The Week Ahead

The Economic Data calendar for the week of the 5th of January through the 9th of January 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 - 01.02.15 Week Ahead




Investing Ideas Newsletter

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

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


Please note we added Hologic (HOLX) on Friday.


We feature two additional pieces of content at the bottom.

Investing Ideas Newsletter - levels1 

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


Investing Ideas Newsletter - Ball drop cartoon 12.31.2014




Sticking With the Long Bond to Start 2015


Consistent with our intermediate-term view on the most probable trajectory of both rates and the reported inflation – i.e. lower – we remain bullish on the long bond (in TLT, EDV and MUB terms), as well as on equities with bond-like characteristics (in XLP, XLV and VNQ terms).


As most recently reiterated by today’s Markit and ISM Manufacturing PMI data, domestic economic growth slowed on the margin in 4Q14 and we will continue to receive such #GrowthSlowing data points throughout the month of January:


Investing Ideas Newsletter - dd1


Investing Ideas Newsletter - dd2


Additionally, there remains a 3-SIGMA net SHORT position in 10Y Treasury futures and options contracts; to the extent long-term Treasuries continue to rally, we think there is ample room for mass capitulation in the coming weeks on long-term.


Investing Ideas Newsletter - dd3


In summary, we continue to see ample risk of Consensus Macro having to cover [higher] securities that you already own.


Shares of Restoration Hardware closed 2014 up 43% and we think this name still has legs in the New Year.


We are modeling $2.40 in EPS for the 2014 fiscal year with a 45% EPS CAGR through 2018. At a mid-twenty multiple, that gets us to an RH stock price well over $250 by 2018.


It remains our favorite name in retail.


Investing Ideas Newsletter - rh


We’ve previously mentioned that we believe YUM is vulnerable to activism, but in this week’s addition we seek to provide more detail on why now is an optimal time for change. YUM currently has both internal and external factors working for it. We believe the company is a change, or two, away from unlocking significant shareholder value.


Internal Changes are a Catalyst for Change

  • New CEO beginning in 2015
  • We believe the current CFO is likely more open to changes than the previous CFO
  • In 1Q15, YUM changed its reporting structure to align global operations outside of China and India by brand
  • This change in reporting structure allows for a clean sale or spinoff of brands
  • The new reporting structure also suggests little internal friction to a potential spinoff or sale of brands
  • YUM has been paying down debt and is now underleveraged relative to peers


External Environment Creates Possibilities

  • Restaurant multiples are at all-time highs
  • Restaurant IPOs are being very well-received by investors
  • Global asset-light business models are trading at a premium to the group
  • Significant liquidity in the fixed income markets
  • Significant liquidity in the franchisee finance market
  • It is a great time to be a seller of restaurant assets, especially of strong brands like YUM’s
  • The board needs to address the issue of increased volatility in the Chinese business
  • Gaming companies have successfully issued tracking on their Chinese assets
  • YUM China could be the largest consumer company in China and investor interest would be strong


Regardless of any major changes, upside to YUM shares in 2015 could also be driven by a recovery in China. The street is modeling a turnaround that is, in our view, rather tempered compared to expectations of past recoveries. If China recovers, the stock will take off. If not, we expect an internal or external force to effect change.


There are multiple ways to win here, which is why we continue to like YUM heading into 2015.


Investing Ideas Newsletter - yum


We added Hologic on Friday. Here is the note which accompanied the addition.


* * * * * * * * * * 


ici fund flows: heavy inflow to passive funds

Investors have favored passive over active this year. Passive equity put up its largest inflow in the 52-week period.


Investing Ideas Newsletter - p7

podcast: morning macro call (Friday 1/2)

Hedgeye CEO Keith McCullough walks through the most important macro data on his radar screen and answers key questions from institutional subscribers.

Investing Ideas Newsletter - 5p

Commodities: Weekly Quant

Commodities: Weekly Quant - chart1 divergences

Commodities: Weekly Quant - chart2 deltas

Commodities: Weekly Quant - chart3 usd correls

Commodities: Weekly Quant - chart4 volume

Commodities: Weekly Quant - chart5 open interest

Commodities: Weekly Quant - chart6 volatility

Commodities: Weekly Quant - chart7 sentiment


Ben Ryan




Enter your email address to receive our newsletter of 5 trending market topics. VIEW SAMPLE

By joining our email marketing list you agree to receive marketing emails from Hedgeye. You may unsubscribe at any time by clicking the unsubscribe link in one of the emails.

