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HAIN: Do You Know What You Own?

Takeaway: We’re releasing a Black Book deep dive on HAIN. Dial-in details and materials to follow.

We’re holding a conference call this Thursday, January 22, at 1pm EST to update our short thesis on HAIN.


The call will focus on updated financial performance — which includes slowing trends, compressing margins, and deteriorating returns – since our initial short call. 


We’ll also take a detailed look at the UK business, which we believe is merely a conventional food business rather than an organic one – and should be valued as such.  We’ll hit on several other key points throughout the presentation, all of which indicate the company is severely misunderstood and mispriced.


Our sum-of-the-parts analysis suggests substantial downside.

LEISURE LETTER (01/20/2015)



  • Jan 29:  PENN 4Q CC
  • Feb 2: Cod Manila Grand Opening
  • Feb 3:  GLPI 4Q CC


David Group - closing 3 VIP rooms (Four Seasons, L'Arc, and MGM Macau). The closures allow the company to expand abroad  The three rooms will close on January 31 while the others will continue to operate as usual. In 1Q 2015, David Group will open VIP operations in Manila (Philippines), Da Nang (Vietnam), and Jeju (South Korea) respectively.” 

Takeaway:  David Group will continue to wind down their business in Macau but they are not pulling out.  The operators can use those leftover tables in their new properties.


Resorts World Manila - Phase 3 of Resorts World Manila, owned by Travellers International, will have additional gaming space. There will also be additional hotel capacity in Phases 2 and 3. A total of PHP6 billion (US$134.4 million) of the PHP16.8 billion net proceeds raised by Travellers International in an initial public offering in 2013 had been spent or earmarked for extensions to the Resorts World Manila casino resort as of December 31. A further PHP259.8 million from the IPO proceeds has been set aside for general corporate purposes, added the filing.

Article HERE


MAR - opened more than 46k rooms in 2014. For 2015, company expects more than 1 million rooms open or under development.

Takeaway: MAR's 2014-2017 goals included opening 200-235k new rooms. 2014 new room growth was a slow start but that should pick up in 2015. 


NCLH - Norwegian Getaway will be used as a floating hotel in 2016 in Rio de Janeiro, Brazil 

Article HERE


RCL Royal Caribbean Cruises Ltd. (RCCL) will launch a new Internet-based reservations system for retailers in March called Espresso, its first complete upgrade since it introduced CruiseMatch in 1990. It will be used by all of the RCCL brands, including Royal Caribbean International, Celebrity Cruises and Azamara Club Cruises. Espresso enables agents to compare up to four potential bookings at one time. Espresso will be optimized for mobile phones and tablets, which is important to home agents visiting clients, said Vicki Freed, Royal Caribbean’s senior vice president of sales.

Article HERE


SilverSea -  SilverSea has launched ‘ultra-inclusive' pricing for all Mediterranean cruises this year. For new bookings made on or after 15 January 2015, fares will now include WiFi and shore excursions.

Article HERE

Takeaway: Could 2015 be the year of the add-ons? Many cruise lines are offering them, even luxury ones.


Gaming tax  Secretary for Economy and Finance Lionel Leong Vai Tac said Sunday that the results of the government’s mid-term review on the gaming industry this year would determine if it’s necessary to adjust the gaming tax upon the renewal of the city’s gaming concessions.

Takeaway:  We don't think a gaming tax hike is likely but it does add another thing to worry about.


Gaming task force Macau government announced on Monday the establishment of an interdepartmental task force on the gaming industry. The main goal is to address the issue of potential job layoffs in the sector.  The government however stressed that up to Monday, it had only received one case of workers being laid off by a junket operator.  So far in January, the gaming regulator had received one request from a junket operator to have its licence cancelled. 

Takeaway:  It would be political suicide for any concessionaire to lay off workers. Meanwhile, the junket community may continue to shrink.


S'pore self-barring – Singapore’s National Council on Problem Gaming (NCPG) is to study the feasibility of allowing whole groups of people to apply to be barred from the city’s gaming resorts under the city-state’s casino self-exclusion program.  The groups under consideration are local (i.e., non-foreign) workers and self-identified members of religious groups.


As of end-2014, the number of casino self-exclusions stood at almost 191,000, up by 6.3% QoQ, according to data from NCPG.  Over 90% of casino self-exclusions involved foreigners, according to the council.  

