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CHART OF THE DAY, MAYBE OF THE YEAR?

Takeaway: TAIL risk is on (to the upside) in the bond market and we think investors should react accordingly.

Is your portfolio prepared for this?:

 

CHART OF THE DAY, MAYBE OF THE YEAR? - 1

 

FOLLOW THE FLOWS

Every week Jonathan Casteleyn, co-head of our Financials Vertical, publishes a in-depth update on all the puts and takes in fund flow space. In going through his piece this week, there were a number of data points that commanded my undivided attention:

 

  • “In the most recent 5 day period, the combination of taxable and tax-free bond funds had the best week all year with $5.5 billion in inflow, well above the running year-to-date average of $1.9 billion. Conversely, equity funds had a very light inflow of just $754 million, well below the year-to-date average of $3.3 billion.”
  • “ETFs had polarized trends this week, with a substantial weekly redemption in equity ETFs and a solid week for bond ETFs. Equity ETFs experienced an $8.7 billion outflow w/w, while Fixed Income ETFs experienced $3.0 billion in inflows. The previous week saw a $4 billion inflow into stock ETFs and a $818 million inflow into bond ETFs. The 2014 weekly averages are now a $385 million weekly inflow for equity ETFs and a $1.0 billion 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 negative $16.4 billion spread for the week ($8.0 billion of total equity outflow versus the $8.5 billion inflow within fixed income; positive numbers imply greater money flow to stocks; negative numbers imply greater money flow to bonds).”

 

CHART OF THE DAY, MAYBE OF THE YEAR? - 2

 

If you’ve internalized any of our research in the YTD, the fund flow reversal from stocks to bonds is not new news, as that is one of the contrarian calls we’ve been making all year. What is new news, however, is the acceleration of funds flowing into the bond market at the expense of equities.

 

TAIL RISK: “ON”

Not surprisingly this coincides with the aforementioned snapping of our long-term TAIL line of support on the 10Y Treasury bond yield. Whenever this happens (irrespective of direction) please listen to us. Our track record using this point of entropy to front-run major asset class rotations is not inconsequential. Going back to May of 2013:

 

  • EARLY LOOK: THE WATERFALL: 5/21/13 (one day prior to Bernanke’s now-infamous taper speech; 10Y UST yield @ 1.93%):
    • The recent 1-month move in both JGBs (we’re short them) and US Treasury Yields are 2 of the 3 most important things in my notebook this morning. The 3rd is gold. And all 3 of these major macro factors are interconnected to a causal factor with a catalyst.
    • Let’s review what I am looking at this morning:
      • Japanese Government Bond Yields (10yr JGBs) = up another +5 bps to 0.89% this morning; +31bps in the last month
      • US Treasury Yields (10yr) = up +1 basis point this morning to 1.96%; +25bps in the last month
      • Gold continues to crash from its 2011 #BernankeBubble top, backing off -0.5% this morning after a 1-day dead cat bounce
    • As always, contextualizing these moves across our multi-duration model matters too:
      • JGB long-term TAIL risk line = 0.81% (so we’re breaking out above that)
      • UST 10yr long-term TAIL risk line = 1.82%
      • Gold snapped its long-term TAIL risk line of $1681 in January (not new)
    • You can ignore the entropy associated with 1 or 2 of these TAIL lines snapping (I hope you didn’t ignore our Gold signal 6 months ago), but it’s really hard to ignore all 3 of them; especially when the mother of all bursts of entropy (#StrongDollar) is in motion.
    • What matters most in macro is what happens on the margin. That’s why Ben Bernanke acknowledging what we have been signaling on employment, housing, and consumption #GrowthAccelerating will matter in his testimony to Congress tomorrow. That’s your catalyst.
  • JAPAN ASKS: “ARE YOU PREPARED FOR A MEANINGFUL BACK UP IN GLOBAL INTEREST RATES?”: 5/22/13 (10Y UST yield @ 2.04%):
    • In recent weeks, both our fundamental research and quantitative risk management signals are suggesting that global duration risk is rising at an accelerating rate. Sure, it could be a massive head fake, but we certainly won’t be the ones holding the bag if we’re sitting here at EOY ’14 with G-7 bond yields +150-200bps higher than they are now. At a bare minimum, this is an increasingly probable scenario worth looking into.
    • As we’ve shown in previous research notes (HEREHERE andHERE), a demonstrable backup in JGB rates could serve to apply selling pressure upon global sovereign debt securities, dragging up rates across various markets. Per the most recent Bank of America Merrill Lynch data, the spread between the nominal yields on G-7 notes and JGB yields narrowed to 61 basis points last week, the lowest since 1990!
    • While it’s not new news that investors have been increasingly shunning duration risk, we think it’s important to understand allof the moving pieces, rather than just relying on consensus expectations for what the Fed is going to do next. To recap those moving pieces:
      • 1) Domestic labor market improvement driven by a housing market recovery that itself is driven by a timely and marked acceleration in US births and household formation and a domestic consumption acceleration that is fueled by a commodity tax cut that is perpetuated by #StrongDollar are all reasons why we think Fed policy is poised for a major inflection over the intermediate term.
      • 2) A weakening yen that facilitates rising JGB yields that are more attractive on a relative basis should serve as an incremental drag on demand for US Treasuries stemming from Japan, which, as a country, currently represents 19.2% of total foreign demand for US Treasuries.
      • 3) Lastly, in a global currency war, manipulators simply need to buy less dollars to remain competitive if the USD continues to rally on trade-weighted basis (the Trade-Weighted US Dollar Index is already up +6% YTD). That ultimately equates to the central banks of commodity producing nations (many of which are EMEs) buying less US Treasuries, at the margins, in order to hold down their nominal exchange rates. The very recent blood-bath we’ve seen across the commodity currency spectrum is supportive of this view.

