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ICI Fund Flow Survey - Defensive Money Funds are Positively Inflecting

Takeaway: Investors pulled capital from both equity and fixed income mutual funds, placing $18 billion into money funds.

Investment Company Institute Mutual Fund Data and ETF Money Flow:

 

Amidst global growth concerns, rising volatility, and sliding markets, net flows into risk assets were negative on both sides of the aisle in the 5 days ending December 10th according to the latest ICI Fund Flow Survey. Total bond funds lost $3.3 billion last week with equity funds also losing an equivalent $3.2 billion. Within the equity fund redemption was a $5.0 billion draw down in domestic stock funds, which makes it 30 of the past 33 weeks with outflow now totaling over $71 billion in domestic stock funds. This data continues to support our cautious stance on shares of T Rowe Price (TROW) and Janus Capital (JNS), especially into the seasonally weakest fourth quarter prints in January (see our JNS and TROW research here). Conversely, investors poured $18 billion into money market funds last week (which have now had $97 billion of inflows in the past 8 weeks), which supports our Best Long Idea for 2015, Federated Investors (FII) (see our FII research here). 

 

ICI Fund Flow Survey - Defensive Money Funds are Positively Inflecting - ICI 1 3

 

In the most recent 5 day period ending December 10th, total equity mutual funds put up net outflows of $3.3 billion according to the Investment Company Institute. The outflow was composed of domestic stock fund withdrawals of $5.0 billion versus the $1.7 billion subscription into international stock funds. The international and domestic equity categories continue to be polarized with international stock funds having inflows in 47 of the past 48 weeks, versus domestic trends which have been very soft with inflow in just 16 of the past 48 weeks. The running year-to-date weekly average for all equity fund flow continues to decline and now settles at a $850 million inflow, well below the $3.1 billion weekly average inflow from 2013. 

 

Fixed income mutual funds put up outflows of $3.3 billion with $4.4 billion of outflows in taxable funds being saved by $1.1 billion of inflows in tax-free funds.  Munis have had a solid run with subscriptions in 47 of the past 48 weeks. The 2014 weekly average for fixed income mutual funds now stands at a $1.0 billion weekly inflow, an improvement from 2013's weekly average outflow of $1.3 billion, but still a pittance of the weekly average of +$5.8 billion in 2012 (our view of the blow off top in bond fund inflow). 

 

Equity ETF results were resilient during the most recent 5 days, offsetting the outflow from equity mutual funds.  Equity ETFs put up a $3.8 billion inflow which is above the 2014 weekly average of a $2.7 billion inflow. Fixed income ETFs however put up a $126 million outflow, below the year-to-date average of $1.0 billion inflow.

 

Mutual fund flow data is collected weekly from the Investment Company Institute (ICI) and represents a survey of 95% of the investment management industry's mutual fund assets. Mutual fund data largely reflects the actions of retail investors. Exchange traded fund (ETF) information is extracted from Bloomberg and is matched to the same weekly reporting schedule as the ICI mutual fund data. According to industry leader Blackrock (BLK), U.S. ETF participation is 60% institutional investors and 40% retail investors.   

 

Most Recent 12 Week Flow in Millions by Mutual Fund Product: Chart data is the most recent 12 weeks from the ICI mutual fund survey and includes the running weekly year-to-date average for 2014 and the weekly quarter-to-date average for 4Q 2014:

 

ICI Fund Flow Survey - Defensive Money Funds are Positively Inflecting - ICI 2

 

ICI Fund Flow Survey - Defensive Money Funds are Positively Inflecting - ICI 3

 

ICI Fund Flow Survey - Defensive Money Funds are Positively Inflecting - ICI 4

 

ICI Fund Flow Survey - Defensive Money Funds are Positively Inflecting - ICI 5

 

ICI Fund Flow Survey - Defensive Money Funds are Positively Inflecting - ICI 6

 

 

Most Recent 12 Week Flow Within Equity and Fixed Income Exchange Traded Funds: Chart data is the most recent 12 weeks from Bloomberg's ETF database (matched to the Wednesday to Wednesday reporting format of the ICI) and the running weekly year-to-date average for 2014 and the weekly quarter-to-date average for 4Q 2014. The third table are the results of the weekly flows into and out of the major market and sector SPDRs:

 

ICI Fund Flow Survey - Defensive Money Funds are Positively Inflecting - ICI 7 2

 

ICI Fund Flow Survey - Defensive Money Funds are Positively Inflecting - ICI 8 2

 

Sector and Asset Class Weekly ETF and Year-to-Date Results: In sector SPDR callouts, the the XLB materials ETF experienced the largest flow on a percentage basis (+7% or +$179 million) with the XLY Consumer discretionary following at a +4% (+$302 million) inflow.

