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Darius Dale: #NFLDraft “Stock Picking”

Hedgeye’s very own all-star offensive lineman and former NFL prospect himself Darius Dale (Yale c/o 2009) provides his insider’s perspective on this year’s offensive line draft class.

 

In addition to knowing a thing or two about global macro ... #DaleKnowsFootball.

 

CLICK HERE to access the presentation; the long/short investment recommendations may shock you.

 

Because games are won and lost in the trenches...

 

Darius Dale: #NFLDraft “Stock Picking” - dale

 


BYD 1Q 2015 CONFERENCE CALL NOTES

Takeaway: Margin improvement drove FY guidance slightly higher. LV Locals missed expectations.

CONF CALL

 

  • Non-gaming initiatives working out
  • Consumers growing more confident and spending more
  • Locals market solid- non-gaming grew in 7th consecutive quarter.  Orleans and Suncoast did well. 
    • EBITDA fell due to $1m disruption at Suncoast (will continue until road work ends in June). 
    • Sports book win down 80% related to Super Bowl bets
  • Downtown LV:  solid Hawaiian play and increased Fremont Street. Non-gaming up 3%. Lower fuel costs from Hawaiian service.
  • Regionals:  Kansas Star (improved marketing plans).  IP (strong flowthrough). Blue Chip (revenue and EBITDA grew). Treasure Chest (revs up 8% thanks to visitation and slot play). Par-a-Dice:  adapting to new competitive landscape well. Delta Downs (well ahead of expectations, strong visitation from core customers)
  •  Borgata:  $5.5m property tax benefits; solid gaming volumes; more cost efficiencies. Contributed to 14,000 more room nights in 1Q.  
  • AC Same-store gaming revenues grew 5% in 1Q 2015
  • Customer is changing:  younger demographic of customers; need to reposition non-gaming amenities
  • Cash room rates at LV: +14%
  • Orleans/Blue Chip renovation scheduled to be completed by end of 2015
  • 20 new F&B concepts will open in next 12 months
  • Debt reduced by $80m in 1Q
  • 1Q capex: $19m ($7m Peninsula, $5m Borgata); will meet previously issued FY capex ($100m maintenance (Boyd), $15m maintenance (Peninsula) $45m project capex, Borgata around $25m)
  • Guidance raised:  
    • Expect LV road construction to impact 2Q (about ~$1mm)
    • Expect LV Locals and Downtown EBITDA to grow 2-3% : also for Q2
    • Expect Midwest/South EBITDA to grow 3-4%: also for Q2
    • Expect Borgata EBITDA ($160-165m) 
  • Borgata leverage ratio: 4.2x (down from 7.0x leverage in March 2014)

Q & A

  • Margins are sustainable, particularly in payroll/marketing
  • Delta Downs:  through April, continue to be very strong
  • LV Q2: trends from Q1 are continuing into Q2.  April is similar to Q1. May is looking good. June is looking soft. Nothing that gives them concern. 
  • REIT option - continue to evaluate
  • LV Downtown: cost cuts (half of it was due to lower fuel costs)
  • Raised FY guidance all due to stronger Q1 results
  • Pacquiao fight and Rock in Rio:  will take advantage by levering up rates
  • Slot replacement cycle is fairly normal


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Casual Dining Shorts?

Casual Dining Shorts? - 6

 

Today, we find it prudent to reiterate our shorts and remind people why we have zero casual dining names on our current Investment Ideas list.

 

While seeing BWLD and PNRA whiff on earnings has really dampened the sentiment around restaurants in the early innings of 1Q15 earnings season, we believe signs of trouble have been brewing for quite some time.  This is particularly true in the casual dining industry, which despite being in the midst of a secular decline, currently trades close to a five-year peak multiple. 

 

Casual Dining Index: EV/EBITDA (NTM)

Casual Dining Shorts? - 11

Source: FactSet

 

Given the recent increase in gasoline prices, decrease in consumer confidence, labor cost pressures, and softening industry sales, we believe there is more downside on tap for restaurants stocks.

 

Regular Gas Price

Casual Dining Shorts? - 2

Source: gasbuddy.com

 

Casual Dining Shorts? - 3

 

Barring an exception, which we will call out if/when it is appropriate, we would not be comfortable owning any casual dining names.  CHUY and DFRG continue to be two of our favorite shorts, but the majority of names could be due for a continued correction.  See our short bench for more ideas.

 

Casual Dining Shorts? - 4

 

Casual Dining Shorts? - 5

 

Latest Relevant Note: 1Q15 Investment Ideas Earnings Preview


BUY THE DIP IN JAPAN

Takeaway: We reiterate our intermediate-to-long term bullish bias on Japanese equities and view any near-term weakness as a buying opportunity.

Watch the brief 2min summary of our latest thoughts on Japan in light of the disappointing BoJ statement today.

 

Thesis summary:

 

  • Today in Japan, the lack of QQE expansion in spite of the BoJ lowering its forecasts for both growth (FY15: down -10bps to +2%) and inflation (FY15: down -20bps to +0.8%) resulted in the Nikkei 225 selling off -2.7%.
  • In conjunction w/ Kuroda’s still-sanguine guidance and our positive outlook for Japanese GDP growth over the next two quarters, marginal easing has now been officially punted well into 2H15.
  • Consensus expects a move in October and we currently have no reason to argue for one month sooner or later than that; we just know two catalysts need to materialize before the BoJ can justify expanding the pace of its asset purchases:
    • The YoY RoC in the USD/JPY cross needs to  converge towards zero.
    • Survey based inflation measures (namely Tankan) need to trend lower  – which they are likely to do if our forecast of continued and material disinflation in Japan proves prescient.
  • All told, we remain bullish on Japanese equities and continue to expect foreign inflows to support the market in light of the “win-win-win” thesis we outlined in a presentation last week (CLICK HERE to access the video replay).

 

BUY THE DIP IN JAPAN - DM Idea Flow Monitor

 

Feel free to ping us with any follow-up questions.

 

DD

 

Darius Dale

Associate


Video | Process: How to Weigh Probability

 

During this week’s Fed Day Live show, Hedgeye CEO Keith McCullough offered real-time analysis on the FOMC statement and answered subscriber questions. In this segment, Keith discusses the value of considering Frequentist factors as well as Bayesian inference and highlights the importance of flexibility and being willing to change the game plan. 


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 80.28%
  • SHORT SIGNALS 78.51%
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