 

GETTING WHIPPED AROUND

Let us not forget how grossly unprepared both sell-side and buy-side macro consensus was for our 2013 #RatesRising theme. The sell-side had a EOY ’13 forecast of 2.18% for the UST 10Y yield. That was obviously way off (it finished 2013 at a cycle-high of 3.03%) and it pales in comparison the Bloomberg consensus EOY ’14 estimate of 3.24%.

 

CHART OF THE DAY, MAYBE OF THE YEAR? - 3

 

Not to be outdone, the buy-side was net long of Treasuries in the futures and options markets to the tune of +21.4k contracts, which stands in stark contrast to the maximum net short position of -176k futures and options contracts, which they coincidentally held at the beginning of this year. That’s come in quite a bit as Treasuries have rallied substantially in the YTD (TLT etf +11.9% vs. IWM etf -5.8%), but only to a net short position of -65.7k futures and options contracts.

 

CHART OF THE DAY, MAYBE OF THE YEAR? - 4

 

Conclusion: both the buy-side and sell-side are inappropriately stuck on the Hedgeye Macro Team’s 2013 #RatesRising theme.

 

TACRM™ SAYS STICK WITH THE PLAYBOOK

Also not surprisingly, TACRM™ has been front-running the aforementioned acceleration in fund flows into the bond market for months (specifically, since JAN). For those of you who are unfamiliar with TACRM™, just think of it as that super-smart, geeky kid who sat in the front of your math class and was too shy to raise his hand to answer questions – even though he knew all of the answers. As such, it is my job to explain and interpret his signals to you.

 

There are four primary tools our TACRM™ All-Weather System employs to accomplish its stated goals of helping you front-run major asset class rotations alongside us:

 

  1. TACRM™ Global Macro Thermodynamic Monitor: We first take the “temperature” of nearly 200 global macro ETFs that represent individual markets or specific plays within each market. From there, we can track the current temperature of any market and compare it to both other markets and its own recent trends.
  2. TACRM™ 20/20 Vision Thermodynamic Monitor: By plotting a similar thermodynamic analysis with the “hottest” 20 and “coldest” 20 markets, we can get a sense of what secondary asset classes are really in or out of favor.
  3. TACRM™ Global Macro Weathervane: By taking the temperatures of all the individual markets that comprise a particular primary asset class, we can then calculate a measure of relative momentum by first calculating intra-asset class dispersion and then normalizing said dispersion. The result is a generalized dynamic asset allocation reading for each primary asset class on a 0-100% scale. From there we can track the current reading (i.e. the “weather”) of any asset class and compare it to both other asset classes and its own recent trends.
  4. TACRM™ Global Macro Barometer: By taking each asset class’ current reading from the aforementioned weathervane system and normalizing it as a percentile of its respective TTM and trailing 5Y peaks, we can get a generalized sense of how much “pressure” is developing in any given asset class.