Article HERE


2 new SK casinos – South Korea said it will approve two more casino resorts and the building of around 5,000 new hotel rooms this year, hoping to boost tourism investment by around 3.5 trillion won (S$4.3 billion). The government would choose operators to invest around 1 trillion won each in two integrated resorts with foreigner-only casinos by the 2H 2014 - part of a three-year plan to boost the economy.

Article HERE 


Vietnam approved a $4 billion resort on Phu Quoc Island that would include a casino with 2,000 slot machines and 200-400 roulette tables. In addition, the resort would have conference centers and an international five-star hotel with 3,000 rooms.

Takeaway: A win for the suppliers


Wisconsin Hard Rock – According to WISN-TV, Gov. Scott Walker is close to reaching an agreement with the Menominee Indians to build their $800 million Hard Rock casino in Kenosha. Walker said the "biggest stumbling block" is trying to reach a deal that would not result in the state having to refund $100 million in potential lost revenue to the Potawatomi Tribe if the Kenosha Casino moves forward.

Article HERE 

Takeaway: This would be bad news for the Chicago-area casinos.


China Q4 GDP - 7.4% growth vs consensus of 7.2%


Hedgeye Macro Team remains negative Europe, their bottom-up, qualitative analysis (Growth/Inflation/Policy framework) indicates that the Eurozone is setting up to enter the ugly Quad4 in Q4 (equating to growth decelerates and inflation decelerates) = Europe Slowing.

Takeaway:  European pricing has been a tailwind for CCL and RCL but a negative pivot here looks increasingly likely in 2015.

Keith's Macro Notebook 1/20: Euro | Gold | S&P 500


Hedgeye CEO Keith McCullough shares the top three things in his macro notebook this morning.

investing ideas

Risk Managed Long Term Investing for Pros

Hedgeye CEO Keith McCullough handpicks the “best of the best” long and short ideas delivered to him by our team of over 30 research analysts across myriad sectors.


Takeaway: In today's edition of the Macro Playbook, we analyze the recent breakout in cross-asset volatility through the lens of TACRM.


Long Ideas/Overweight Recommendations

  1. iShares U.S. Home Construction ETF (ITB)
  2. Consumer Staples Select Sector SPDR Fund (XLP)
  3. Health Care Select Sector SPDR Fund (XLV)
  4. PowerShares DB U.S. Dollar Index Bullish Fund (UUP)
  5. iShares 20+ Year Treasury Bond ETF (TLT)
  1. LONG BENCH: Vanguard REIT ETF (VNQ), Utilities Select Sector SPDR Fund (XLU), Vanguard Extended Duration Treasury ETF (EDV)

Short Ideas/Underweight Recommendations

  1. iShares TIPS Bond ETF (TIP)
  2. CurrencyShares Japanese Yen Trust (FXY)
  3. iShares MSCI Emerging Markets ETF (EEM)
  4. Industrial Select Sector SPDR Fund (XLI)
  5. SPDR Barclays High Yield Bond ETF (JNK)
  1. SHORT BENCH: SPDR Oil & Gas Exploration & Production ETF (XOP), CurrencyShares Euro Trust (FXE), WisdomTree Emerging Currency Fund (CEW)



Checking In With TACRM: With the recent bout of cross-asset volatility – e.g. the VIX increased +19.4% WoW to close up +9.1% YTD – we’re sure many investors are incrementally confused about the macro environment. Fortuitously for our subscribers, we have built effective quantitative tools to help investors contextualize what’s happening, why it’s happening and how to take advantage of it in one’s portfolio.


One of those tools is our Tactical Asset Class Rotation Model (TACRM), which is designed to systematically measure momentum across a variety of asset classes in order to transform those signals into actionable investment themes. TACRM does this by generating a normalized view of price momentum for every liquid market in the world. That momentum score is derived from a multi-factor, multi-duration approach, which we have termed a “Volatility-Adjusted Multi-Duration Momentum Indicator” reading, or “VAMDMI” for short.


Recall that this VAMDMI metric is simply the arithmetic mean of three independent z-scores of volume-weighted average price data, in which the three sample sizes (i.e. short-term, intermediate-term and long-term) accordion inversely to the trend in global financial market volatility. The metric is designed to standardize recorded momentum across securities and asset classes with variant betas, effectively normalizing the degree to which marginal investors might have a propensity to buy or sell a given market.


