• run with the bulls

    get your first month

    of hedgeye free


Fund Flows, Refreshed

Takeaway: In the most recent week, absolute money flow into mutual funds was balanced but fixed income continues to display relatively better trends.

Fund Flows, Refreshed - wallstreet2


Investment Company Institute Mutual Fund Data & ETF Money Flow


In the most recent week, absolute money flow into mutual funds was balanced between fixed income and equity products but bond trends continue to display improving rates of change versus decreasing momentum in equities.


Total equity mutual fund flow improved sequentially week-to-week but produced a tally below the 2014 year-to-date weekly average. The $3.1 billion that came into all equity mutual funds during the most recent 5 day period ending April 2nd was split between a fairly weak $949 million inflow into U.S. equity funds versus the $2.1 billion that moved into international stock funds. This higher demand for foreign equity products has been consistent over the past two years with international stock fund inflow having averaged $2.8 billion per week this year and $2.6 billion per week last year in 2013 with domestic fund products averaging an inflow of just $1.2 billion thus far in '14 and a $451 million inflow last year in comparison. The 2014 running weekly average inflow for all equity mutual funds is now $4.0 billion, still an improvement from the $3.0 billion weekly average inflow for 2013. 


Fixed income mutual fund flow improved sequentially week-to-week and the 12 week linear trend lines in the product graphs below display improving momentum for bond funds versus equity funds. For the week ending April 2nd, $3.3 billion flowed into all fixed income funds, an improvement from last week's $1.2 billion inflow. The breakout of improving bond fund inflow amounted to $3.1 billion into taxable products and a $202 million inflow into tax-free or municipal products. The inflow into taxable products this week was the 8th consecutive week of positive flow and the inflow into municipal or tax-free products was the 12th consecutive week of positive subscriptions. The 2014 weekly average for fixed income mutual funds now stands at a $1.9 billion weekly inflow, an improvement from 2013's weekly average outflow of $1.5 billion but a far cry from the $5.8 billion weekly average inflow from 2012 (our view of the blow off top in bond fund inflow).


Exchange traded funds (ETF) experienced positive trends during the week, with a very strong week of subscriptions into stock ETFs with $4.1 billion in net inflow with bond ETFs experiencing a slightly above average inflow of $1.6 billion for the most recent 5 day period. The 2014 weekly averages are now a $421 million weekly inflow for equity ETFs and a $946 million weekly inflow for fixed income ETFs. 


The net of total equity mutual fund and ETF trends against total bond mutual fund and ETF flows totaled a positive $2.3 billion spread for the week ($7.3 billion of total equity inflow versus the $4.9 billion inflow within fixed income; positive numbers imply greater money flow to stocks; negative numbers imply greater money flow to bonds). The 52 week moving average has been $7.2 billion (more positive money flow to equities), with a 52 week high of $31.0 billion (more positive money flow to equities) and a 52 week low of -$37.4 billion (negative numbers imply more positive money flow to bonds for the week). 


Mutual fund flow data is collected weekly from the Investment Company Institute (ICI) and represents a survey of 95% of the investment management industry's mutual fund assets. Mutual fund data largely reflects the actions of retail investors. ETF information is extracted from Bloomberg and is matched to the same weekly reporting schedule as the ICI mutual fund data. According to industry leader Blackrock (BLK), U.S. ETF participation is 60% institutional investors and 40% retail investors.   


Fund Flows, Refreshed - ICI chart 1


Most Recent 12 Week Flow in Millions by Mutual Fund Product


Fund Flows, Refreshed - ICI chart 2


Fund Flows, Refreshed - ICI chart 3


Fund Flows, Refreshed - ICI chart 4


Fund Flows, Refreshed - ICI chart 5


Fund Flows, Refreshed - ICI chart 6


Most Recent 12 Week Flow Within Equity & Fixed Income Exchange Traded Funds

Fund Flows, Refreshed - ICI chart 7


Fund Flows, Refreshed - ICI chart 8


Net Results


The net of total equity mutual fund and ETF trends against total bond mutual fund and ETF flows totaled a positive $2.3 billion spread for the week ($7.3 billion of total equity inflow versus the $4.9 billion inflow within fixed income; positive numbers imply greater money flow to stocks; negative numbers imply greater money flow to bonds). The 52 week moving average has been $7.2 billion (more positive money flow to equities), with a 52 week high of $31.0 billion (more positive money flow to equities) and a 52 week low of -$37.4 billion (negative numbers imply more positive money flow to bonds for the week).


