We are removing RHP from the Hedgeye Best Ideas list. We still like RHP’s fundamental positioning given the long demand tail endemic in the group segment. However, the strong run in the stock – up 29% since we put RHP on Best Ideas on 09/18/14 versus +9% for the peer group – has narrowed the valuation disparity to the hotel REIT sector. RHP’s EV/EBITDA discount has narrowed from 2.5 turns to approximately 1 turn, which we feel is appropriate given its small size and narrow focus.
Takeaway: No smoking gun but big move in the stock brings valuation closer to peer group.
"The euro is down -1% to $1.07 on neither inflation nor employment data doing anything month-over-month (EUR/USD down because markets expect Draghi to deliver more cowbell in attempts to create inflation, which looks impossible right now)," Hedgeye CEO Keith McCullough wrote this morning.
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.
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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.
* * * * * * *
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
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
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