That is definitely a mouthful. What isn’t a mouthful is the analytical color TACRM provides investors. Below, we frame up the current state of macro markets through TACRM’s various analytical lenses, flagging what we deem to be noteworthy (i.e. investable) signals.


At the primary asset class level:


  • Only DM Equities has a bullish “INCREASE Exposure” signal. On a cumulative one-week forward basis since the start of 2008, the MSCI World Index has returned +32.4% when TACRM is generating the aforementioned signal for DM Equities. That compares to a buy-and-hold return of +5.9% over that same time frame.
  • Cash – which is comprised simply of volatility (VXX) and U.S. dollars (UUP) – continues to have the largest Passive Trend Follower Asset Allocation at 36%, which is in the 100th percentile of readings on a TTM basis and in the 95th percentile of readings since the start of 2008. Its “DECREASE Exposure” signal implies one (or both) of these markets will continue to experience a second derivate slowing of VWAP momentum over the intermediate term. A pullback in volatility would obviously auger well for the signal discussed in the previous bullet.
  • Fixed Income & Yield Chasing currently has a “DECREASE Exposure” signal which it has maintained since late-September due to the ongoing break down in foreign-currency denominated debt, domestic high yield debt, curve steepeners and MLPs – which were all in line with our #Quad4 theme.
  • The strength in the other secondary asset classes that make up the Fixed Income & Yield Chasing primary asset class – i.e. Treasuries, munis, Utilities and REITs – is becoming so pervasive that we’d expect it to the push the entire asset class back into “INCREASE Exposure” territory in the coming weeks. Specifically, 47% of the 30 ETFs that comprise this asset class have a VAMDMI reading greater than +1x, which implies a clear trend of positive VWAP momentum across multiple durations.
  • That being said, we don’t need to see an “INCREASE Exposure” signal to be bullish on the appropriate pockets of this (or any other) asset class and we remain bullish on Treasuries (TLT, EDV), munis (MUB), Utilities (XLU) and REITs (VNQ) as outlined above in our thematic investment conclusions.












At the secondary asset class level:


  • We consistently analyze extreme VAMDMI readings to determine if there is a trend developing “underneath the hood” that may be front-running a broader phase transition at the primary asset class level. On this metric, #Quad4 continues to get incrementally priced into global financial markets. Of the top-20 VAMDMI readings, only three of the exposures – i.e. Philippines (EPHE), Indian small-caps (SMIN) and Gold (GLD) – are not consistent outperformers during historical periods of #Quad4. Only one of the bottom-20 VAMDMI readings – i.e. Finland (EFNL) – is not a consistent underperformer during historical periods of #Quad4.
  • In an attempt to take advantage of changing sector and style factor leadership, we consistently analyze extreme VAMDMI readings within the U.S. equity market as well, often looking for a pattern of leadership and/or laggardship that rhymes with one of our GIP Model quadrants. On this metric, #Quad4 continues to dominate as well.
  • Specifically, across the 47 sectors and style factors we track in the domestic equity market, #Quad4 outperformers account for 8 of the highest 10 VAMDMI readings: REITs (VNQ), Utilities (XLU), Healthcare (IHE, IBB, XLV IHI), Consumer Staples (XLP) and mega caps (USMV). Additionally, #Quad4 underperformers account for 9 of the lowest 10 VAMDMI readings: Financials (KRE, IAI, KIE, XLF), Energy (XLE, AMLP, IEZ, XOP) and Basic Materials (XLB).
  • All told, our patience in sticking with our #Quad4 trade continues to pay off amid incessant calls to adopt a more offensive asset allocation strategy heading into a likely #Quad1 setup in 1Q15. It’s a great long/short market for discretionary macro investors that possess a repeatable process to take advantage of!
  • Lastly, TACRM is generating a “BUY” signal for both Gold (GLD) and Silver (SLV). As we highlighted in last Friday’s Macro Playbook, we haven’t yet found a fundamental reason to like the precious metals complex, but we’re happy to make one up because that’s what the market is telling us to do. Gold is resoundingly bullish on our price/volume/volatility quantitative factoring as well, meaning we are looking to buy the metal on pullbacks – irrespective of our view on the U.S. dollar, which may change as the rate of change in the domestic labor market negatively inflects. Stay tuned.








