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Launching Coverage on Semiconductors

Launching Coverage on Semiconductors - HE SC launch

 

Hedgeye will be hosting a call today, July 1st at 11:00am EDT to welcome Craig Berger, our new Semiconductor Analyst and Technology Sector Head. Craig will offer some initial comments along with a slide deck highlighting key themes and best ideas in his space.

 

CALL DETAILS

  • Toll Free Number:
  • Direct Dial Number:
  • Conference Code: 859426#  
  • MaterialsCLICK HERE (Slides will be available approximately one hour prior to the start of the call) 
  • Ping  for more information. 

 

TOPICS WILL INCLUDE:

  • What do key semiconductor revenue, profitability, and cash metrics look like?
  • What is the state of global supply chain inventories?
  • Which chip firms could see outsized dividend hikes, or new initial dividends, in coming quarters?
  • Which chip firms make attractive acquisition targets?
  • What are some interesting long and short ideas in the semiconductor space?
  • With calls on QCOM, INTC, AMD, NVDA, SLAB, IRF, and more 

 

ABOUT CRAIG BERGER, CFA, CPA  

Craig is joining Hedgeye as our Semiconductor Analyst and Technology Sector Head and has spent more than a decade as a semiconductor equity research analyst. Previously, he served as managing director for FBR Capital Markets (2007-2013), Wedbush Morgan (2005-2007), and Smith Barney Citigroup (2002-2005). Craig has won several awards from Forbes and ThomsonReuters, and has numerous media and press interactions. Beyond Wall Street, Craig worked at Intel Corp. (1) in positions of increasing responsibility in the CPU and capital spending finance groups, giving him critical industry insight and experience.


VIDEO: Keith's Macro Notebook 7/1: Canadian Dollar, Oil, Germany


CORELOGIC DATA FOR JUNE - THE SINGLE DIGIT SLIDE CONTINUES

Takeaway: Home prices increases have decelerated by 410 bps in the last four months. The headwinds should persist for another ~8 months.

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. 

 

CORELOGIC DATA FOR JUNE - THE SINGLE DIGIT SLIDE CONTINUES - Compendium 070114

 

Today's Focus: June CoreLogic Home Price Report

CoreLogic released its monthly home price report for May/June earlier this morning. Unlike S&P/Case-Shiller, which is a rolling 3-month average repeat sales index,CoreLogic is a single month index released on almost no lag. Essentially, it gives you information three months more current than what you get from Case-Shiller. 

 

CoreLogic estimates that home prices rose +7.7% YoY in June, a deceleration vs the +8.8% in May and +10.0% in April. We show this in the first chart below.

 

Interestingly, in the past few months we've seen material upward revisions to the preliminary estimates for the most recent month-ended. This month, however, the revision was almost non-existent and actually was revised lower. The preliminary estimate for May was +8.9% and the final number came in at +8.8%.

 

Its also worth noting that while sales comps begin to ease through 2H14, price comps don’t really begin to ease until Feb 2015 (hardest near-term comp is Oct which was +11.8% YoY). As such, we think the next 8 months of worsening pricing data will weigh on the housing complex.

 

Our main thesis on housing is that the rate of home price appreciation will slow meaningfully over the course of 2014 and into 2015. Historically, inflections in the rate of HPI or HPD have been major macro drivers of relative positive or negative performance.

 

CORELOGIC DATA FOR JUNE - THE SINGLE DIGIT SLIDE CONTINUES - Corelogic NSA YoY TTM

 

CORELOGIC DATA FOR JUNE - THE SINGLE DIGIT SLIDE CONTINUES - Corelogic exDistressed NSA YoY TTM

 

CORELOGIC DATA FOR JUNE - THE SINGLE DIGIT SLIDE CONTINUES - Corelogic NSA YoY LT

 

 

About CoreLogic:

CoreLogic HPI incorporates more than 30 years worth of repeat sales transactions, representing more than 55 million observations sourced from CoreLogic's property information database. The CoreLogic HPI provides a multi-tier market evaluation based on price, time between sales, property type, loan type (conforming vs. nonconforming), and distressed sales. The CoreLogic HPI is a repeat-sales index that tracks increases and decreases in sales prices for the same homes over time, which provides a more accurate constant-quality view of pricing trends than basing analysis on all home sales. The CoreLogic HPI covers 6,208 ZIP codes (58 percent of total U.S. population), 572 Core Based Statistical Areas (85 percent of total U.S. population) and 1,027 counties (82 percent of total U.S. population) located in all 50 states and the District of Columbia."