 

ICI Fund Flow Survey - Defensive Money Funds are Positively Inflecting - ICI 9

 

 

Net Results:

 

The net of total equity mutual fund and ETF trends against total bond mutual fund and ETF flows totaled a positive $4.0 billion spread for the week ($563 million of total equity inflow versus the $3.4 billion outflow from fixed income; positive numbers imply greater money flow to stocks; negative numbers imply greater money flow to bonds). The 52 week moving average has been $2.2 billion (more positive money flow to equities), with a 52 week high of $17.7 billion (more positive money flow to equities) and a 52 week low of -$37.5 billion (negative numbers imply more positive money flow to bonds for the week). 

 

 

ICI Fund Flow Survey - Defensive Money Funds are Positively Inflecting - ICI 10

 

Exposures: The weekly data herein is important for the public asset managers with trends in mutual funds and ETFs impacting the companies with the following estimated revenue impact:

 

ICI Fund Flow Survey - Defensive Money Funds are Positively Inflecting - ICI 11 

 

 

 

Jonathan Casteleyn, CFA, CMT 

 

 

 

Joshua Steiner, CFA

 

 


LVS SHORT: REMOVING FROM BEST IDEAS

Takeaway: Given the recent carnage in the name and potential for a relief rally off the sentiment ebb, we’d prefer to move to the sidelines.

We are removing LVS Short from the Hedgeye Best Ideas list.  We’ve been negative on the Macau stocks and LVS since February and acknowledge that signficant risks remain over the intermediate (trend) term.  However, investor sentiment may have bottomed.  We sense potential investors may be chomping at the bit to buy Macau at a perceived discount following the Chinese President’s visit tomorrow and the release of what is generally known to be awful revenue figures for December.  Thus, there appears to be increasing probability of a relief rally in the Macau stocks and while that’s not a great investment thesis, it is enough for us to recommend investors take profits in what has been a profitable short call. 

 

Significant risks are prevalent and we remain significantly below the Street for Q4 and 2015 estimates for LVS and the other Macau stocks.  Stay tuned.


CALL INVITE | STATEMENT ANALYSIS - PUTTING COMPANIES THROUGH A LINGUISTIC POLYGRAPH TEST

“Statement Analysis is the most accurate way of determining if a person is lying in a verbal or written statement. A person cannot give a lengthy deceptive statement without revealing that it is a lie. This is because people's words will betray them.”

-Mark McClish, creator of the Statement Analysis method

 

HOW WE ARE USING STATEMENT ANALYSIS

Reading conference call/Analyst meeting transcripts is a key part of the analyst’s job.  We all use words to define our reality, and our choice of words can be revealing.  The premise of Statement Analysis is that a person’s choice of specific words can reveal when there might be an attempt at deception.  This Statement Analysis exercise looks exclusively at a company’s written and verbal statements.  Using these hidden clues, we can dig deeper into a company’s public pronouncements for signals of potential concerns in a company’s reporting.

 

TIMING OF THE CALL

On December 23 at 11am we will be hosting a conference call on Statement Analysis and how we apply it to our own financial analysis.  On the call will be Mark McClish, creator of the Statement Analysis system and a federal law enforcement official for the past 26 years. We will provide the names of the companies discussed on the day of the call.

 

MARK MCCLISH BIO

In 1990, Mark was promoted to the position of Inspector/Instructor at the U.S. Marshals Service Training Academy located at the Federal Law Enforcement Training Center in Glynco, GA. He taught at the Training Academy for nine years serving as the lead instructor on interviewing techniques. He used this time to study deceptive statements and conduct research on deception. Based on his findings, he created the Statement Analysis techniques for detecting deception in a verbal and written statement. While assigned to the Training Academy Mark was also the lead defensive tactics instructor for the Marshals Service.

 

Mark retired from the Marshals Service in 2009 and started Advanced Interviewing Concepts. His company provides interviewing skills training and assists investigators in analyzing statements.

 

WHAT WE INTEND TO ACCOMPLISH ON THE CALL

On the call we will focus on:

  • Why Statement Analysis is important.
  • Mark’s process and findings.
  • Provide analysis on select companies. 
  • Identify areas within specific corporate releases that bear closer scrutiny, and
  • Compare company comments with their financial statements.

 

The call will last about an hour including time for Q&A.

 

 

Howard Penney

Managing Director

 

Fred Masotta

Analyst


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Statement Analysis - Putting Companies Through a Linguistic Polygraph Test (Correction)

Takeaway: A correction to the date of the call - the call will be held next Tuesday, December 23rd, at 11:00am EST.

