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Shuffle Master (SHFL): Buying some...

The stock is down -83% from where some of the "smart" hedge fund guys would pitch it to me as a long at "idea dinners" in 2006, and at 20% of the float, short interest continues to build to a level where the same hedge fund community now thinks "its a short to zero".

Additionally, 78% of the sell side's ratings on SHFL are now Hold/Underweight/Sell. In September of 06', according to Factset, 75% of the ratings were Buy + OverWeight!

My Partner, Todd Jordan, has edge here, and we don't think it's a zero. Buying it in the $5.91-$6.26 range is where I'd get more aggressive, but I bought 1/3 of a position in my fund today.
KM


(Chart courtesy of stockcharts.com)

Indian "Schemes"

Sandeep Singh, from the Hindustan Times wrote a great article today outlining the mathematical reality that 2 of 3 funds in India have delivered below 1% returns over the last 12 months.

While these returns are not funny, the language he uses is. Indians like calling investment funds "schemes". Maybe that's because thats what they, like tulips, turned out to be!

Singh highlights that "of the 170 equity schemes that have been in existence for more than a year, only 18 schemes (around 10 per cent) delivered returns of more than 10 per cent. Only a third of the schemes have outperformed Sensex which itself has grown by a mere 1.1 per cent over the past one year."

*Full Disclosure: I recently covered my short position in IFN.
KM

Copper Update: Confusion Continues...

Today the Chinese Government flipped us over on our back again by providing more politically massaged "data", this time signaling decreasing copper demand.

The custom office reported May refined copper imports of 94,196 tons. Imported supplies are down -26% from the prior month. Copper futures sold off -0.5% today.

Below is a chart of copper prices/Chinese import data.

Andrew Barber
Director
Research Edge

Hedgeye Statistics

The total percentage of successful long and short trading signals since the inception of Real-Time Alerts in August of 2008.

  • LONG SIGNALS 80.64%
  • SHORT SIGNALS 78.61%

Quote of the Day from the Head of Goldman's Quant Investments

Actually, according to Bloomberg's Tom Cahill, Goldman's Robert Litterman, (head of GS quant investments) said this at the GAIM Conference in Monaco on June 19th. Thankfully, I was not chasing "hedgies" around at this conference, so I am happy to take this quote on time delay...

"We couldn't get out and if we had it would have made it worse. We had to ride it out.'' -Bloomberg Article, June 24 ("Goldman's Global Alpha Fund Gains After 2007 Plunge")

Anyone remember 1987? Buler?

Liquidity remains one of the many reasons why the US stock market can bounce for a "Trade", but remains in a downward bear market "Trend".
KM

HSY - Milton could not possibly have seen the world as it is today

As I understand it, Milton Hershey left instructions to fund his charity "in perpetuity." As a result, the Hershey Trust takes the long-term view and doesn't factor in the in the daily ebbs and flows of the company and the market place. I'm reading between the lines of some recent statements made by members of the Hershey Trust.

How about looking at the past 30 years and the changes in the competitive landscape, which have make Hershey a niche player in the global confectionery market. Hershey competes against some of the strongest food and confectionery companies in the world. And the competition is only getting stronger following the recent merger of Mars-Wrigley and Cadbury's decision to focus on its core business. Also lurking are Nestle and Kraft Foods, who just love the fact that Hershey is in such disarray.

I don't think Milton Hershey would be very happy to see the mess his company is in. If he only knew that his company had become such an American Icon only to then be potentially destroyed by political pressures and archaic thinking. Today, the State of Pennsylvania claims a special relationship with the Hershey Trust, since it regulates charities. As a result, the trust can stand behind management mediocrity, citing Milton Hershey's intentions and state laws as a reason not to sell the company.

Hershey's competitors are adapting to the global nature of the confectionery business while Hershey is standing still. Although the company's new vision, which was revealed last week, is headed in the right direction, it will not create significant value for the trust or more importantly, shareholders. The U.S. confectionery business is not growing and the competition is tough and will not cede market share to anybody. So competitively, Hershey is in a position of weakness and does not hold a very good hand. The only way out is through a deal with Kraft, as the uproar that would be felt in Hershey, PA if a foreign firm bought Hershey would make such a deal nearly impossible. If Kraft were to buy a controlling stake in the company, the trust could get a couple of board seats, Milton's charity would be funded in perpetuity and the people of Hershey, PA would be happy.

The longer this goes on the worse it becomes for the trust and the people of Hershey, PA.


Marking American Net Wealth to Market...

The Case/Shiller house pricing index was released today for the month of April at -15.3% year over year. Of course, now it's June, and we can tell you that the homes that have been sold have been marked to market lower sequentially. Marking to model doesn't do anyone any good.

When we look back on 2007-2008, we are going to remember this as a time when we saw the largest collective losses in American equity and real estate portfolio's ever.

No, this is not good, and even though I got lucky buying this US market for a "Trade" this morning, it certainly doesn't change the fundamental negative "Trend" lower that will be perpetuated by this two track depreciation in American net wealth.
KM

(Picture:http://www.libertyfilmfestival.com/libertas/wp-content/uploads/2007/11/american-flag-2a.jpg)

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