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Investing Ideas Newsletter

Takeaway: Current Investing Ideas: EDV, HCA, MUB, RH, TLT and XLP.

Below are Hedgeye analysts’ latest updates on our six current high-conviction long investing ideas and CEO Keith McCullough’s updated levels for each.

 

*We also feature two pieces of content from our research team at the bottom.

Investing Ideas Newsletter  - InvestingIdeas11.14 

Trade :: Trend :: Tail Process - These are three durations over which we analyze investment ideas and themes. Hedgeye has created a process as a way of characterizing our investment ideas and their risk profiles, to fit the investing strategies and preferences of our subscribers.

  • "Trade" is a duration of 3 weeks or less
  • "Trend" is a duration of 3 months or more
  • "Tail" is a duration of 3 years or less

CARTOON OF THE WEEK

Investing Ideas Newsletter  - Moby Yen 11.13.2014

IDEAS UPDATES

TLT | EDV | XLP | MUB

 

More #Quad4 Confirmation

 

  • #Deflation Risk, Revisited: With respect to our CPI model (CLICK HERE to review that methodology), we continue to anticipate disinflation in headline CPI readings over the intermediate term. This would be the case even if commodity prices stopped going down today and remained flat, due to the comparative base effects of #InflationAccelerating in 1H14. Of course, additional commodity price deflation – which our TACRM model continues to imply – would only perpetuate downward concavity in reported inflation; sub-1% YoY CPI readings are very probable over the intermediate term. Since the start of 2008, the CRB Index has declined by a cumulative -43% on a 1-week forward basis when TACRM is generating a “DECREASE Exposure” signal for Commodities as a primary asset class like it is currently.
  • #ConsumerSlowing, Confirmed: Speaking of developing downward concavity, how about domestic consumption growth? Lost amid the perma-bull storytelling about lower gas prices is the fact that Retail Sales growth continues to slow on a trending basis, decelerating from +4.4% YoY in SEP to +4.1% YoY in OCT! Retail Sales accounts for roughly 1/3rd of PCE, which is ~70% of GDP, so as U.S. consumption growth goes, U.S. economic growth goes – in this case, lower!

 

Investing Ideas Newsletter  - 3

 

Investing Ideas Newsletter  - 4

 

Investing Ideas Newsletter  - 5

 

All told, with both growth and inflation slowing, we reiterate our #Quad4 asset allocation of long TLT, MUB, EDV and XLP. We see downside to 1.7% on the 10Y Treasury bond yield over the intermediate term.

HCA

 We sent out a report explaining our position on Friday. Click here to read.

RH 

There’s only one thing that matters right now with Restoration Hardware – and that is next week’s Grand Opening of the new Restoration Hardware Design Gallery in Atlanta.

 

The store, which is in the Buckhead section of Atlanta, was constructed in space formerly occupied by ESPN Zone. It is about 3x the size of existing design galleries, and 7x larger than legacy stores. While one store will not make or break this company, the anecdotes about productivity that come out in the ensuing weeks will be a major focal point for Wall Street.

 

The company reports earnings in the second week of December, and will have quantitative insight as to how the store is performing. They set expectations for $650/square foot once the store is up and running, but we think it will come in well ahead of that. 

 

 

* * * * * * * * * * 

ADDITIONAL RESEARCH CONTENT BELOW

mcdonald's: weak

We continue to stay on the sidelines here... with a bearish bias.

Investing Ideas Newsletter  - 14

oil: supply, supply, supply

After a heavy week of data, both the fundamental picture and behavioral market activity suggest continued downside pressure.

Investing Ideas Newsletter  - 57


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 implied vol

Commodities: Weekly Quant - chart7 sentiment

Commodities: Weekly Quant - chart8 1 mth correls

Commodities: Weekly Quant - chart9 3 mth correls

Commodities: Weekly Quant - chart10 6 mth correls

Commodities: Weekly Quant - chart11 1yr correls

Commodities: Weekly Quant - chart12 3yr correls

 

Ben Ryan 

Analyst


The Best of This Week From Hedgeye

Here's a quick look at some of the top videos, cartoons, market insights and more from Hedgeye this past week.

HEDGEYE TV

Real Conversations: Crisis Coming? Stockman on ‘Likely Global Recession’ 

David Stockman, the outspoken former Reagan budget director and bestselling author of “The Great Deformation,” sits down with Hedgeye CEO Keith McCullough to discuss a number of important subjects in this wide-ranging interview including consequences of what the Fed is currently doing and why a global recession may be in store.

 

EXCERPT | Are Global Central Banks Running Out Of Bullets? A Call with John B. Taylor

This is an excerpt from the Q&A portion of the Hedgeye Macro Team's conference call with Stanford University Professor John B. Taylor. 

Contact sales@hedgeye.com for access to the full call. 

 

COMPLIMENTARY VIDEO | Hedgeye's Morning Macro Call with CEO Keith McCullough 11/12/14

We are pleased to present this complimentary peek behind-the-macro-scenes of Hedgeye's daily Morning Macro Call for institutional subscribers. Watch for a special appearance by retail analyst Brian McGough during the Q&A.

