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Commodities: Weekly Quant

Commodities: Weekly Quant - chart1 divergences

Commodities: Weekly Quant - chart2 deltas

Commodities: Weekly Quant - chart3 usd correls

Commodities: Weekly Quant - chart4 s p correls

Commodities: Weekly Quant - chart5 volume

Commodities: Weekly Quant - chart6 vol

Commodities: Weekly Quant - chart7 sentiment

Commodities: Weekly Quant - chart8 1mth correls

Commodities: Weekly Quant - chart9 3mth correls

Commodities: Weekly Quant - chart10 6mth correls

Commodities: Weekly Quant - chart11 1Yr correls

Commodities: Weekly Quant - chart12 3Yr correls

 

Ben Ryan

Analyst


The Week Ahead

The Economic Data calendar for the week of the 3rd of November through the 7th of November is full of critical releases and events.  Attached below is a snapshot of some of the headline numbers that we will be focused on.

 

The Week Ahead - 10.31.14 Week Ahead


EHTH: Covering the Short (Removing from Best Ideas List)

Takeaway: We added EHTH Short to our Best Ideas List on 2/7/14. Our bearish thesis remains largely intact, but we're out of catalysts until 1Q15.

KEY POINTS

  1. NOTHING HAS REALLY CHANGED: The only material positive news from the 3Q14 earnings call was that IFP commission rates are expected to remain the same in 2015; pushing back an inevitable downside catalyst to 2016 at the earliest.  But the same risks that crippled the business in 2014 remain into 2015.  EHTH still has limited connectivity with the public exchanges (a requisite to selling subsidized plans), which means EHTH may not have the ability to drive enough new account growth to offset its churning IFP members.  All things considered, the setup hasn't changed much from 2014; EHTH could see another down year in IFP membership next year.  
  2. BUT WE'RE OUT OF CATALYSTS UNTIL 1Q15: Open Enrollment runs from 11/15/14-2/15/14.  EHTH will not really know what 2015 will look like until 1) it starts collecting premiums on its new members, and 2) it knows how many of its current members have churned.  The company will issue its 2015 guidance before that occurs, which means that can go either way since it won't really understand its 2015 prospects until its 1Q15 earnings release.  Until then, remaining short could expose us to near-term bullish catalysts on immaterial events (e.g. random news flow similar to last year).  Given that the stock is up following cautiously optimistic management commentary for 2015, we would rather book the gain and get out of the way...for now.

EHTH: Covering the Short (Removing from Best Ideas List) - EHTH   Net Member Growth 3Q14

 

Let us know if you have any questions or would like to discuss in more detail. 

 

Hesham Shaaban, CFA

@HedgeyeInternet

 

 

 


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20 Proprietary Risk Ranges

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Video | Is There A Bubble in Restaurant Stocks?

In an excerpt from an Institutional Call earlier this week, Restaurant Sector Head Howard Penney fields a question concerning a bubble in low quality small cap U.S. stocks. As competiion heats up in the space CHUY’s odds of beating the larger more well known names in the space appear slim. The restaurants team recently turned bearish on CHUY, adding it to the Best Ideas list as a short.


FLASHBACK: Hedgeye's Howard Penney Says Short Starbucks $SBUX

Takeaway: Hedgeye managing director Howard Penney added SBUX to the Hedgeye Best Ideas list as a short on September 11.

Editor's note: This note by Hedgeye managing director Howard Penney adding Starbucks (SBUX) to the Hedgeye Best Ideas list as a short was originally published September 11, 2014 at 16:49. The world’s biggest coffee-shop chain posted quarterly revenue after the close yesterday that missed estimates sending shares lower approximately -3% today.

We are adding SBUX to the Hedgeye Best Ideas list as a short.

 

We are hosting a Black Book call next Thursday, September 18, 2014 at 11am EST to run through our thesis and field questions.  We will send out dial-in information and materials for the call next week.

 

FLASHBACK: Hedgeye's Howard Penney Says Short Starbucks $SBUX - 98

SBUX: The Seven-Year Itch

It’s been seven years since Howard Schultz penned his now famous memo to management and employees, outlining where the company had gone wrong and what it needed to do to get back on track.  It has also been six years since I turned positive on Starbucks – but nothing lasts forever.

 

McDonald’s went on an eight-year corporate revival before it lost its luster and we fear Starbucks is nearing the end as well.  In this presentation, we will outline a number of concerns we have with the company leading us to believe that the street is overly optimistic about its future prospects.

 

I recently read that Harvard Business School Professor and Historian Nancy Koehn has studied Starbucks and its leader, Howard Schultz, for nearly 20 years.  She recently released a new HBS Case Study, “Starbucks Coffee Company: Transformation and Renewal,” which traces “the dramatic arc of the company’s past seven-plus years – a period that saw Starbucks teeter on the brink of insolvency, dig deep to renew its sense of purpose and direction, and launch itself in new, untested arenas that define the company as it exists today.”

 

While all of this may be true, I too have been following Howard Schultz and Starbucks for over 20 years.  Unlike Ms. Koehn, however, I did not go to Harvard and I am not a HBS Professor.  But I did release a Hedgeye Black Book in early 2009 detailing why I believed Starbucks was a great company and the stock was a great buy.

 

Today, while Starbucks is still a great company with a strong management team, the stock is far less attractive.  More specifically, and perhaps to the heart of the topic, I believe the company’s domestic business is maturing and management is rapidly attempting to stem this decline by deviating from its core.  Let us not forget that sentiment is near an all-time high.  To me, this HBS Case is simply another example of a Starbucks “top.”

 

Our call on SBUX will focus on:

  • Menu trends suggest increased complexity and slower throughput
  • Decelerating same-store sales and traffic
  • Rapid diversification away from the core business
  • Proprietary Hedgeye survey confirming new menu initiatives are not resonating with consumers
  • Significant and sustainable increase in coffee costs
  • Peak margins
  • Street optimism and overconfidence

 

Howard Penney

Managing Director 

 

Fred Masotta

Analyst



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