 

(CLICK HERE to download)

 

From a thermodynamic perspective, TACRM™ is signaling a considerable degree of heat across various components of the fixed income space – both in nominal and inflation-linked securities (shhh… did someone say #InflationAccelerating?):

 

CHART OF THE DAY, MAYBE OF THE YEAR? - 5

Slide 10

 

CHART OF THE DAY, MAYBE OF THE YEAR? - 6

Slide 11

 

From a weather perspective, the spread between the relative momentum in Fixed Income & Yield Plays and DM Equities continues to widen, with the former taking share from the latter in marginal capital flows:

 

CHART OF THE DAY, MAYBE OF THE YEAR? - 7

Slide 12

 

From an atmospheric perspective, pressure for investors to chase returns in Fixed Income & Yield Plays is near peak from both a TTM and trailing 5Y perspective, while the opposite is true for DM Equities:

 

CHART OF THE DAY, MAYBE OF THE YEAR? - 8

Slide 13

 

All told, TAIL risk is on (to the upside) in the bond market and we think investors should react accordingly.

 

For those of you who’d like to learn more about TACRM™ and how it can add value to your investment process, please shoot us an email and we’ll gladly set up a call. The user guide can be accessed via the following link: http://docs.hedgeye.com/HE_TACRM_2014.pdf.

 

Have a fantastic weekend!

 

DD

 

Darius Dale

Associate: Macro Team


ANOTHER SIGN OF WEAKNESS FROM THE NEW HOME MARKET

Takeaway: April's headline starts/permits print looks great, until you look closely. Single family continues to trudge wearily, going nowhere fast.

Welcome to The Hedgeye Housing Research Vertical

Yesterday we introduced our Hedgeye Housing Vertical research product. The effort is being led by Josh Steiner and Christian Drake from the Financials and Macro teams. Subscribers to Financials and/or Macro verticals are currently set up to receive this product. If you'd prefer not to receive our housing-focused research going forward please let us know.

 

Our goal is to help investors understand the trends and spot inflection points in the US housing market by tracking 15-20 different housing data series and presenting them in a hyper-simple format. Whenever data hits we will publish a brief note summarizing its importance, or lack thereof. Our Hedgeye Housing Compendium table (below) aspires to present the state of the housing market in a visually-friendly format that takes about 30 seconds to consume.

 

We've broken the market into four main categories: Home Prices, the existing home market, the new home market, and other miscellaneous data. The focus is on simple supply and demand measurements and whether they're weakening or strengthening, on the margin. We're using red and green to make it easy for investors to gauge, at a glance, whether there's widespread improvement, deterioration or a mixed bag. 

 

As the housing research effort evolves we hope you'll engage us with questions and feedback.  

 

ANOTHER SIGN OF WEAKNESS FROM THE NEW HOME MARKET - Compendium Table

 

Today's Focus: April Housing Starts & Permits

The Census Bureau released its monthly Housing Starts & Permits data for April this morning. The big takeaway is this: don’t be fooled by the headline.

 

While total starts and permits bounced sharply in April vs March, the bounce was entirely attributable to multifamily. Single family starts and permits did not show any bounce from normalizing weather and continue to show slug-like progress in renormalizing back to pre-crisis levels. Multifamily starts and permits remain strong and are showing a nice, weather-related bounce, suggesting that rental demand continues to benefit from the conjunction of a strengthening labor market, ongoing household formation and QM’s negative effects on would-be first-time buyers.