Fund Flows, Refreshed - ICI chart 9 


Editor's Note: This is a research note originally published April 10, 2014 by Hedgeye’s Financials team Jonathan Casteleyn & Josh Steiner. Follow Jonathan & Josh on Twitter @HedgeyeJC and @HedgeyeFIG.



VIDEO | Macro Notebook 4/14: EUROPE OIL UST10YR

Monday Mashup: DRI Comes Under Fire

The table below lists our current Investment Ideas as well as our Watch List -- a list of potential ideas that we are in the process of evaluating.  We intend to update this table regularly and will provide detail around any material changes.


Monday Mashup: DRI Comes Under Fire - 1

Recent Notes

04/07/14  Monday Mashup: BWLD, PNRA and More

04/07/14  New Best Idea: Short BNNY

04/11/14  BNNY: Intermediate-Term Downside

Events This Week

04/17/14  CMG earnings call 11am EST

Chart Of The Day

Despite underperforming the SPX, quick service and fast casual stocks were a pocket of relative strength last week within the XLY, as 13 out of the 17 companies we track outperformed the broader index.


Monday Mashup: DRI Comes Under Fire - 22

Recent News Flow

Monday, April 7

  • YUM News hit the tape that the company is testing a new chicken concept, Super Chix, in Arlington Texas as an exploratory concept for potential international purposes.  Super Chix, similar to Chick-fil-A has a very basic menu which includes a chicken sandwich, chicken tenders, fries, drinks and frozen custard.
  • BOBE was downgraded to underperform at CL King

Tuesday, April 8

  • SONC was rated the #1 Burger Chain and #5 Brand Overall by the Temkin Group in its Experience Ratings report. 

Wednesday, April 9

  • El Pollo Loco chose Jefferies and Morgan Stanley as underwriters for its IPO which is expected later this year.
  • RT announced 3QF14 earnings, beating analyst estimates on both the top and bottom line as company-owned same-store sales only declined -190 bps vs expectations of -550 bps.  Its store closures in the quarter largely stemmed the recent massive declines in sales. In addition to these closures, management has identified $13mm in annual cost saving initiatives and is continually looking for more cost cutting opportunities. 

Thursday, April 10

  • RT raised to neutral at Tigress Financial

Friday, April 11

  • ISS and Glass Lewis released reports recommending shareholders should submit consents to Starboard in its ongoing effort to call a Special Meeting.  DRI released a public statement disagreeing with the firms conclusions, stating that Glass Lewis’ “assertions regarding Darden’s record of engagement are demonstrably false.”  Later that day, Darden announced that a smaller independent proxy advisory firm, Egan Jones, recommended that shareholders reject Starboard’s effort to call a Special Meeting.
  • DRI A group of Darden shareholders filed a lawsuit against the company over its recent bylaw changes.  The shareholders are alleging that these recent bylaw changes were enacted specifically to prevent them from voting on the Red Lobster spinoff.

U.S. Macro Consumption

The XLY (-3.7%) underperformed the SPX (-2.6%) last week, although both casual dining and quick service stocks, in aggregate, outperformed the broader XLY benchmark.  The Hedgeye U.S. Consumption Model continues to be a bearish signal and is now flashing red on 8 out of 12 metrics.  Confirmed by last week’s performance, we continue to believe the current environment is more conducive to select fast casual and quick service restaurants than casual dining restaurants.


Monday Mashup: DRI Comes Under Fire - 3

XLY Quantitative Setup

From a quantitative setup, the sector remains bearish on an intermediate-term TREND duration.


