Hedgeye's Healthcare Sector Head Tom Tobin and Analyst Andrew Freedman discussed what they will be looking for in this weeks Jobs Report as it relates to their favorite names in Healthcare. Tom and Andrew also hit on recent events within the sector and answered questions from viewers live.
In this brief excerpt from today’s edition of The Macro Show (click here for full replay), Hedgeye CEO Keith McCullough reviews his latest S&P 500 levels and discusses the illegal practice of managers marking up their books into month’s end.
Editor’s Note: Below is an email Hedgeye CEO Keith McCullough sent to Fox Business anchor Maria Bartiromo and her show’s producers last Friday morning before his appearance on “Opening Bell.” Incidentally, one of our biggest recent calls, long Housing (ITB), is up almost 5% versus the S&P 500 since we added it to Investing Ideas on March 4th. Images added.
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This morning it’s back to business with what I think is the best way to be positioned right now:
Long US Dollars (UUP)
Long long-term Treasuries (TLT)
Long US Housing (ITB)
Long US Consumption and Healthcare stocks (XLY and XLV)
Short Commodities and their related stocks/bonds (OIL and XOP)
Ultimately this is the long and short of being positioned for our top Global Macro Theme in Q1 of 2015, Global #Deflation (yes, there are plenty of ways to be uber LONG of the bearish theme – because it’s only bearish for those who are long inflation expectations).
Lots to talk about including another slow GDP print. Looking forward to being with you,
Keith R. McCullough
Chief Executive Officer
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Takeaway: KSS health and fitness announcement. WMT Canada removes free shipping. Weekly chain store sales mild as comps get tougher.
To see our note Retail – Our 2015 Quarterly Playbook please CLICK HERE
KSS - Kohl’s Delivers New Active and Wellness Solutions to Families Nationwide
Takeaway: KSS put out a fancy press release this morning outlining its new health and fitness initiatives. Most of which the company has been talking about for some time. But, let's keep the new launches in perspective. KSS, like most retailers, adds new brands to its arsenal every year, and it cycles out the unproductive ones. The brands associated with this year's fitness flavor -- Nike, Adidas, Asics -- are much more likely traffic drivers, but they are also brands KSS has carried for years. Yes, the floor allocations will probably march higher as KSS tries to catch up to the competition in its athletic/sportswear offering. But, we think it's important to remember that a) these national brands come in at a lower gross margin, and b) as e-comm becomes a bigger part of the puzzle the need to compete on price and or shipping $ becomes even more important.
WMT, TGT, AMZN - Wal-Mart Canada to drop unlimited free shipping as competition eases
Takeaway: 1) This is genius. WMT moved to free shipping in 2013 to compete with the TGT openings in Canada. Now as Target is set to close its final doors in Canada, WMT hikes rates back up because it can. It's what everyone fears (I guess 'everyone' here would refer to regulators) AMZN will do in the US. 2) This is an interesting case study for US retail where the gamesmanship online is just heating up. AMZN has forever set the pace for the industry when it comes to shipping hurdles, but TGT made a market share place by dropping it's free shipping from $50 to $25 earlier this year. We expect more retailers to use this an offensive weapon, forcing the rest of the industry into free shipping and returns all day every day. The interim move to Free Shipping should be felt by the retailers in 2H15.
WEEKLY RETAIL SALES (ICSC -- 80 General Merchandise Stores)
Takeaway: Today we're looking at about 3% growth -- on top of a very easy (sub 1%) week last year. The important takeaway is that as March comes to a close, sales comps for the rest of the year get very difficult. Heading into 2Q, growth normalizes – this should be the most ‘normal’ of all the quarters through the year. If you want to see what a company like KSS, M or RL is really capable of, this should be it (we can’t wait). It should also be a quarter where reported earnings growth decelerates by at least 500bp to the high single digits.