 

Taking a look at the data, single family starts grew 5k month-over-month or 0.8% to 649k, while single family permits grew 2k, or 0.3% m/m to 602k. Multifamily starts, however, grew by an impressive 120k m/m (+39.6%) to 423k and permits were up 78k m/m, or +19.5% to 478k.  Said differently, multifamily accounted for 96% of the growth in Starts and 98% of the growth in Permits month-over-month.

 

One interesting observation is the apparent trendline divergence between LTM SF starts and permits. Take a look at the first chart below. SF starts are exhibiting a positive upward slope, but permits are showing the opposite. Permits, by definition, lead starts, so the lack of any upward trajectory in permits should tamp down expectations for a coming bounce in starts.

 

Yesterday’s soft NAHB HMI print of 45 taken with today’s soft single family data paints an ongoing picture of a housing market that continues to stumble through the first half of 2014. Interestingly, these most recent two data points reflect the new home market, which is actually faring better than the existing home market due to the slightly higher affluence of the average buyer.

 

We think three factors are principally responsible for this weak 1H14 performance. First, QM rules that took effect on January 10 of this year are having a suppressing effect on credit availability. Second, institutional investor demand for properties is waning sharply. Third, affordability dynamics have swung sharply; whereas 12-18 months ago there was a strong asymmetry favoring homeownership, today renting vs owning are close to a toss-up.

 

ANOTHER SIGN OF WEAKNESS FROM THE NEW HOME MARKET - Single Family   Starts   Permits ST

 

ANOTHER SIGN OF WEAKNESS FROM THE NEW HOME MARKET - Single Family   Starts   Permits LT

 

ANOTHER SIGN OF WEAKNESS FROM THE NEW HOME MARKET - Starts Single vs Multi MoM Chg Stacked Bar

 

ANOTHER SIGN OF WEAKNESS FROM THE NEW HOME MARKET - Permits Single vs Multi MoM Chg Stacked Bar

 

ANOTHER SIGN OF WEAKNESS FROM THE NEW HOME MARKET - Multi Family   Starts   Permits ST

 

ANOTHER SIGN OF WEAKNESS FROM THE NEW HOME MARKET - Multi Family   Starts   Permits LT

 

ANOTHER SIGN OF WEAKNESS FROM THE NEW HOME MARKET - Total Starts TTM

 

ANOTHER SIGN OF WEAKNESS FROM THE NEW HOME MARKET - Total Starts Long term

 

About Housing Starts & Permits:

The US Census Bureau records the number of new housing units that have obtained permits for construction and those that have begun construction. This data includes new buildings intended primarily as residential units. The US Census Bureau defines a start as, “Start of construction occurs when excavation begins for the footings or foundation of a building.” 

 

 

Joshua Steiner, CFA

 

Christian B. Drake


Video | Keith’s Rant of the Day: Buy Inflation, Short Growth

CEO Keith McCullough looks at key style factors within the market that’s signaling him what to do now.


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VIDEO | Keith's Macro Notebook 5/16: UST 10YR XLF COMMODITIES


LEISURE LETTER (05/16/2014)

Tickers: BYI, FLL, PENN, GLPI, MGM, WYNN, HOT, MAR

EVENTS TO WATCH

Friday, May 16

  • Japan Gaming Conference thru Friday, May 16

Tuesday, May 20- Wednesday 21

  • East Coast Gaming Congress 

Tuesday, May 20 -Thursday May 22

  • G2E Asia - The Venetian Macao

http://www.g2easia.com/Conference/#IGaming

COMPANY NEWs

BYI – CEO/President and board member Ramesh Srinivasan to step down; the Board of Directors appointed chairman Richard Haddrill CEO, effective May 23, 2014.  Previously, Handrill was the company’s Chief Executive Officer from 2004 to 2012. Handrill served as a member of the board since 2003 and Chairman of the board since 2012.  Additionally, David Robbins, who has been serving as the board’s Lead Independent Director, has been appointed Chairman of the board effective May 23, 2014. Robbins also served as Chairman from 1997 to 2010. Ramish Srinivasan is no longer an employee of Bally Technologies.