Monday Mashup: DRI Comes Under Fire - 4

Casual Dining Restaurants

Monday Mashup: DRI Comes Under Fire - 5


Monday Mashup: DRI Comes Under Fire - 6

Quick Service Restaurants

Monday Mashup: DRI Comes Under Fire - 7


Monday Mashup: DRI Comes Under Fire - 8



Howard Penney

Managing Director


Fred Masotta



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.

Inflation Slowing Growth

Client Talking Points


Year-to-date leaders are lagging this morning – Cyprus -2.6%, Denmark -2.2%, Austria -1.8% – as the DAX dips back below my intermediate-term TREND line of 9381. We currently have no European Equity exposure – Pain Trade is probably lower, for now #Waiting.


WTI broke out back above our TREND line last week (up again this morning to +6% year-to-date). I get a lot of questions about Oil – because it was one of the few commodities not going up – so this move plus Natural Gas up +13% YTD = #ConsumerSlowing. It isn’t good.


Treasury yield of 2.63% remains decisively broken (bullish for our slow-growth Gold Bond call) as the Street continues to expect #RatesRising in 2014 (that was the 2013 call). That’s not happening if we’re right on inflation slowing growth (Fed has 0% credibility fighting inflation).

Asset Allocation


Top Long Ideas

Company Ticker Sector Duration

Hologic is emerging from an extremely tough period which has left investors wary of further missteps. In our view, Hologic and its new management are set to show solid growth over the next several years. We have built two survey tools to track and forecast the two critical elements that will drive this acceleration.  The first survey tool measures 3-D Mammography placements every month.  Recently we have detected acceleration in month over month placements.  When Hologic finally receives a reimbursement code from Medicare, placements will accelerate further, perhaps even sooner.  With our survey, we'll see it real time. In addition to our mammography survey. We've been running a monthly survey of OB/GYNs asking them questions to help us forecast the rest of Hologic's businesses, some of which have been faced with significant headwinds.  Based on our survey, we think those headwinds are fading. If the Affordable Care Act actually manages to reduce the number of uninsured, Hologic is one of the best positioned companies.


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.


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


We remain bullish of Gold, in $GLD terms @KeithMcCullough


"Hard work without talent is a shame, but talent without hard work is a tragedy." - Robert Half


Twitter is having no trouble signing up users. But some new research provides an update on the size of an ongoing problem: getting people to tweet. A report from Twopcharts, a website that monitors Twitter account activity, states that about 44% of the 974 million existing Twitter accounts have never sent a tweet. To be sure, people don’t have to actively tweet to find the service useful, but the report highlights Twitter’s user retention issue. (WSJ)

LEISURE LETTER (04/14/2014)



Monday, April 14

  • Atlantic City March revenues released

Wednesday, April 16

  • HTZ at BAML Auto Summit

Thursday, April 17

  • GE 1Q14 Earnings – 8:30 a.m. call – real estate comments?
  • BX 1Q14 Earnings – 11 a.m. PIN 149 943 55 – lodging comments & color?
  • TZOO  Earnings – 11 am Call
  • DIS – Investor Day – cruise & parks commentary?

Monday, April 22

  • IGT FQ2 earnings - 5 p.m. , Passcode: IGT

Thursday, April 24

  • PENN Q1 earnings - 10 a.m.  
  • HOT Q1 earnings - 10:30 a.m. , Passcode: 12049644



BYD & MGM - The Borgata Hotel Casino & Spa filed a federal lawsuit against Phillip Ivey Jr., claiming he won $9.6 million in a card-cheating scheme in baccarat.  The lawsuit alleges Ivey and an associate exploited a defect in cards made by a Kansas City manufacturer that enabled them to sort and arrange good cards in baccarat.

TAKEAWAY:  While we are not attorneys, this case seems to be a product liability/product defect case. This does explain some of the low hold experienced by Borgata in the 1H of 2012. 


PENN - CEO Tim Wilmott at last week's Mid-America Gaming Congress commented "there’s no question Ohio will be a $2 billion casino state (by 2019/2020) - assuming no added competition from neighboring states."

TAKEAWAY: Many media outlets conveniently left out the latter part of his comment.  A bold prediction on its own but does he really believe there will be no more regional competition?  


