Takeaway: We’re looking for stocks where our analysts are bearish yet are immediate-term overbought. KSS hits on both accounts.
We’re adding KSS to our #Real Time Alerts on the short side. We’re looking for stocks where our analysts are bearish fundamentally yet are immediate-term overbought on top of a bearish formation. KSS hits the trifecta.
One of the best ways we can explain away our concern around KSS is in the market share dispersion chart below. JCP ceded $2.7bn in share in the first three quarters of the year, and is on track to clock in at about $4bn for the year. How much of that is KSS winning? Less than 0.3%. That’s flat-out embarrassing.
We’re consistently told by KSS bulls that the KSS and JCP customers are different given that KSS is off-mall. But we can’t get over KSS’ sheer inability to execute on this once in a lifetime opportunity. We need to remind everyone that JCP is within one month of when it starts to go against -20%+ comps from a year ago. It won’t comp positive. But the delta will definitely get more difficult for KSS.
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To listen to the Q1 2013 Macro Themes Conference Call hosted earlier today by the Hedgeye Macro Team, led by CEO Keith McCullough, please CLICK HERE (in order to access the replay you will need your hedgeye.com login information.) To view the presentation that accompanied today's call CLICK HERE.
Both our research and risk management indicators are signaling a shift away from #GrowthSlowing and have a bullish read-through for equities as fund flows move out of bonds. The risk of the U.S. Debt Ceiling remains a factor; however, we expect a rebound from the consumer as Bernanke's Commodity Bubble continues to deflate.
Housing market fundamentals continue to strengthen and are expected to maintain and possibly accelerate their momentum through 2013. We see changes in key housing metrics driving further upside that includes inventory levels, pricing and household formation.
With the recent election of prime minster Shinzo Abe and his appointment of Taro Aso as finance minster, Japan looks to dominate the macroeconomic news flow out of Asia in Q1 as it pursues a variety of unconventional monetary and fiscal policies. Still our favorite short in all of Global Macro, we believe the yen will continue its descent vis-a-vis the U.S. dollar and the euro, imposing a variety of spillover risks for Japanese and international financial markets.
Based on data provided by the CFTC (Commodity Futures Trading Commission), it appears that non-commercial players (read: hedge funds) were caught offside with respect to the recent upward move in corn prices. Long positions in corn have declined from a recent peak of 433,003 contracts (10/23/12) to 345,549 contracts in the most recent data (1/8/13). At the same time, short positions have increased from 99,344 contracts to 124,689. Basically, hedge funds spent the winter getting less long corn.
Looking back further, the data suggests that the actions of non-commercial players don’t necessarily reflect well upon their reputations as “smart” money – peaks in bullish position as measured by net long positions as a percentage of net short positions coincide startlingly well with peaks in corn prices. Admittedly, speculation may be driving some of the moves in the commodity, but it doesn’t appear to us as if hedge funds do a very good job of making money trading corn futures.
Our bias is to get short corn at these levels, as we move into a relatively quiet data period over the next couple of months and into U.S. planting intentions. Meanwhile, we will be watching to see what the "smart" money does and, if history is any indication, be prepared to move in the opposite direction.
HEDGEYE RISK MANAGEMENT, LLC
Commodities took a nose dive after the September “Bernanke Top” and have yet to fully recover. Some commodities, such as gold, are still depressed in price while others have shown moderate gains and recovery. The price of crude oil, which is a huge growth catalyst, remains relatively high around $112 a barrel (Brent) having shot up since December while the CRB Commodities Index’s growth is stagnant. If oil hits $130 a barrel again, we can easily go back to #GrowthSlowing from #GrowthStabilizing.
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