ICON - Iconix CFO Resignation
KER - Puma and FIGC Sign New Deal
WMT - Wal-Mart Hits Back in Converse Case
GPS - Banana Republic Unveils New-Look Flagship
Takeaway: Domestic equity mutual funds go into net redemption for 2015; Equity ETFs have a banner week.
This note was originally published March 26, 2015 at 08:38 in Financials
Investment Company Institute Mutual Fund Data and ETF Money Flow:
Domestic equity mutual fund flows exhibited accelerating weakness with a -$1.8 billion outflow for the 5 day period ending March 18th. This now wipes out the slight running year-to-date gain that had marked the first 10 weeks of '15 when including the latest data. In comparison, the first 11 weeks of 2014 totaled a +$15.0 billion inflow displaying the stark differences setting up for domestic equity fund managers this year, with now a -$933 million total for the first 11 weeks of 2015. We continue to flag that shares of T. Rowe Price will bear the brunt of these weak equity domestic fund trends, and the stock remains on our Best Ideas list as a Short/Avoid. (See our latest TROW research.)
Another recent theme making itself especially apparent, is favoritism for passive products over active management. While total equity and bond mutual funds took in +$1.9 billion and +$449 million respectively last week, passive equity ETFs had their biggest week of the year with +$21.9 billion in inflows, and passive bond ETFs took in a healthy +$2.8 billion. As outlined in our sector exposure table at the bottom of this note, BlackRock (BLK) and Invesco (IVZ) house the most substantial ETF exposure on a revenue basis at 44% and 19% respectively. Repeating last year's behavior, both stocks year-to-date have out performed the S&P asset management index with BLK returning +3.8% and IVZ up +4.2%. The asset management group is down -0.2% thus far in 2015.
In the most recent 5 day period ending March 18th, total equity mutual funds put up net inflows of +$1.95 billion according to the Investment Company Institute, exceeding the year-to-date weekly average inflow of +$1.84 billion and the 2014 average inflow of +$620 million. The inflow was composed of international stock fund contributions of +$3.7 billion and domestic stock fund withdrawals of -$1.8 billion. International equity funds have had positive flows in 48 of the last 52 weeks while domestic equity funds have had only 15 weeks of positive flows over the same time period.
Fixed income mutual funds put up inflows of +$449 million, trailing their year-to-date weekly average inflow of +$2.8 billion and their 2014 average inflow of +$929 million. The inflow was composed of +$259 million of contributions to taxable funds and +$190 million of contributions to tax-free or municipal bond funds. Munis have had a solid run with subscriptions in 51 of the last 52 weeks.
Equity ETFs took in +$21.9 billion, outpacing the year-to-date weekly average inflow of +$2.1 billion and the 2014 weekly average inflow of +$3.2 billion. Fixed income ETFs took in +$2.8 billion, trailing the year-to-date weekly average inflow of +$1.4 billion and the 2014 weekly average inflow of +$1.0 billion.
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 weekly average for 2014 and the weekly quarter-to-date average for 1Q 2015:
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), the weekly average for 2014, and the weekly quarter-to-date average for 1Q 2015. In the third table are the results of the weekly flows into and out of the major market and sector SPDRs:
Sector and Asset Class Weekly ETF and Year-to-Date Results: Sector SPDR flows were mixed last week. The consumer staples XLP ETF experienced the largest percentage outflow (-4%, -$331 million) while utilities, via the XLU, experienced the largest percentage inflow (+4%, +$238 million).
The net of total equity mutual fund and ETF flows against total bond mutual fund and ETF flows totaled a positive +$20.6 billion spread for the week (+$23.8 billion of total equity inflow net of the +$3.3 billion inflow to fixed income; positive numbers imply greater money flow to stocks; negative numbers imply greater money flow to bonds). The 52-week moving average is +$1.4 billion (more positive money flow to equities), with a 52-week high of +$27.9 billion (more positive money flow to equities) and a 52-week low of -$15.5 billion (negative numbers imply more positive money flow to bonds for the week).
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:
Jonathan Casteleyn, CFA, CMT
Joshua Steiner, CFA
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