to augment what you learn in the classroom. Must be a current college or university student to qualify.