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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. 


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

 


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.

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

 


Retail Callouts (11/14): Retail Sales, JWN, TGT, NKE, KATE, WMT, GPS

Takeaway: Retail sales not equal to Dept. Store #s. JWN better than the rest. TGT takes page from WMT playbook. NKE to players: don't mess with kicks.

ECONOMIC DATA

 

Takeaway: A sequential tick up on both the 1 and 2 yr trend lines, though it wasn't reflected in the commentary we've heard from retailers over the past few days. Maybe the answer is as simple as people are buying less of what Department Stores are selling. If that answer works for M and KSS then it's good enough for us.

 

Retail Callouts (11/14): Retail Sales, JWN, TGT, NKE, KATE, WMT, GPS - 11 14 chart1

 

COMPANY HIGHLIGHTS

 

JWN - 3Q14 Earnings

 

Retail Callouts (11/14): Retail Sales, JWN, TGT, NKE, KATE, WMT, GPS - jwn sigma

 

Takeaway: The things that we like about JWN, in a space where we have an overwhelmingly negative view, all looked solid. 3.9% Revenue growth, 5% square footage growth, 22% DTC growth on the full-price banner, and 34% growth in Hautelook/Rack.com. After the week of earnings we've seen across the department store space the top line was all that mattered (+9% reported, ~+8% if you exclude the estimated Trunk Club benefit). But, the earnings algorithm was weak, 9% revenue growth translated into a 5% growth in earnings (ex. Trunk Club dilution EPS growth = 11%). The SIGMA trajectory is punk with inventories growing 15 percentage points ahead of sales and margins declining. That almost always equates to a negative margin event in the short term. We added JWN to the long bench on 10/16, but still aren't comfortable with a name operating  in a space where we think 93mm square feet needs to disappear over the next 5 years.

 

TGT - Target Follows WMT E-comm Acquisition Playbook

(http://www.startribune.com/lifestyle/282538741.html)

 

  • "Powered Analytics' Fabric product uses mobile technology, location data and machine learning to connect a retailer's app to the in-store shopping experience."

Retail Callouts (11/14): Retail Sales, JWN, TGT, NKE, KATE, WMT, GPS - ecomm

 

Takeaway: TGT taking a page out of the WalmartLabs playbook. To keep score - WMT has acquired 15 small tech startups since 2010. Everything from a streaming video service to a recipe and meal planning service. TGT's acquisition strategy has been more company focused to date, i.e. chefs.com and dermstore.com. Maybe none of WMT's deals are homeruns but it has allowed the company to build its digital acumen through the acquisition of people and technology. TGT is way behind on this front and we'd point out has one of the worst dot.com track records in all of retail over the past 8 years.

 

NKE - Nike warns NFLers Not To Mess With Kicks

Retail Callouts (11/14): Retail Sales, JWN, TGT, NKE, KATE, WMT, GPS - nke

 

Takeaway: We don't blame Nike for reinforcing its endorsement policy and protecting its investment. The company is shelling out $220mm per year for the NFL deal on top of what it is paying its endorsees to wear it's gloves/cleats, and pay to wear fees. Players are billboards and that strategy doesn't work if you can't see the swoosh. Maybe the answer is neon colorways à la the London Olympics or the 2014 World Cup - though we doubt the NFL would let that fly.

 

 

OTHER NEWS

 

KATE - Kate Spade Opens 1st West Coast Location

(http://www.retail-insider.com/retail-insider/2014/11/kate-spade)

 

  • "Kate Spade has opened its first West Coast (Canada) store at Park Royal Shopping Centre in West Vancouver. The 2,000 square foot location is in the mall's southern component, called Park Royal South, next to the mall's new Michael Kors store."

 

WMT - Wal-Mart Told Store Managers to Match Online Prices With Amazon

(http://www.wwd.com/retail-news/mass-off-price/wal-mart-told-store-managers-to-match-online-prices-with-amazon-8031791?module=Retail-latest)

 

  • "Greg Foran said the directive was meant to formalize a practice already in place in many stores. 'About half of the stores were doing it anyway,'"

 

GPS - Old Navy Blasted for Higher Cost of Its Women’s Plus-Size Jeans

(http://www.bloomberg.com/news/2014-11-13/old-navy-criticized-for-higher-cost-of-women-s-plus-sized-jeans.html)

 

  • "The petition charges Old Navy with sexism, noting that a pair of women’s plus-size jeans can cost about $15 more than regular jeans, while a pair of men’s jeans costs the same no matter the size."


LULU - Lululemon pushing menswear, expansion

(http://www.fierceretail.com/story/lululemon-pushing-menswear-expansion/2014-11-13)

 

  • "In an effort to boost its menswear sales, Lululemon has begun opening more dual-sex flagship stores. And on Black Friday, the yoga apparel company will open its first men's only store in Manhattan."

 

BABA - Alibaba's boutique shop 11 Main opens doors on mobile

(http://www.usatoday.com/story/tech/personal/2014/11/12/alibaba-11-main-mobile-launch/18909609/)

 

  • "The shopping site 11 Main, which opened on the Web in June, can be browsed on new smartphone apps especially designed for Apple and Android devices. An iPad app will launch this year."

 

AMZN - Hachette Looks Like the Winner as Its War With Amazon Ends

(http://www.businessweek.com/articles/2014-11-13/hachette-looks-like-the-winner-as-war-with-amazon-ends)

 

  • "Hachette Chief Executive Michael Pietsch announced that the book publisher has reached a new multiyear agreement with Amazon.com, ending months of contentious contract negotiations. The deal, which will cover print and e-book distribution, will begin next year."

GLD: Removing Gold from Investing Ideas

Takeaway: We are removing GLD from our high-conviction stock idea list.

We are removing Gold (ETF: GLD) from investing ideas on the bounce within a bearish @Hedgeye TREND (+1%) to step aside from the steamroll that is #QUAD4 deflation.

 

Both gold and oil (the most tightly correlated commodities to the USD) are bearish on an intermediate-term TREND basis vs. the USD in a bullish TREND set-up. The bearish TREND set-up for the Japanese Yen and Euro against the dollar remains intact and are models suggest these large currency moves have even more room to run.

 

GLD: Removing Gold from Investing Ideas - br5

 

With growth setting up to surprise to the downside in the U.S. (which was the set-up which got us into gold on the long-side back in May), deflation’s ugly head (growth slowing and rates moving lower) has more to say over the intermediate-term. Economic data continues to confirm an early cycle slowdown continues with extremely difficult CPI comps even if commodities started going down in Q4 and Q1 2015 (when inflation surprised to the upside) because of the year-over-year comparative basing effect.     

 

 


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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