Here is the replay of today's edition of RTA Live.
A MUST-SEE IF YOU'RE AN INVESTOR IN THE HEALTHCARE SPACE.
Hedgeye Healthcare Sector Head Tom Tobin and Analyst Andrew Freedman hosted a Q&A session today exclusively on Hedgeye TV.
They provided an update on their proprietary HOLX tracker and detailed key takeaways from an earlier discussion with a Healthcare IT Consultant on ATHN, CERN, CPSI and MDRX.
Takeaway: Call today at 11:00am EST, details provided below
Participating Dialing Instructions
US Toll Free:
Confirmation Number: 39551096
Materials: CLICK HERE
Today at 11:00am we will be hosting a conference call on the Cereal industry with David Sprinkle. David is the research director at Packaged Facts, which publishes a leading line of syndicated research reports on the U.S. food market.
Topics will include:
- The future of both the cold and hot segments
- The split personality of the segment
- Pricing trends
- The ancient grain story
- Where the category is struggling
- Where the categories winners are
- Why the category is important
- What breakfast categories are growing/emerging
This call be will be followed by a detailed Black Book on General Mills on May 6th.
David Sprinkle is the research director at Packaged Facts, which publishes a leading line of syndicated research reports on the U.S. food market. He has contributed to publications such as Candy & Snack Today, Gourmet Retailer, Natural Products Insider, Nutraceuticals World, and Progressive Grocer, as well as presented at industry conferences including Engredia, Fancy Food Show, GOED Exchange, Global Food Forums, Global Forum on the Future of Food, Healthy Beverages Expo, Ingredient MarketPlace, Institute of Food Technologists (IFT), IFT Wellness, International Baking Industry Expo, National Coffee Association, National Confectioners Association, Nutracon, SupplySide West, and World Tea Expo. Book-length publications through Packaged Facts include Premium Consumers and the New Economy and Americans in 2020. David has an MBA from Tulane University in New Orleans, where he also taught business communications.
The call will last about an hour including time for Q&A.
Risk Managed Long Term Investing for Pros
Hedgeye CEO Keith McCullough handpicks the “best of the best” long and short ideas delivered to him by our team of over 30 research analysts across myriad sectors.
CHUY delivered a bottom line beat despite a slight top line miss in 1Q15. Comps of +1.9% fell well short of the consensus estimate of +2.7%, but management effectively managed the cost structure in order to produce earnings per share of $0.19. 2H15 guidance continues to look like a stretch. Nice opportunity to short here on the pop.
Composition of the comp. Although this was the 19th consecutive quarter of positive comps for Chuy’s, the bulk of the growth in same-store sales came from a +3.3% increase in average check (+2.8% price) and was partially offset by a -1.4% decline in traffic. As we’ve noted in the past, traffic is the true indicator of the health of a brand. It appears to us that Chuy’s is taking price in order to drive comps and margins, but at the detriment of traffic. This is a highly unsustainable trend. Management noted a -2% impact from adverse weather in Texas, Oklahoma, and parts of the Southeast. We note that TXRH, which just reported +8% same-store sales growth, said weather was not an issue in the quarter.
Credit where it’s due. We like to think we’ll always give credit where it is due and, in our view, management did a very nice job controlling costs in the quarter. While cost of sales primarily benefitted from lapping last year’s inflationary spike in dairy and produce, as well as the September 2014 and February 2015 price increases, it also benefitted from the implementation of zero based management. On the labor line, initiatives to improve labor productivity through the implementation of best practices across the system also paid dividends, with labor costs as a percentage of sales down -30 bps y/y. There were some questions on the call regarding the sustainability of this trend. As one of the analysts asked, are you “maybe pushing it a little bit too far?” We think they are and it will become abundantly clear as the year progresses.
Difficult setup in 2H15. Given the beat, management guided up full-year earnings per share from $0.74-0.77 to $0.76-0.79 while keeping same-store sales guidance flat at +2.5% (+2.8% price). Full-year food inflation is expected to come in at 0-1%, below the prior guidance of 1-2%, but is expected to accelerate sequentially. Getting to the core of short thesis here, new units continue to be a drag on same-store sales (as they enter the comp base) and margins. Non comp stores are operating at a high single digit margin in the first year and a low double digit margin in the second year. Importantly, development plans for 2015 are going to be more back-end loaded than originally anticipated, which should pressure margins despite the street’s expectations for notable margin expansion. We believe that margins in the first quarter were more an aberration than reality and think that 2H15 is setting up to be a very difficult period for the company.
This note was originally published at 8am on April 21, 2015 for Hedgeye subscribers.
“Humble inquiry is a process of discovery.”
That’s a solid research thought from a section of a solid #behavioral book I finished reading on vaca, Learn Or Die. The section is titled “Asking Not Telling” and I thought a lot about that when it comes to my #process.