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.



On December 18, the Hedgeye Retail Team hosted a Black Book call on the athletic apparel and footwear space.  On Wednesday we released this excerpt, in which Sector Head Brian McGough explains how his opinion of athlete endorsements has evolved (which is particularly relevant given $UA's recent signing of Andy Murray) and reveals what Under Armour needs in order to become the next Nike.

This institutional conference call focused on Athletic footwear and apparel space. Specific names included Nike (NKE), Adidas (ADDYY), UnderArmour (UA), Foot Locker (FL), Hibbett (HIBB), Dick's Sporting Goods (DKS), and Finish Line (FINL) - which collectively offer up a good mix of LONGS and SHORTS.







In December our Restaurants Team held a conference call for institutional investors Statement Analysis - Putting Companies Through a Linguistic Polygraph Test with former U.S. Deputy Marshall Mark McClish.


Mark McClish is the author of I Know You Are Lying and the creator of the Statement Analysis method. In this brief excerpt Mark explains how to identify signs of deception and dissects an excerpt from HAIN’s Q1 earnings call as an example.

Reading conference call and 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.



Oil Plunge!

The Best of This Week From Hedgeye - Oil plunge 12.31.14

Oil prices slumped almost 50% in 2014, set for the biggest annual decline since 2008. "It's flat out ugly for whoever is long inflation expectations in Energy terms," says Hedgeye CEO Keith McCullough.



The Sound of Deflation

The Best of This Week From Hedgeye - Deflation balloon 12.29.14

That sound you're hearing around the globe? Deflation.



Real- Time Alerts: Historical Closed Position Return Distribution 

The Best of This Week From Hedgeye - COD RTA 12.30.14


The brief excerpt below is from Tuesday's Morning Newsletter written by Hedgeye U.S. macro analyst Christian Drake.


We’ve #TimeStamped 2,969 signals in Real-Time Alerts since 2008.  The historical data is there to see and download on our website and in the Chart of the Day below we show the return distribution across RTA’s 6+ year history.  In our attempt to further the evolution towards an investing meritocracy, we feel we’ve built a better Risk Management mousetrap. 


As always, you are free to disagree.  We happily accept and consider all (thoughtful) criticism as we work to continually evolve the process.  



2014 Outperformance in Low Beta: #PAIN

The Best of This Week From Hedgeye - COD low beta 1.2.15


This is a brief excerpt from Friday's Morning Newsletter by Hedgeye CEO Keith McCullough.


*  *  *  *  *  *  *

If you’re a U.S. equity only investor, the lower-volatility + higher-absolute-and-relative returns came in mostly slow-growth, lower-beta, #YieldChasing sectors:

  1. Number 1 (within the Top 9 S&P Sectors) for 2014 was Utilities (XLU) at +24.3% YTD
  2. Number 2 for 2014 was Healthcare (XLV) at +23.3% YTD

Yep, instead of being long #deflation (Energy stocks, XLE, DOWN -10.6% YTD), these slower-growth, lower-volatility sectors had similar returns to what? Yep – the Long Bond.



Cartoon of the Day: Ode to Mario

Cartoon of the Day: Ode to Mario - Draghi cartoon 01 02 2015

Mario, Mario, Quite Contrary-O

How Does Your QE Go?

HOLX: Adding Hologic to Investing Ideas

Takeaway: We are adding Hologic to Investing Ideas.

Note: The excerpt below was written earlier this morning by Hedgeye CEO Keith McCullough. Stay tuned for further updates from our Healthcare sector head Tom Tobin.

HOLX: Adding Hologic to Investing Ideas - Hologic Logo RGB

Looking for names that my Research Team likes that are:


1. Bullish intermediate-term TREND duration

2. Immediate-term TRADE oversold within their bullish TREND


Hologic is a name Tom Tobin has liked for a while, but he's also becoming the axe in the name with regards to monitoring the company's key revenue factors using his proprietary process.


In what Tom calls his 3D TOMO Tracker Update (Institutional Research product) of US facilities currently offering 3D Tomosynthesis, month-to-date December placements signaled a break-out quarter after a sharp acceleration in October and slight correction to a still very high rate in November.


We believe we are seeing a sustained acceleration in placements that will likely drive upside to Breast Health throughout FY2015.



the macro show

what smart investors watch to win

Hosted by Hedgeye CEO Keith McCullough at 9:00am ET, this special online broadcast offers smart investors and traders of all stripes the sharpest insights and clearest market analysis available on Wall Street.