Net-net-net-net-net, with the exception of the breakout in the precious metals, nothing has really changed. That being said, however, the precious metals complex is definitely the most important thing to watch, on the margin, as it relates to its signaling capability regarding G-3 monetary policy, which itself continues to be the primary driver of dispersion among asset class returns.


Please click on the following link to review the various explanations associated with the aforementioned analyses; the model is refreshed daily to the extent you find the aforementioned signals helpful. Send us an email if you’d like to dig in further. Best of luck out there this week!


***CLICK HERE to download the full TACRM presentation.***



Global #Deflation: Amidst a backdrop of secular stagnation across developed economies, we continue to think cyclical forces (namely #StrongDollar driven commodity price deflation) will drag down reported inflation readings globally over the intermediate term. That is likely to weigh heavily upon long-term interest rates in the developed world, underpinning our bullish outlook for U.S. Treasury bonds.


EARLY LOOK: Climbing the Wall (1/16)


#Quad414: After DEC and Q4 (2014) data slows, in Q1 of 2015 we think growth in the US is likely to accelerate from 4Q, aided by base effects and a broad-based pickup in real discretionary income. We do not, however, think such a pickup is sustainable, as we foresee another #Quad4 setup for the 2nd quarter. Risk managing these turns at the sector and style factor level will be the key to generating alpha in the U.S. equity market in 1H15.


The Hedgeye Macro Playbook (1/16)


Long #Housing?: The collective impact of rising rates, severe weather, waning investor interest, decelerating HPI, and tighter credit capsized housing in 2014.  2015 is setting up as the obverse with demand improving, the credit box opening and 2nd derivative price and volume trends beginning to inflect positively against progressively easier comps. We'll review the current dynamics and discuss whether the stage is set for a transition from under to outperformance for the complex.


HOUSING: Purchase Demand | Post-Holiday Deluge (1/14)


Best of luck out there,




Darius Dale

Associate: Macro Team


About the Hedgeye Macro Playbook

The Hedgeye Macro Playbook aspires to present investors with the robust quantitative signals, well-researched investment themes and actionable ETF recommendations required to dynamically allocate assets and front-run regime changes across global financial markets. The securities highlighted above represent our top ten investment recommendations based on our active macro themes, which themselves stem from our proprietary four-quadrant Growth/Inflation/Policy (GIP) framework. The securities are ranked according to our calculus of the immediate-term risk/reward of going long or short at the prior closing price, which itself is based on our proprietary analysis of price, volume and volatility trends. Effectively, it is a dynamic ranking of the order in which we’d buy or sell the securities today – keeping in mind that we have equal conviction in each security from an intermediate-term absolute return perspective. 

Post-MLK Day Mashup: SBUX, MCD On Tap

Post-MLK Day Mashup: SBUX, MCD On Tap - 1


Recent Notes

01/12/15 Monday Mashup: Changes to Our Investment Ideas List

01/15/15 Select Long/Short Updates


Events This Week

Tuesday, January 20th

  • Jefferies Winter Consumer Summit: ZOES, NDLS, LOCO

Wednesday, January 21st

  • Jefferies Winter Consumer Summit: BJRI, RUTH, FRSH, CHUY

Thursday, January 22nd

  • SBUX earnings call 5:00pm EST

Friday, January 23rd

  • MCD earnings call 11:00am EST


Chart of the Day

Post-MLK Day Mashup: SBUX, MCD On Tap - 2


Recent News Flow

Monday, January 12th

  • DNKN announced that in 2014 its franchisees open up 422 net new Dunkin' Donuts and Baskin-Robbins units and guided to 410-440 net new units in 2015.
  • KKD reaffirmed FY15 adjusted EPS of $0.69-0.74 and guided to FY16 adjusted EPS of $0.79-0.85, below the $0.86 the street was looking for.
  • CHUY released preliminary fourth quarter results, announcing that same-store sales increased 3.8% during the period.  The company also reaffirmed its 2014 diluted EPS guidance range of $0.67-0.69, implying $0.12-0.14 diluted EPS in 4Q14.
  • PLKI released preliminary FY14 results which included 6.2% global same-store sales growth, 201 global new restaurant openings, and 148 global net restaurants.  They also announced that global same-store sales grew 9.8% in the fourth quarter.
  • JMBA announced that it is deploying software from ArrowStream, a leading SaaS provider for food service supply chains to optimize the company's spend programs and partnerships.  The relationship between the two is expected to enhance and simplify Jamba Juice's supply chain processes and result in cost savings.
  • TXRH CFO Price Cooper resigned to become CFO at Krispy Kreme.

