Takeaway: WYNN missed lowered estimates badly and cut the dividend. Negative implications for LVS and MGM.
In case you missed it. Here's the replay from today's edition of The Macro Show.
The Macro Show is Hedgeye's dynamic pre-market rundown highlighting the most important global macro developments where CEO Keith McCullough shares 15 minutes or less of prepared market analysis and commentary and then answers your questions in a live Q&A session.
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"Last night Japan reported a bomb of a Retail Sales report at -9.7% year-over-year for the month of March," Hedgeye CEO Keith McCullough wrote in today's Morning Newsletter. "That compared to a paltry -1.7% in the month prior. And the Japanese stock market went up on that…"
Being long stocks/commodities ahead of an easier Fed and bombed out Q1 earnings expectations is one thing – holding all long positions related to the consumer as gas prices rise and consumer confidence makes lower-highs is entirely another.
As you can see in the data/chart below, “confidence” is both pro-cyclical (Late-Cycle) and mean reverting. If March was the high for this cycle, that’s is going to be a new problem. In rate of change terms, confidence has been bullish for 6 years.
Takeaway: We're launching our first 'Idea Vetting Book' next week, which will thoroughly vet the bull/bear case (and ultimate EPS power) for KORS.
NEW HEDGEYERETAIL PRODUCT
On Thursday, May 7th at 1:00pm ET we will be releasing a new product for HedgeyeRetail subscribers aimed at Idea generation around battleground stocks in Retail, or those that simply pass through our initial Idea screening process and make it to our Idea Bench. These “Idea Vetting Books” are distinctly different from the Black Books you’ve come to expect from us (and should still expect from us in the same quantity).
While Black Books are focused around our top ideas, the Vetting Books will go through all financial and operational puts and takes across TRADE, TREND, and TAIL durations sourced from a group of roughly 125 stocks. We don’t know where we’ll come out on a given name until the very end of our process – and in some cases, the answer might be that ‘the call’ is to do nothing with the stock. But we’ll explain in detail precisely why that is the case. This is and has been a core part of our internal investment process in sourcing what we consider to be Big Ideas, and with this product, we’re opening it up to our customers.
VETTING BOOK #1: MICHAEL KORS (KORS)
Next Thursday’s Vetting Book will be focused around Michael Kors (KORS). The name recently found its way onto our Long bench, after losing $8bn, or 40% of its market value over the past 12-months. How we see it, this name is likely a binary outcome. At $63 it appears to be trading at 14x earnings, but it’s probably not. The ‘e’ part of the equation is wrong. Either the company hits/beats earnings and the stock goes up meaningfully, or numbers come down materially, and the stock looks expensive at a much lower stock price. We’ll focus on vetting the near-term earnings drivers, long-term opportunity for growth as well as the cost of that growth, and ultimately, what the right size and margin structure is for KORS.
We’ll be hosting a conference call at 1:00 pm ET on Thursday, May 7th.
CALL INFO WILL BE DISTRIBUTED THE WEEK OF MAY 4th.
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