TAKEWAY:  The sell side explanations don't seem to hold much water. The company's hands are probably tied in terms of what they can say but we wonder if there was some kind of incident with Srinivasan. Conduct standards for executives are high these days especially for highly regulated companies in gaming.  That said, we don't have any inside information but we're not sure there is anything to worry about regarding BYI's operations.

         

BX – will acquire Cosmopolitan from Deutsche Bank for $1.73 billion in cash for ~16.7 times 2013 EBITDA of $103m.  In a related data point, Cosmo Q1 gaming revenues increased 20.2% while hotel revenues jumped 18.8% to  $75.7 million on stronger group traffic which in turn drove ADR $303

TAKEAWAY: Private equity now fully involved in the gaming industry, could more gaming acquisitions be in the offering?

 

FLL – cancelled its agreement, announced in March, to purchase 507-room Fitz Tunica Casino & Hotel from The Majestic Star Casino LLC for US$62 million. Full House revealed in its recent earnings report that “the company will not likely be successful in obtaining financing for the purchase. As a result, we have requested Majestic Star to consider termination of the agreement.”

TAKEWAY:  Oops

                

PENN – Greenlight Capital disclosed via 13F filing a 100% increase in shares owned in PENN at a current 2 million shares vs 1 million shares previously.

TAKEWAY: Betting on new casino growth and a regional reversal

 

PENN / GLPI – Penn National Gaming the parent company of Argosy Sioux City filed for Chapter 11 bankruptcy for the property.  As part of the reorganization, PENN is asking bankruptcy court to allow it to continue operating. PENN’s justification for filing for Chapter II is that it would lose its entire $110 million investment in the market if it loses its license. And that license is part of the bankruptcy estate, meaning bankruptcy court has authority over it, the company contends.  PENN is suing in court to retain its license, but that trial does not begin until autumn.

TAKEWAY: Given PENN's admission that the company recognized it failed to renew its gaming license, this seems like an extreme action.

 

MGM – “We’re absolutely considering an IPO in Japan, but not initially,” MGM Chief Executive Officer James Murren, 52, said in an interview in Tokyo yesterday. “The best model is to put together an ownership group, finance through equity partners, open the facility, generate a strong track record of performance. We did that in Macau.”

TAKEWAY:  MGM still a longer shot in our opinion.  

 

WYNN - is “actively looking” for equity partners for a planned integrated resort in Japan and would eventually list the venture, according to comments made by President Matt Maddox at the Japan Gaming Congress.  Additionally, Wynn Resorts intends to conduct an initial public offering if awarded a gaming license for a planned Japan resort with the offering intended to increase the company’s profile in Japan.

TAKEWAY: "We'll list too if it helps us get a license..."

 

WYNN MACAU, 1928.HK – denies it lets triad-linked junket operators promote VIP gaming .  Wynn Macau has denied accusations leveled by a union boss Jeff Fiedler in a letter to the Macau Gaming Inspection and Coordination Bureau (DICJ) director yesterday (15-May in Asia).  Wynn Macau called Mr. Fiedler's accusations "those of a bitter, unsuccessful union boss who lost representation of employees in Steve Wynn's prior company, Mirage Resorts (SCMP)

TAKEWAY:  Mr. Fielder was the founder of the CasinoLinks web-site that attacked casino companies doing business in Macau. Additionally, Mr. Fielder has strong ties to the Democratic Party and Democratic Leader Nancy Pelosi so there is a political angle here against Steve Wynn. These allegations have been made repeatedly against WYNN by Fielder and CasinoLinks over the years so nothing new.  

 

HOT – has listed for sale the five-star Sheraton on the Park Sydney, which would continue to be managed by Starwood.  Sheraton on the Park Sydney is situated opposite Hyde Park in the central business district, close to Sydney’s luxury retail precinct. The hotel comes with 557 guest rooms and suites, a restaurant, a tea lounge, a bar, extensive conference and function space, leased retail space and a range of recreational facilities.  JLL's Hotels & Hospitality Group has been appointed to market the freehold hotel. Expressions of interest are welcome until June 20.

TAKEWAY:  Finally, a company owned asset listed for sale.  Could an expanded repurchase program be forthcoming as a result of the asset sale(s)?