Statement Analysis - Putting Companies Through a Linguistic Polygraph Test 


“Statement Analysis is the most accurate way of determining if a person is lying in a verbal or written statement. A person cannot give a lengthy deceptive statement without revealing that it is a lie. This is because people's words will betray them.”

-Mark McClish, creator of the Statement Analysis method

 

HOW WE ARE USING STATEMENT ANALYSIS

Reading conference call/analyst meeting transcripts is a key part of the analyst’s job.    We all use words to define our reality, and our choice of words can be revealing.  The premise of Statement Analysis is that a person’s choice of specific words can reveal when there might be an attempt at deception.  This Statement Analysis exercise looks exclusively at a company’s written and verbal statements.  Using these hidden clues, we can dig deeper into a company’s public pronouncements for signals of potential concerns in a company’s reporting.

 

TIMING OF THE CALL

On December 23rd at 11am we will be hosting a conference call on Statement Analysis and how we apply it to our own financial analysis.  On the call will be Mark McClish, creator of the Statement Analysis system and a federal law enforcement official for the past 26 years. We will provide the names of the companies discussed on the day of the call.

 

MARK MCCLISH BIO

In 1990, Mark was promoted to the position of Inspector/Instructor at the U.S. Marshals Service Training Academy located at the Federal Law Enforcement Training Center in Glynco, GA. He taught at the Training Academy for nine years serving as the lead instructor on interviewing techniques. He used this time to study deceptive statements and conduct research on deception. Based on his findings, he created the Statement Analysis techniques for detecting deception in a verbal and written statement. While assigned to the Training Academy Mark was also the lead defensive tactics instructor for the Marshals Service.

 

Mark retired from the Marshals Service in 2009 and started Advanced Interviewing Concepts. His company provides interviewing skills training and assists investigators in analyzing statements.

 

WHAT WE INTEND TO ACCOMPLISH ON THE CALL

On the call we will focus on:

  • Why Statement Analysis is important.
  • Mark’s process and findings.
  • Provide analysis on select companies. 
  • Identify areas within specific corporate releases that bear closer scrutiny, and
  • Compare company comments with their financial statements.

 

The call will last about an hour including time for Q&A.

 

 

Howard Penney

Managing Director

 

Fred Masotta

Analyst


December 18, 2014

December 18, 2014 - Slide1

 

BULLISH TRENDS

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BEARISH TRENDS

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Call Invite | Statement Analysis - Putting Companies Through a Linguistic Polygraph Test

“Statement Analysis is the most accurate way of determining if a person is lying in a verbal or written statement. A person cannot give a lengthy deceptive statement without revealing that it is a lie. This is because people's words will betray them.” -Mark McClish, creator of the Statement Analysis method

 

HOW WE ARE USING STATEMENT ANALYSIS

Reading conference call/Analyst meeting transcripts is a key part of the analyst’s job.    We all use words to define our reality, and our choice of words can be revealing.  The premise of Statement Analysis is that a person’s choice of specific words can reveal when there might be an attempt at deception.  This Statement Analysis exercise looks exclusively at a company’s written and verbal statements.  Using these hidden clues, we can dig deeper into a company’s public pronouncements for signals of potential concerns in a company’s reporting.

 

TIMING OF THE CALL

On December 22nd at 11am we will be hosting a conference call on Statement analysis and how we apply it to our own financial analysis.  On the call will be Mark McClish, creator of the Statement Analysis system and a federal law enforcement official for the past 26 years. We will provide the names of the companies discussed on the day of the call.

 

MARK MCCLISH BIO

In 1990, Mark was promoted to the position of Inspector/Instructor at the U.S. Marshals Service Training Academy located at the Federal Law Enforcement Training Center in Glynco, GA. He taught at the Training Academy for nine years serving as the lead instructor on interviewing techniques. He used this time to study deceptive statements and conduct research on deception. Based on his findings, he created the Statement Analysis techniques for detecting deception in a verbal and written statement. While assigned to the Training Academy Mark was also the lead defensive tactics instructor for the Marshals Service.

 

Mark retired from the Marshals Service in 2009 and started Advanced Interviewing Concepts. His company provides interviewing skills training and assists investigators in analyzing statements.

 

WHAT WE INTEND TO ACCOMPLISH ON THE CALL

On the call we will focus on:

  • Why Statement analysis is important.
  • Mark’s process and findings.
  • Provide analysis on select companies. 
  • Identify areas within specific corporate releases that bear closer scrutiny, and
  • Compare company comments with their financial statements.

 

The call will last about an hour including time for Q&A.

 

 

Howard Penney

Managing Director

 

Fred Masotta

Analyst


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