Tuesday, January 13th

  • FRGI promoted IT veteran Ryan Nowlin to vice president - information technology.  Nowlin, who has been with FRGI since 2012, is responsible for the company's entire IT structure.
  • JMBA agreed to appoint James C Pappas, Managing Member of JCP Investment Management, and Glenn W. Welling, Managing Member and CIO of England Capital LLC, to its Board of Directors, effective immediately.


Sector Performance

The SPX (-1.2%) outperformed the XLY (-1.7%) last week.

Post-MLK Day Mashup: SBUX, MCD On Tap - 3


Post-MLK Day Mashup: SBUX, MCD On Tap - 4


XLY Quantitative Setup

Post-MLK Day Mashup: SBUX, MCD On Tap - 5


Casual Dining Restaurants

Post-MLK Day Mashup: SBUX, MCD On Tap - 6


Post-MLK Day Mashup: SBUX, MCD On Tap - 7


Quick Service Restaurants

Post-MLK Day Mashup: SBUX, MCD On Tap - 8


Post-MLK Day Mashup: SBUX, MCD On Tap - 9

Hedging the Storm in Energy

Hedging the Storm in Energy - Marketing ImageVF


Hedgeye’s Macro and Energy teams will host a guest speaker call TOMORROW (Wednesday, January 21st at 1p.m. EST) to discuss current trends in and implications of the commodity hedging practices of US E&Ps, natural gas processors, and various industrial commodity consumers.


The call will feature Wayne Penello and Andy Furman of Risked Revenue Energy Associates (“R^2”).  R^2 is an independent hedge advisor serving E&P companies, midstream service providers, and large consumers.  Wayne Penello is the President and Founder of R^2, and has 30 years of experience in commodity options trading, market-making, and asset management.  Andy Furman has 25 years of experience in energy trading and is an expert at valuing and trading options.


Topics for Discussion:

  • Overview of R^2’s services, clients, and proprietary risk management systems;
  • The mechanics of entering into a commodity hedge;
  • Assessment of current industry hedge positions;
  • R^2’s commodity price outlook for crude oil, natural gas, and NGLs;
  • Client psychology – what E&Ps are currently thinking and doing in the oil, gas, and NGL markets;
  • Likely result of borrowing-base determinations from financial institutions;
  • The challenge and opportunity in hedging NGLs;
  • And more…


About Risked Revenue Energy Associates:

R^2 is a consultant and market agent in the energy space serving upstream, midstream, and end users of energy-related commodities (including private equity interests).  R^2 brings over 150 years of experience including but not limited to market-making, trading, asset management, and industry expertise. The firm utilizes a patented risk management strategy to help implement and stress test a company’s hedge book, leverage, and cash flows, among a long list of other metrics under various scenarios. R^2 suggests the most relevant hedging strategies and negotiates/executes on behalf of their clients on a daily basis.


Wayne Penello is the President and Founder of R^2. He has 30 years of market-making, option trading and asset management experience in the energy industry. Mr. Penello began his career on the New York Mercantile Exchange, where he was a market maker and served as Ring Chairman of options trading. Subsequently, he held positions managing globally distributed energy assets for Vitol S.A., Vitol U.S.A., Tenneco Gas Marketing and Torch Energy. Mr. Penello was formerly a research scientist. He holds a Masters degree in Marine Sciences from Stony Brook University and an undergraduate degree in Marine Biology from Southampton College.


Andy Furman was co-founder and CEO of Atlantic Capital Consultants, an options market-making firm on the NYMEX from 1987 – 2001. After leaving the NYMEX trading floor in 2001, Mr. Furman traded for hedge funds. Most recently he held the position of Managing Director for Hudson Capital Group, LLC where as Manager and Trader for Energy Futures and Options he used spread arbitrage and option strategies to achieve consistent profitability. Mr. Furman holds a Bachelor of Science degree in Chemical Engineering from MIT.


Macro Team


Early Look

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