 

MAR - EVP Anthony Capuano sold 4,000 shares of MAR on Monday, May 12th at an average price of $59.45, for a total value of $237,800.00. Following the sale, the executive vice president now directly owns 62,463 shares of the company’s stock, valued at approximately $3,713,425.

TAKEWAY:  Insider selling becoming prevalent in hotel stocks. Will Blackstone in June contribute to the trend (HLT)?

 

TUI AG

 

LEISURE LETTER (05/16/2014) - TR

 

TAKEWAY: Small player (RCL JV) who reaffirmed its turnaround outlook on European cruise industry 

 

ClubMed - reported 1H results which were in line w ith expectations but offered commentary on current trends with included comments about cumulative summer 2014 bookings as of May 10 with bookings (3.0%) impacted by a strong downturn in the Europe-Africa region, in particular over the last eight weeks at (16.3%), and a slowdown in Asia.  In the Americas, bookings were up 11.5%, mainly driven by the sustained momentum of sales in 
North America.

TAKEAWAY: European slowdown seems to be more company specific (closure of 2 managed short-haul villages) and the Easter shift but the decline in reservations in Asia was due to China/Malaysia rifts.  US bookings were strong.

INDUSTRY NEWS

Macau Smoking Ban - full smoking ban on mass floors beginning Monday, October 6, 2014.

TAKEAWAY: Given the recent Labor Day protests in Macau and the smoking debate, this policy outcome seemed an inevitable conclusion.  We're hearing VIP rooms and Premium Mass will be excluded.

 

Macau Airlift - Starting 1 July 2014, AirAsia will increase the number of flights it operates between Macau and Manila, Philippines. from its existing 3 flights per week services between Manila and Macau, to 7 flights per week.

TAKEAWAY: Can't hurt.

MACRO 

China Lending - Nonperforming loans rose by 54 billion yuan ($8.7 billion) in the three months through March to 646.1 billion yuan, the highest level since September 2008, based on data released by the China Banking Regulatory.  Non-performing loans accounted for 1.04% of total lending, up from 1% three months earlier.  The 10th straight quarterly increase in defaults adds to concern banks’ profitability may slip as they build buffers to cover loan losses.

TAKEAWAY: Chinese banks had the biggest quarterly increase in bad loans since 2005 as a slowdown in the world’s second-largest economy causes defaults to rise. Not yet a worry for Macau but we're starting to get a little concerned.

 

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.


Stay With the Program

Client Talking Points

UST 10YR

The yield finally crashes after our TAIL riskline of 2.61% on the 10-year signaled the point of entropy was pending. I see nothing but backpedaling from people who are still positioned for what they should have been last year (#RatesRising). Consensus needs to come our way as inflation slows real growth.

FINANCIALS (XLF)

Back into the red for 2014 year-to-date, and they should be – Down Rates = Yield Spread Compression = Financials Down. It still looks very 2011 stagflation to me – as inflation slows growth, you get equity market multiple compression (and bond market multiple expansion).

COMMODITIES

The CRB Commodities Index is up +9.6% year-to-date versus Growth (Russell2000) down -5.9%. #timestamped. Meanwhile, if it ain’t broke, don’t change it – stay with the long inflation, short US growth program.

Asset Allocation

CASH 20% US EQUITIES 6%
INTL EQUITIES 8% COMMODITIES 22%
FIXED INCOME 22% INTL CURRENCIES 22%

Top Long Ideas

Company Ticker Sector Duration
HOLX

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.

OC

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.

DRI

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

TWEET OF THE DAY

Portugal -1.6% looking more and more like the roundtrip Greek stocks have been @KeithMcCullough

QUOTE OF THE DAY

"If opportunity doesn't knock, build a door." - Milton Berle

STAT OF THE DAY

Swiss voters go to the polls this weekend in a nationwide referendum on whether to introduce what would be the highest minimum wage anywhere in the world. If approved, employers would be obliged to pay workers a monthly minimum of 4,000 Swiss francs ($4,470) - which works out as just over $53,600 a year. (BBC)


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