In addressing our ability (or lack thereof) to listen, Hess cites the behavioral research of Edgar Schein (MIT Professor) “who believes that the US has a culture that values telling over asking.”
“I know more than you, and therefore, I am smarter and better than you.” Sound familiar? … “alternatively, asking says I care about what you think and I am ready to invest myself in listening.” (pg 66) Are you a good listener?
Back to the Global Macro Grind…
While I am still quite bullish on both stocks and bonds into the Fed meeting next week, I am still short of something that I always seem to be short of – time! That makes the listening exercise all the more important. It’s who/what you listen to that matters.
For the first part of my career, I listened to my bosses. Then, while my bosses were making mistake, I started to realize that if I listened more to the market, I could help them make less mistakes. Hedgeye’s #process is highly influenced by this experience.
As our process evolves, more and more of my time is spent listening to my analysts. That’s a role reversal from my beginnings. Technically, I’m the boss – but our analysts are empowered to know more than me about their respective domains.
In the spirit of listening to the best analyst there is (Mr. Macro Market), here’s what he’s saying this morning:
- Pain Trade in US Stocks = #on
- Chinese, Japanese, and European Bull Market in Equities = still #on
- FX and Fixed Income markets = #boring
Boring works. Defined in Hedgeye mathematical speak, boring is when the variance of what I call the risk range compresses. Tighter ranges are easier to risk manage. They tend to trend upwardly, as volatility falls. They don’t have a lot of chop.
There‘s not a lot of “chop” in raging bull markets (like the Shanghai Composite, Nikkei, or DAX) as the only things getting chopped there are fingers of the short sellers who didn’t obey the commands of the central planners.
If you want to discover “chop” try trading something with a widening risk range (rising variance) that goes both up and down with no discernible TREND, then drop whatever that something is -1% one day, and ramp it +1% the next. Rinse/Repeat.
That something, in this morning’s case (per Mr. Macro Market) is the SP500:
- She was -1.1% on Friday, then +0.9% yesterday
- She’s been down, up, down, up for the YTD, depending on the month you listened to
- And now, she’s ramping what I call the Pain Trade to test the top-end of the range (again)
Pain Trade is the one that the largest % of market participants are not positioned for. One very important way to listen to where the crowd is positioned is in futures and options contract terms. Before yesterday’s (and this morning’s pre-market futures) ramp, here’s where non-Commercial CFTC futures/options NET positioning stood:
- SP500 (Index + Emini) net SHORT position of -40,978
- The 3 month avg net position = +13,092 (net LONG)
- The 6 month avg net position = +31,930 (net LONG)
In other words, if you’re good at listening to Mr. Macro Market, then you have to be quick to contextualize what it is you think you heard. I don’t know about you, but as I get older I need to double check things as I see/hear less well! Then there’s listening to opposing thoughts across multiple durations and trying to put that within a context of rising and falling probabilities…
This hockey player guy still thinks the Fed is going to be less hawkish on rates in 2015, but then there’s this Japanese dude named Hamada who told Abe that he might need moarrr central planning cowbell overnight = Down Yen, Up Dollar…
Trying to risk manage it all can be quite humbling, indeed.
Our immediate-term Global Macro Risk Ranges (with intermediate-term TREND views in brackets) across 12 big macro factors are now as follows:
UST 10yr Yield 1.85-1.95% (bearish)
SPX 2084-2117 (bullish)
RUT 1252-1278 (bullish)
Nikkei 19717-20058 (bullish)
DAX 11786-12576 (bullish)
VIX 12.34-15.27 (bullish)
USD 97.02-98.95 (bullish)
EUR/USD 1.05-1.08 (bearish)
YEN 118.61-121.12 (bearish)
Oil (WTI) 48.72-57.69 (bearish)
Gold 1181-1210 (neutral)
Copper 2.67-2.79 (bearish)
Best of luck out there today,
Keith R. McCullough
Chief Executive Officer
The Hedgeye Gaming, Lodging, and Leisure team will host a conference call TODAY at 1PM to discuss the latest findings from our proprietary cruise pricing database. Please contact your Hedgeye salesperson for call details or video link.
Points of discussion include:
- Expanded Pricing Database
- Almost doubled the number of itineraries to 20,000
- Inclusion of river cruises and other ocean brands
- Pricing two years out (on a rolling basis)
- Latest pricing pivots (RCL,CCL, NCLH)
- (NEW*) weekly sequential pricing
- Where is European pricing headed?
- Is RCL holding price in the Caribbean? Is it good enough?
- New ship premiums
- Same-store pricing
- NCLH 1Q preview
- Research topic: Asia
- Pricing vs Bookings
- China vs non-China
- Ocean vs River
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