If You Do Macro You Won't Do These Stocks

We as a firm are concerned. We have the strongest macro call on the Street, in my opinion, but it's not positive. If you know anything about lodging you know that RevPAR is a function of supply and demand and demand is driven by Macro.
  • I'm not just worried about GDP. This time around the lodging beta could be significantly higher than the typical 1.0. Airline capacity is declining and airfares are going up. About time if you are an airline but clearly not good for the hotel industry. It might be time to invest in video conferencing finally, but probably not the time for lodging stocks. There is no RevPAR story, not here, not globally. As far as I can see the only growth story is global brand penetration driving new units. While certainly an investable story, it is a long term thesis. The near and intermediate story may be margins. We can argue about where the economy is heading but history shows us that margins have a long way to fall should we hit a downturn. As the chart displays, margins fell by a whopping 850 bps during the last downturn (2000 to 2002). Applying that margin degradation to the most recent revenues posted by the big four lodging companies results in an average EBITDA hit of 45%.
  • We don't want to be all gloom and doom. The demand for international branded hotel product appears insatiable. We see Marriott and Hilton as the primary beneficiaries although Starwood should capitalize as well. The supply situation is favorable domestically and more fee based business models could soften the economic blow. However, estimates look like they need to come down, potentially in a big way. In other words, as we like to say at Research Edge: Investors are not bearish enough.

Did the US Economy Just “Collapse”? "Worst Personal Spending Since 2009"?

This is a brief note written by Hedgeye U.S. Macro analyst Christian Drake on 4/28 dispelling media reporting that “US GDP collapses to 0.7%, the lowest number in three years with the worst personal spending since 2009.”

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7 Tweets Summing Up What You Need to Know About Today's GDP Report

"There's a tremendous opportunity to educate people in our profession on how GDP is stated and projected," Hedgeye CEO Keith McCullough wrote today. Here's everything you need to know about today's GDP report.

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Cartoon of the Day: Crash Test Bear

In the past six months, U.S. stock indices are up between +12% and +18%.

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GOLD: A Deep Dive on What’s Next with a Top Commodities Strategist

“If you saved in gold over the past 20 to 25 years rather than any currency anywhere in the world, gold has outperformed all these currencies,” says Stefan Wieler, Vice President of Goldmoney in this edition of Real Conversations.

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Exact Sciences Up +24% This Week... What's Next? | $EXAS

We remain long Exact Sciences in the Hedgeye Healthcare Position Monitor.

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Inside the Atlanta Fed's Flawed GDP Tracker

"The Atlanta Fed’s GDPNowcast model, while useful at amalgamating investor consensus on one singular GDP estimate for any given quarter, is certainly not the end-all-be-all of forecasting U.S. GDP," writes Hedgeye Senior Macro analyst Darius Dale.

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Cartoon of the Day: Acrophobia

"Most people who are making a ton of money right now are focused on growth companies seeing accelerations," Hedgeye CEO Keith McCullough wrote in today's Early Look. "That’s what happens in Quad 1."

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People's Bank of China Spins China’s Bad-Loan Data

PBoC Deputy Governor Yi says China's non-performing loan problem has “pretty much stabilized." "Yi is spinning. China’s bad-debt problem remains serious," write Benn Steil and Emma Smith, Council on Foreign Relations.

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UnderArmour: 'I Am Much More Bearish Than I Was 3 Hours Ago'

“The consumer has a short memory.” Yes, Plank actually said this," writes Hedgeye Retail analyst Brian McGough. "Last time I heard such arrogance was Ron Johnson."

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Buffalo Wild Wings: Complacency & Lack of Leadership (by Howard Penney)

"Buffalo Wild Wings has been plagued by complacency and a continued lack of adequate leadership," writes Hedgeye Restaurants analyst Howard Penney.

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Todd Jordan on Las Vegas Sands Earnings

"The quarter actually beat lowered expectations. Overall, the mass segment performed well although base mass lagging is a concern," writes Hedgeye Gaming, Lodging & Leisure analyst Todd Jordan on Las Vegas Sands.

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An Update on Defense Spending by Lt. Gen Emo Gardner

"Congress' FY17 omnibus appropriation will fully fund the Pentagon's original budget request plus $15B of its $30B supplemental request," writes Hedgeye Potomac Defense Policy analyst Lt. Gen Emerson "Emo" Gardner USMC Ret.

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