WYNN - Anthony Gattineri, co-owner of the site where Wynn Resorts has proposed to build greater Boston’s only casino, has refused to sign the pledge even though the Massachusetts Gaming Commission says it will not approve a casino without assurances that criminals won’t profit from it or the land sale. Gattineri’s refusals are fueling speculation that convicted felon Charles Lightbody is still part owner of the land, an assertion Lightbody’s lawyer denies.

TAKEAWAY: Wynn attempting to keep arm's length from any gray matter dealings. More hurdles to overcome.


RCL - (Baltimore Sun)  Hundreds of passengers on The Grandeur of the Seas became severely ill due to norovirus.  It's the 2nd incident in two weeks as the same ship also had a viral outbreak on March 28 with more than 100 sick passengers. 

TAKEAWAY: This ship is cursed.  A major fire last year, now 2 norovirus cases. The media attention on norovirus is larger than usual this year. A bad omen for the cruise industry.


LRT costs still up in the air Macau Business Daily

Macau and Taipa will not be linked by the light rail transit system before 2018/2019.  Taipa will be the first section completed, and is scheduled to be operational by 2016.  The initial project was budgeted at 4.2 billion patacas (US$525 million) but the figure soon ballooned to MOP7.5 billion (US$937 million) in 2009.  Two years later, the budget would be revised up to 11 billion patacas (US$1.37 billion).

TAKEAWAY:  This project is turning into a political joke


Hard Rock Hotel & Casino Sioux City - has already received about 1,500 online job applications, or nearly three for every one of the 500 positions that will be filled at the downtown gaming and entertainment venue over the next few months.  With construction of the $128.5 million project at least two months away from completion, hiring remains in the early stages. Only nine employees are on the payroll so far, including the general manager and directors of human resources, finance, slots, table games and security. The casino plans to hire about 150 dealers.

TAKEAWAY: Another negative data point for the future of Argosy Sioux City (PENN & GLPI). 


Texas Gambling - this Wednesday, the Texas Lottery Commission is scheduled to consider letting bingo players use “video confirmation” to show whether pull-tag tickets, which are similar to lottery scratch-off tickets, are winners.  Lottery officials say they don’t consider video confirmation an expansion of legalized gambling.

TAKEAWAY: Could this be the next, progressive step toward gaming in Texas? 


Avian Flu - found among chickens that died at a poultry farm in Taragi, Kumamoto Prefecture, Japan.  The prefecture began culling about 112,000 chickens - 56,000 chickens at the Taragi farm and 56,000 at another farm operated by the same person at another farm in the same prefecture. Kumamoto Prefecture is located in very southern Japan. 

TAKEWAY: Another Bird Flu case, this time larger but in a more remote region of the Asia. 



China Lending Policies - IMF Asia-Pacific director Changyong Rhee called reining in credit growth, especially outside the banking sector, a "very important task to secure (China's) long-term stability".  Rhee further noted China risks a financial crisis that could cripple the world's second-largest economy and wreak global economic havoc without stronger oversight of its lending practices.  Finally, IMF financial counselor Jos Vials has said Beijing needs to ensure that lending rates more accurately reflect risks. One way to do that would be to raise borrowing costs, he said.

TAKEAWAY:  Macro risks are piling up on the mainland but so far no material impact on Macau gaming. 


Singapore GDP - for the three months to March 31 grew by just 0.1% on a seasonally adjusted and annualized basis compared with a revised 6.1% increase in the fourth quarter, according to the Ministry of Trade and Industry. The city-state's economy is estimated to have expanded 5.1% on year, compared with a median 5.2% increase tipped by the economists. GDP had risen a revised 5.5% on year in the fourth quarter.

TAKEAWAY:  Flat growth in Singapore


Hedgeye remains negative on consumer spending and believes in more inflation.  Following  a great call on rising housing prices, the Hedgeye Macro/Financials team is turning decidedly less positive.

TAKEAWAY:  We’ve found housing prices to be the single most significant factor in driving gaming revenues over the past 20 years in virtually all gaming markets across the US.


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.