 

Joshua Steiner, CFA

 

Christian B. Drake


Daily Trading Ranges

20 Proprietary Risk Ranges

Daily Trading Ranges is designed to help you understand where you’re buying and selling within the risk range and help you make better sales at the top end of the range and purchases at the low end.

LEISURE LETTER (07/01/2014)

Tickers: LVS, WYNN, MPEL, MGM, GLPI, ISLE, H, HOT, BEL, RHP, CCL, RCL

EVENTS

  • Thurs July 3: ISCA 9 am Q2 earnings , pswd 69156862

COMPANY NEWS

880:HK / SJM Holdings – (GGRAsia)  According to industry figures, here is the June GGR shares:

  • SJM: 24.9%
  • LVS: 22.0%
  • GALAXY: 21.1%
  • WYNN: 9.5%
  • MPEL: 12.2%
  • MGM: 10.3%

Takeaway: Strong showing by the local, Chinese mass-centric operators.

  

GLPI & ISLE – late yesterday Reuters reported Isle of Capri (ISLE) is in renewed sales talks with Gaming & Leisure Properties (GLPI)

Takeaway: We are EXTREMELY skeptical of such discussions leading to a completed transaction! 


H – Toronto, Ontario-based Westmont Hospitality Group is on the verge of buying the Park Hyatt Washington from Hyatt Hotels Corp. for $100 million or $462,963 per key for the 216-key hotel located at 1201 24th St. NW - near embassy row.

Takeaway: The capital recycling program continues.

 

HOT – is reportedly in talks with the owner of the five-star Nikolskaya Hotel in Moscow to convert the property to a St. Regis Hotel. 

Takeaway: If you can't build 'em, convert 'em - especially in the luxury segment of lodging. 

 

OEH / BEL – formally changed its name from Orient-Express Hotels Ltd. to Belmond Ltd. following approval from shareholders at the 2014 annual general meeting of shareholders held yesterday. Additionally, the Company intends to change the ticker symbol of its class A common shares listed on the New York Stock Exchange from OEH to BEL on July 28, 2014

Takeaway: On April 28, we suggested potential new ticker symbol of "BMD" - it seems simplicity was an overriding factor. 

 

RHP – announced a $14 million expansion and renovation of Ryman Auditorium. The building's historic auditorium, renovated in 1994, will remain unchanged while the renovation will focus on the building's addition, which was completed in 1994.

Takeaway: Building out the non-core lodging amenities similar to MGM's current ancillary development in Las Vegas.

 

CCL P&O and Cunard Line's 6% extra bonus promise (TTG Digital)

P&O Cruises and Cunard (CCL brands) are offering travel agents bonus commission of up to 6% in a new booking promotion.  They are paying the extra commission on selected bookings for departures between September 2014 and June 2015.

 

The lines will be paying the 6% bonus, on top of standard commission of 7.5%, to agents for sales of P&O’s Select Price and Cunard Fare tickets, while agents can also earn an extra 3% commission for bookings of Early Saver fares for both brands.

Takeaway: While we have been seeing more commission incentives lately, CCL's commissions as a % of ticket revenue has been pretty steady this year.

 

RCL - Developing tour subsidiary (Travel Weekly)

RCL has confirmed it is working on a new subsidiary focused on developing and marketing land tours around the globe.  The new company is still in formation, but RCCL has named John Weis, its former vice president of global tour operations, to spearhead its development.

RCCL already offers guests on its three cruise brands thousands of tours in hundreds of destinations. It said the new subsidiary, to be called TourTrek, will operate in 90 countries and will be wholly owned by RCL.

INDUSTRY NEWS

Macau June GGR (DICJ) Macau’s casino revenue fell for the first time in five years in June to HKD26.422 billion (MOP 27.215 bn), down by 3.73% year/year or approx. HKD1.023 billion and also down 15.88% month/month or approx. HKD4.989 billion.

