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CAT: Removing Short CAT From Best Ideas List, Would Hold Some Short Exposure Through 10-K Release

 

“Skeptical of Oil & Gas Capital Spending…Energy-related capital spending looks like ‘mining capital spending-lite’”

 

– Hedgeye Industrials 4/21/2014 CAT: Defining Differences & The Segment Formerly Known As Power Systems

 

 

Overview


Given the convergence of 2015 guidance and our estimate range, one of the primary downside catalysts has been realized in our CAT thesis.  The pull-back in the "resources capital spending tide" is better recognized now (to see slides from earlier CAT calls, CLICK HERE, or CLICK HERE, or CLICK HERE etc).  The lower guide may be a bit of a near-term ‘cover the news event’.

 

We are trying to use the Best Ideas list better; we view it as a signal for where we think it is worth initiating positions and spending research time

 

We would stay short some CAT through the mid-February release of the firm’s 10-K.  The 10-K should update such interesting items as the SEC investigation and credit exposures at CAT Financial (Textron-lite?).  CAT really does have some dicey exposures at CAT Financial, but, as we wrote yesterday, it will take some time for those to play out.  We may add CAT back to the list, but for now we don’t want to press current relative lows.  We may be getting too cute, but its hard to control 'position size' in a research note.

 

CAT: Removing Short CAT From Best Ideas List, Would Hold Some Short Exposure Through 10-K Release - CAT 1

 


Cartoon of the Day: Earnings? U-G-L-Y

Cartoon of the Day: Earnings? U-G-L-Y - earnings cartoon 01.27.2015

"The mainstream financial media and sell-side wants to talk about anything besides earnings right now," Hedgeye CEO Keith McCullough wrote this morning. "It's the worst start to an EPS season in six years."


BUYING GOLD INTO FOMC

Takeaway: Dollar Down, Rates Down = #StrongGold

Gold tested and confirmed its BEARISH to BULLISH TREND reversal, and we sent out the buy signal today in GLD (10:28 a.m. at $124.00) to our real-time alerts subscribers for a trade into the FOMC announcement tomorrow afternoon. We will continue to manage this exposure with a BULLISH intermediate-term TREND bias. Stay tuned for updates on this trade.

 

GLD Risk Management Levels:

  • BUY TRADE = $119.51
  • SELL TRADE = $127.34
  • BUY TREND (BULLISH) = $118.69

BUYING GOLD INTO FOMC - Levels Chart

 

With the continued deterioration in U.S. economic data, we believe there is a probability Yellen’s language will be interpreted by the market as more dovish than her previous path as she attempts fight the pain of global deflation within the fed framework.  

One of the last Q4 data points, A durable goods orders print this morning, showed a large sequential deceleration of -3.4% in December. The number was slightly positive on a year-over-year basis, the general TREND since we moved into QUAD#4 reeks #deflation, which we fully expect to be a big talking point tomorrow.

 

BUYING GOLD INTO FOMC - chart2 durable goods

 

Yellen will anchor on 1) deflationary headwinds and 2) the recent deterioration in the labor market in tomorrow’s speech.

A more dovish policy path could be perpetuated with a GDP miss on Friday (which we model as more likely than not with a very difficult Q4 comp on a year-over-year basis). Under this scenario pressure on the dollar should bode well against a long gold position for a TRADE. Please reach out with any questions.

 

Ben Ryan

Analyst

  


Early Look

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Relied upon by big institutional and individual investors across the world, this granular morning newsletter distills the latest and most vital market developments and insures that you are always in the know.

Retail Callouts (1/27): ICSC, Global ecommerce, FAST, GME, NKE

Takeaway: Apparel and Footwear global e-commerce snapshot. ICSC - current weather not helping against the easiest comp of the year.

EVENTS TO WATCH

Retail Callouts (1/27): ICSC, Global ecommerce, FAST, GME, NKE - 1 27 chart2

 

 

ECONOMIC DATA

 

Takeaway: Nothing big to call out from this weeks data point. The 2.6% comp was a slight acceleration on the 2yr trend line - up 20bps. What struck us as we looked at the chart this morning was the upcoming week 5 comp, which was the first flat reading in the ICSC since Feb. 2010. As we sit here in CT in the midst of a state wide travel ban retailers must deal with mother nature once again. Not a great set-up for a blowout week.

 Retail Callouts (1/27): ICSC, Global ecommerce, FAST, GME, NKE - 1 27 chart1

 

 

HIGHLIGHTS

 

E-Commerce Market Comparison 

 

Takeaway: We ran our own consumer survey in late December to gauge what the landscape looked like across 19 different subsectors of retail. We've presented just a fraction of the findings - focused primarily on the Athletic Space in our Athletic Black Book and Foot Locker Calls. We'll dig into the entire space in much more detail when we release our E-Commerce Black Book.

 

We thought this was an interesting look at the global apparel and footwear market.

 

  1. The first graphic shows the top 10 countries ranked by 2013 revenue totals. The growth numbers across the board are pretty remarkable. The US and Japan were the slowest growers, but were also the most mature markets in 2008.
  2. China has been on an absolute tear with a 5yr CAGR of 180%. The total sales number is now on par with the US from a base of zero and penetration is now higher than the US. That's an amazing combination of consumer adoption and systems integration.
  3. The 5 most penetrated markets are now: UK, China, US, France, and Germany. Graphic 2 shows the Global heat map.

Apparel & Footwear E-Commerce Sales

Retail Callouts (1/27): ICSC, Global ecommerce, FAST, GME, NKE - 1 27 chart4

 

Global Heat Map - Apparel and Footwear E-commerce penetration

Retail Callouts (1/27): ICSC, Global ecommerce, FAST, GME, NKE - 1 27 chart5

Source: Euromonitor

 

OTHER NEWS

 

SHLD - Sears Canada Names Boire as CEO

(http://www.wwd.com/business-news/human-resources/sears-canada-names-boire-as-ceo-8145452?module=hp-topstories)

 

FAST Retail - Uniqlo Enters Canadian Market

(http://www.wwd.com/retail-news/department-stores/uniqlo-enters-canadian-market-8145448?module=Retail-latest)

 

MAT - Mattel Names Christopher Sinclair as Chairman and Interim Chief Executive Officer

(http://news.mattel.com/News/Mattel-Names-Christopher-Sinclair-as-Chairman-and-Interim-Chief-Executive-Officer-42c.aspx)

 

Sports Authority names former Pep Boys exec as chief marketing officer

(http://www.chainstoreage.com/article/sports-authority-names-former-pep-boys-exec-chief-marketing-officer)

 

GME - GameStop launches tax refund program

(http://www.chainstoreage.com/article/gamestop-launches-tax-refund-program)

 

NKE - Nike signs major sports deal with Xavier

(http://www.bizjournals.com/cincinnati/news/2015/01/26/nike-signs-major-sports-deal-with-cincinnati.html?ana=yahoo)

 

 


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As stocks get hit hard today, Hedgeye CEO Keith McCullough explains to Fox Business “Opening Bell” host Maria Bartiromo what’s behind the market volatility and selloff.


Keith's Macro Notebook 1/27: #Deflation | UST 10YR | Earnings

 

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


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