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Poll of the Day Recap: 72% Say $RUT's Next Stop Is 1000

Takeaway: 72% said 1000; 28% said 1200

Hedgeye CEO Keith McCullough noted in today’s Morning Newsletter: “The Russell 2000 bounced on no-volume to yet another lower-high of 1114 yesterday and at -4.3% YTD, the Russell 2000 is still bearish on both our immediate-term TRADE and intermediate-term TREND durations.” But we wanted to know what you think.

 

Today’s poll question was: What's the next stop for the Russell 2000?

 

Poll of the Day Recap: 72% Say $RUT's Next Stop Is 1000 - 1


At the time of this post, 72% said the next stop would be 1000; 28% said it would be 1200.


Those who believe it will drop to 1000 say it’s “the next area of support.” One voter explained, “$RUT has been the gift that keeps on giving if you're on the put side. It's entering bear market territory and once that happens... swoosh!”

 

Additionally, as another voter said, “The last leg up in Feb felt blow-off which usually means a larger drawdown is coming. Also, leverage gets risky and expensive if the market isn't making higher highs and the longer IWM sells off the more pressure is put on the S&P.  I'm thinking at least support at $1050.”

 

In the opposite camp, voters who chose 1200 said:
 

  • “Don’t think it hits either 1000 or 1200 in next few months but down 9% from high with SPX near all-time high, the easy trade is RUT trades lower but Mr. Market likes to penalize the easy trade...so higher.”
     
  • “Shorting the $RUT seems like a too-obvious trade now. Wouldn't be surprise, it squeezes higher and traps more people before turning lower again.”
     
  • “Been down so long it looks like up to me.”

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Hedgeye Retail: Urban Outfitters Deserves Credit for Accountability | $URBN

Takeaway: This is the kind of accountability we like to see from companies we invest in.

Hedgeye Retail: Urban Outfitters Deserves Credit for Accountability | $URBN - 2

URBN 1Q15 Earnings

 

Hedgeye Retail: Urban Outfitters Deserves Credit for Accountability | $URBN - chart2 5 20 large

TAKEAWAY FROM HEDGEYE’S BRIAN MCGOUGH:

Definitely a disappointing quarter for Urban Outfitters, and as everybody knows, it's all about weakness in the URBN concept. One thing we give management all the credit in the world for is that it did not use weather as an excuse -- even though everyone else is. They noted that great companies perform regardless of the weather -- as Anthropologie and Free People did. They expect the same from Urban, which is dragging because of its own problems, not Mother Nature's.  That's the kind of accountability we like to see from companies we invest in.

 

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Editor's Note: This is a research excerpt from Hedgeye Retail sector head Brian McGough. Follow Brian on Twitter @HedgeyeRetail

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Cartoon of the Day: Abandon Ship

Takeaway: We’ve been hitting you with this DOWN-volume-UP-day thing square in the head this year.

Cartoon of the Day: Abandon Ship - volume cartoon 5.20.2014

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BNNY: Reiterating Short Into Earnings

We added Annie’s (BNNY) to our Best Ideas list as a short on 04/07/2014 at $37.16/share.  Since this time, the stock has traded down approximately ~15% while earnings estimates have essentially remained flat.  With the company set to report 4QF14 earnings on June 10th, we are reiterating our short.

 

To be clear, we believe Annie’s is a strong, resonant brand that is well positioned to grow within the natural and organic segment of the food industry.  This is generally acknowledged by the street, as the company has been awarded a substantial premium valuation to its peer group.  While this gap has tightened since we released our call, it still exists to a notable degree.  BNNY is showing significantly stronger top line growth than its peers, but we have legitimate concerns with the company’s ability to manage EPS in the intermediate-term; a risk that we believe is not fully reflected in stock.

 

In our view, managing a rapidly growing business is becoming increasingly challenging – a problem the recent Joplin plant acquisition could exacerbate.  While last year’s balance sheet issues give cause for concern, management has done an adequate job tightening internal controls.  What is more concerning to us, however, is increased competition (WWAV, WMT), building margin pressure (cheese, organic grains), a lack of earnings visibility and aggressive estimates. 

 

We remain bearish on an intermediate-term TREND duration and continue to believe that 4QF14 and FY15 estimates will prove too aggressive as Annie’s incurs some common growing pains.

 

Research Recap:

New Best Idea: Short BNNY (04/07/2014)

Presentation: Short BNNY (04/10/2014)

BNNY: Intermediate-Term Downside (04/11/2014)

 

BNNY: Reiterating Short Into Earnings - chart1

 

Howard Penney

Managing Director

 

Fred Masotta

Analyst


BNNY: Reiterating Short Into Earnings

We added Annie’s (BNNY) to our Best Ideas list as a short on 04/07/2014 at $37.16/share.  Since this time, the stock has traded down approximately ~15% while earnings estimates have essentially remained flat.  With the company set to report 4QF14 earnings on June 10th, we are reiterating our short.

 

To be clear, we believe Annie’s is a strong, resonant brand that is well positioned to grow within the natural and organic segment of the food industry.  This is generally acknowledged by the street, as the company has been awarded a substantial premium valuation to its peer group.  While this gap has tightened since we released our call, it still exists to a notable degree.  BNNY is showing significantly stronger top line growth than its peers, but we have legitimate concerns with the company’s ability to manage EPS in the intermediate-term; a risk that we believe is not fully reflected in stock.

 

In our view, managing a rapidly growing business is becoming increasingly challenging – a problem the recent Joplin plant acquisition could exacerbate.  While last year’s balance sheet issues give cause for concern, management has done an adequate job tightening internal controls.  What is more concerning to us, however, is increased competition (WWAV, WMT), building margin pressure (cheese, organic grains), a lack of earnings visibility and aggressive estimates. 

 

We remain bearish on an intermediate-term TREND duration and continue to believe that 4QF14 and FY15 estimates will prove too aggressive as Annie’s incurs some common growing pains.

 

Research Recap:

New Best Idea: Short BNNY (04/07/2014)

Presentation: Short BNNY (04/10/2014)

BNNY: Intermediate-Term Downside (04/11/2014)

 

BNNY: Reiterating Short Into Earnings - chart1

 

Howard Penney

Managing Director

 

Matt Hedrick

Associate

 

Fred Masotta

Analyst


Daily Trading Ranges, Refreshed

Takeaway: Almost six months into 2014, what is clearly causal to slowing US consumption growth is #InflationAccelerating.

Editor's note: This unlocked edition of Daily Trading Ranges was originally provided to subscribers on May 20, 2014 at 7:30 a.m EST. For more information on how you can receive these levels every morning in your inbox click here.  

 

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BULLISH TRENDS

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BEARISH TRENDS

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