While you're at it... 

 

Click here to subscribe to Hedgeye on YouTube. It takes one second (and it's free).

 

HEDGEYE IN THE MEDIA

Hedgeye CEO Keith McCullough Warns About Bull on Fox Business: Beware of "Rainbows In Puppy Land"

Outspoken Hedgeye CEO Keith McCullough minced no words and pulled zero punches discussing the bull market run on Fox Business' "Opening Bell' Thursday morning, reminding viewers of the 'fetal position' many were in just a month ago.

 

CARTOON

Curious Aliens

The Best of This Week From Hedgeye - Monetarypolicy aliens 11.13.14

Gambling central bankers across the globe are torching their currencies, inflating dangerous bubbles, and threatening markets and economic stability around the world.

 

On The Other Hand

The Best of This Week From Hedgeye - GasPrices drop carsexpensive 11.12.14

On the one hand, gas prices have dropped for 46 straight days to their lowest level in four years.

 

CHART

How 'Bout That Weimar Nikkei!

The Best of This Week From Hedgeye - COD 11.13.14

"[T]hose who were long Japanese stocks for a centrally planned “economic recovery” (i.e. those who were down, in Nikkei terms -10-15% at one point this year before Abe/Kuroda devalued, again)," wrote CEO Keith McCullough in Thursday's Morning Newsletter, "have seen a +20% return from Japan’s October 17th low of 14,532 (as the economy continued to slow). 'So,' call being long Japan (or Germany’s stock market in 1924) for the wrong reasons, a win!"

 

Liquidity Traps = Bearish 

The Best of This Week From Hedgeye - COD liquiditytrap

 

POLL OF THE DAY

Does Russia Pose a Threat to Stocks?

According to its top commander, NATO officials have seen Russian combat troops and military equipment entering Ukraine this week. This comes on the heels of increased tensions between Russia and the West over recent months, including a sharp uptick in Russian fighters and bombers flying missions over Europe. 


Attention Students...

Get The Macro Show and the Early Look now for only $29.95/month – a savings of 57% – with the Hedgeye Student Discount! In addition to those daily macro insights, you'll receive exclusive content tailor-made to augment what you learn in the classroom. Must be a current college or university student to qualify.

The Week Ahead

The Economic Data calendar for the week of the 17th of November through the 21st 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 - 11.14.14 Week Ahead


HCA: Adding Hospital Corporation of America to Investing Ideas

Takeaway: We are adding HCA to Investing Ideas.

Editor's note: We added HCA to Investing Ideas last Friday 11/7. What follows below is our reasoning from our Healthcare Sector Head Tom Tobin.

 

HCA: Adding Hospital Corporation of America to Investing Ideas - 48

 

HCA $90 +

 

We flagged the divergence between High Yield and HCA at the end of September as a reason to take profits, and did just that a week later after being up 72%.  

 

Since then, the stock has corrected approximately -12% on the back of a few sell side downgrades despite strong Q3 earnings. 

 

Key data points that we follow continue to show a positive fundamental environment for hospitals and HCA in particular. We view recent weakness as a buying opportunity, as our model points to continued EBITDA upside versus consensus through 2015 and a stock that can trade north of $90.

 

HCA: Adding Hospital Corporation of America to Investing Ideas - but5

 

Price and Estimates Trending Higher

 

One of the problems we identified with HCA heading into 3Q14 earnings was the strong bias to the long side on both the buyside and sellside.  With a few downgrades, incremental fear from SCOTUS, and a -12% move in the stock, we are far more excited by the name on the long side.  If operating fundamentals excluding ACA continue their modest recovery, consensus EBITDA in 2015 and 2016 look way to low.

 

HCA: Adding Hospital Corporation of America to Investing Ideas - f1

 

HCA Admissions Growth ex-Exchange Strong

Recent concerns among the Hospital names and HCA in particular have centered on the Supreme Court (SCOTUS) review of the legality of subsidy distribution through Federal Exchanges.  We’d make 2 points:

 

1)      Handicapping the SCOTUS outcome is close to impossible and

2)      Under an adverse SCOTUS ruling scenario, the headwind would be modest

 

HCA: Adding Hospital Corporation of America to Investing Ideas - f2

 


Cartoon of the Day: Harpoon

Cartoon of the Day: Harpoon - Moby Yen 11.13.2014

 

Japan’s equivalent of Janet Yellen (his name is Haruhiko Kuroda) essentially said that Hedgeye Macro nailed it on our #GrowthSlowing call and that the Bank of Japan is at a “critical point to overcome deflation.” There’s that word again, #deflation.

 

Forget what 80 TRILLION is in the context of what the Germans did in the 1920s for a second (99% of people in this world don’t get the econ #history lesson anyway) and think about what this Panic Policy in Japan is going to do to the rest of the world’s economics in 2015

 


Hedgeye Statistics

The total percentage of successful long and short trading signals since the inception of Real-Time Alerts in August of 2008.

  • LONG SIGNALS 80.33%
  • SHORT SIGNALS 78.51%
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