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Adidas Goes For the Cool Factor | $ADDYY

Takeaway: To Adidas' credit, it does a very good job of launching a new technology (and explaining to consumers what the technical merits are.)

Editor's Note: This is a complimentary research excerpt from Retail Sector Head Brian McGough. For more information on our services click here.

 

adidas Launches Climachill Apparel That Lowers Your Temperature and Raises Your Game

 

Adidas Goes For the Cool Factor | $ADDYY - adidas launches climachill active cooling apparel 01

  • "adidas launches Climachill, a revolution in active cooling apparel technology. The line incorporates innovative fabric woven with titanium and industry-first 3D aluminium cooling spheres. The technology provides an instant chilling sensation to help athletes' performance in warm conditions – lowering their body temperature so they can train harder, run longer, retain their focus and compete at the highest level."
     
  • "Climachill pieces – including running, training and tennis tees, tanks and shorts – are available now from $40 to $60 on adidas.com and in select retailers nationwide."

Takeaway from Hedgeye’s Brian McGough:

Okay, so it's not exactly the best winter to be introducing something called Climachill. But, to Adidas' credit, it does a very good job of launching a new technology and then explaining to consumers what the technical merits are.

 

While it might seem like an obvious marketing strategy, this is the exact area where Nike has struggled for the better part of 30 years. Did you ever notice that the tags on a Nike product hanging on the rack are identical? Seriously. Whether it is a thermal jacket, or bathing suit for a 6-year old.

 

We might admit that Nike has the better product, but this is where it could learn a thing or two from Adidas.

 Adidas Goes For the Cool Factor | $ADDYY - chart3 3 14 

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EXPERT CALL TUESDAY MARCH 18 (11AM): THE REIT STRUCTURE: A VIABLE ALTERNATIVE FOR BYD AND OTHERS?

There is little doubt that GLPI’s split from PENN created tremendous shareholder value. So, why can’t other gaming companies like BYD, ISLE, LVS, MGM, PNK, or WYNN pursue similar value-creating transactions?

 

There is growing speculation that BYD could be next to follow the PENN route, now that an activist and real estate focused investor has taken a big stake in the stock.

 

We’re delighted to tackle this issue head on next Tuesday, March 18 at 11am, with Ed Glazer, Partner at Goodwin Procter, who has extensive experience with REITs and currently represents the only casino REIT – Gaming and Leisure Properties (GLPI).

 

We will tackle pertinent issues on our call including:

  • The case for casino REITs
  • Taxable vs non-taxable spin
  • REIT spin mechanics
  • The potential impact of proposed legislation
  • BYD:  A case study
    • Discussion of Issues
    • Discussion of Potential Complexities
    • Post Transaction Valuations

For dial-in details, please contact .

 

Edward Glazer

Ed Glazer is a partner in the firm's Tax Practice and its nationally recognized Real Estate, REITs & Real Estate Capital Markets Group. He focuses principally on structuring and implementing tax-oriented commercial transactions of all types, including real estate and venture capital transactions, mergers and acquisitions, pension investments in real estate involving issues of unrelated business taxable income, leveraged financings, and workout and debt restructurings. Mr. Glazer regularly advises clients in structuring collective investment vehicles, in structuring real estate securitizations, in forming and operating public and private REITs and in forming real estate funds.


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Stock Report: Owens Corning (OC)

Stock Report: Owens Corning (OC) - HE OC table 3 14 14

THE HEDGEYE EDGE

Construction activity remains cyclically depressed, but has likely begun the long process of recovery.  A large multi-year rebound in construction should provide a tailwind to OC shares that the market appears to be underestimating.  Both residential and nonresidential construction in the U.S. would need to roughly double to reach post-war demographic norms.  As credit returns to the market and government funded construction begins to rebound, construction markets should make steady gains in coming years, quarterly weather aside, supporting OC’s revenue and capacity utilization. 

 

OC’s markets have improved structurally over the past decade.  Both OC and many of its competitors filed for bankruptcy in the late 1990s/early 2000s to free themselves from asbestos liabilities.  With those matters resolved, many areas of the building products industries have emerged into more consolidated industries with fairly rational competitors.   Regulations, such as building codes, should also support demand for many of OC’s products.

 

A significant, multi-year rebound in OC’s end-markets combined with structural improvement should allow the shares to be rerated by the market.

 

Stock Report: Owens Corning (OC) - chart

 

TIMESPAN

INTERMEDIATE TERM (TREND) (the next 3 months or more)

We estimate that more than half of OC sales are to supply new construction projects, so a gradual trend of rebounding construction activity should provide a tailwind.   While there may be volatility in 1Q construction activity, bad weather can also increase demand for certain OC roofing products.  We also expect to see continued improvement in OC’s insulation margins in 1H 2014, a segment where returns have the most rebound potential.  

 

 

LONG-TERM (TAIL) (the next 3 years or less)

Our base-case valuation range for OC is $60-$70/share, which is attractive relative to the alternatives in the Industrials sector.  We expect the residential and nonresidential new construction recoveries to be reasonably simultaneous in coming years, driving higher capacity utilization and pricing for OC and other building products companies.

 

OC is not a member of an S&P Index, which it was prior to 2000, and recently restarted a dividend.  Both are potential positives.  After roughly six years in asbestos-related bankruptcy and having its end-markets evaporate in the financial crisis, we think OC has a lot more earnings and cash generation potential in coming years than the current valuation reflects.  

 

  

ONE-YEAR TRAILING CHART

Stock Report: Owens Corning (OC) - HE OC chart 3 14 14



Bubbly: SP500 Levels, Refreshed

Takeaway: I might consider chasing the mo-mo on the upside, if the fundamental research view supported it – but it doesn’t.

Editor's note: This unlocked research note from CEO Keith McCullough was originally published March 10, 2014 at 10:44 in Macro. For more information on our services click here.

POSITION: 11 LONGS, 10 SHORTS @Hedgeye

 

If the buck wasn’t burning and #InflationAccelerating wasn’t slowing US growth, I wouldn’t be selling on immediate-term TRADE overbought signals. Consensus hasn’t acknowledged the inflation impact on 2014 growth (yet), and I like that.

 

Bubbly: SP500 Levels, Refreshed - bubb

 

To call it a bubble isn’t a big deal. I called it a bubble when I was buying it all of last year (remember: #BTDB – buy-the-damn-bubble). What else would you call the all-time highs in prices?

 

Across our core risk management durations, here are the lines that matter to me most:

  1. Immediate-term TRADE overbought = 1888
  2. Immediate-term TRADE support = 1864
  3. Intermediate-term TREND support = 1805

In other words, why would you buy an overbought price if you have 4% mean reversion downside to the TREND line of 1805? I might consider chasing the mo-mo on the upside, if the fundamental research view supported it – but it doesn’t.

 

Let’s see if 1864 holds. Then we reset.

 

KM

 

Keith McCullough

Chief Executive Officer

 

Bubbly: SP500 Levels, Refreshed - km1

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