Takeaway: We will receive the monthly details at the end of this week.

 

Singaporeans to Spend More - According to the Visa Affluent Study, affluent Singaporeans are planning to spend more on dining, entertainment and travel this year, and the willingness to open their wallets is being driven by an increased optimism in the local economy.  82% of affluent respondents from Singapore (defined as cardholders that earn more than US$100,000 (S$124,600) in annual income) intend to spend the same or more this year than they did in 2013.

 

Takeaway: A potential uptick for the locals/mass segment at RWS and MBS? We haven't seen mass growth in 2014 yet.

 

New York Upstate Gaming Expansion – following the June 30th deadline for filing a formal application for the four potential licenses, both PENN and CZR completed final applications.  A total of 17 final bids were submitted for the potential four licenses.  The final bids will be evaluated by the State of New York.

Takeaway: Let the marketing and public relations efforts start telling the story for why each sponsor's project is the best option...

 

Mississippi Gaming Expansion – the Mississippi Gaming Commission voted to allow Land Holdings One to begin construction on the Scarlet Pearl Casino Resort, after the company secured the $280 million in financing needed to build the resort. The Scarlet Pearl will be built on property along Biloxi's Back Bay and will have 60,000 square feet of gaming space with more than 1,000 slot machines, a 300 room hotel tower, and a 36 hole miniature golf course.  The property is scheduled to open during Summer 2015.

Takeaway: As soon as one property closes, another property breaks ground to open.  Scarlet is expected to open with around 1,350 slots in 2015.

MACRO

China Macro Data

  • Manufacturing PMI 51.0 vs 51.0 consensus and 50.8 prior - six-month high\
  • HSBC manufacturing PMI 50.7 vs 50.8 consensus and 49.4 prior -- the first reading above 50 this year

Takeaway: June final economic data was in line with "flash" estimates during the month and continued the recent improving trend. 

 

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.


Q2 ENDS WITH RISING SECTOR VARIANCE

Client Talking Points

CAN$

It’s Canada Day! And the Loonie is starting to breakout vs Burning Bucks ($1.08 USD/CAN is the TREND breakout line). Being long #InflationAccelerating via the Canadian Stock Market (TSX +12.9% year-to-date) beats being long U.S. growth too.  

OIL

WTI kicks off Q3 with another +0.4% bounce to $105.77/barrel; no immediate-term TRADE resistance to $106.94, then a lot higher if the U.S. Dollar continues to break down. Big U.S. #ConsumerTax remains intact as real wages in the US go negative for the 1st time in 2 years.

GERMANY

DAX trying to bounce this morning after a soggy end to Q2, but the 2nd derivative of the German economy data is starting to slow (PMI 52.0 JUN vs 52.4 MAY) as the DAX falls below its immediate-term TRADE line of 9902 – something new to monitor.

Asset Allocation

CASH 18% US EQUITIES 6%
INTL EQUITIES 15% COMMODITIES 22%
FIXED INCOME 24% INTL CURRENCIES 15%

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.

LM

Legg Mason reported its month ending asset-under-management for April at the beginning of the week with a very positive result in its fixed income segment. The firm cited “significant” bond inflows for the month which we calculated to be over $2.3 billion. To contextualize this inflow amount we note that the entire U.S. mutual fund industry had total bond fund inflows of just $8.4 billion in April according to the Investment Company Institute, which provides an indication of the strong win rate for Legg alone last month. We also point out on a forward looking basis that the emerging trends in the mutual fund marketplace are starting to favor fixed income which should translate into accelerating positive trends at leading bond fund managers. Fixed income inflow is outpacing equities thus far in the second quarter of 2014 for the first time in 9 months which reflects the emerging defensive nature of global markets which is a good environment for leading fixed income houses including Legg Mason.

Three for the Road

TWEET OF THE DAY

TREASURIES: 2.55% 10yr Yield continues to confound consensus growth bulls

@KeithMcCullough

QUOTE OF THE DAY

“He who will not economize will have to agonize.”

-Confucius

STAT OF THE DAY

75% of U.S. businesses make under $100K in annual revenue.



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