5 Real Risks That Could Derail Hillary Clinton’s White House Bid

Listening to most recent mainstream media reports, you get the sense that former Secretary of State Hilary Clinton is not only a shoe in to win the Democratic nomination for President, she’s also very likely to win the general election.  While most people on the right may view this with varying degrees of trepidation and disbelief, the view is actually well founded in current polls. 

5 Real Risks That Could Derail Hillary Clinton’s White House Bid - z hi


As it relates to her party’s nomination, the top six polling candidates based on poll aggregates are as follows:

  • Clinton – 64.2%;
  • Warren – 12.5%;
  • Biden - 9.8%;
  • Sanders – 7.4%; and
  • Webb – 2.6%.

You get the point.  The current “race” for the Democratic nomination isn’t really a race.  Her current spread over Elizabeth Warren is a staggering +51.7 points.  Fast forward to the general election match up, Clinton holds a sizable lead against various potential Republican nominees.   Her most significant competitors— the GOP triumvirate of Jeb Bush, Rand Paul, and Marco Rubio—all trail over 7 points behind her in the poll aggregates.


The bottom line is that if the election was held today, there’s little doubt Hilary Clinton would be elected President.  The election of course is not today and between now and November 8th, 2016 a lot can, and will, happen.  Without further ado, here are five key factors that could put what currently looks like an inevitable Clinton Presidency at risk.


1. The Clinton Foundation - This risk is the most topical right now given the current scrutiny the Foundation is receiving thanks to Peter Schweitzer’s book, “Clinton Cash: The Untold Story of How and why Foreign Governments and Businesses Helped Make Bill and Hillary Rich.” It is also very likely an issue that will not go away.  On some level, whether the Clintons acted ethically as it relates to the Foundation is irrelevant because there is enough fodder that it will allow Republicans to continue to keep the heat on the Foundation.  To the extent the scrutiny accelerates, the Foundation has the potential to become Clinton’s “Swift Boat” moment.
2. Likeability (and accessibility) – Since announcing her candidacy more than 35 days ago, Hillary has answered a grand total of 8 questions from the press.   Whether this lack of accessibility is ultimately perceived as a lack of a common touch (think Hillary going into Chipotle wearing sunglasses and not leaving a tip) remains to be seen. However,  as the chart below shows, her favorability has taken a steady decline since she left office as Secretary of State in February 2013.  Most interesting, since actually announcing her intention to run for President, her “Unfavorable” rating has exceeded her “Favorable” rating.  

5 Real Risks That Could Derail Hillary Clinton’s White House Bid - z dj1

3. Rubio Emergence – Ultimately for Hillary to not win the Presidency, a front running Republican candidate will have to emerge.  The current GOP crop of contenders is broad, some would even argue deep, but there’s really no one is standing out or breaking out from the crowd.   In the Real Clear Politics chart below, we show the top 14 candidates for the Republican nomination. (Yes, 14!) As the RCP chart shows, there is no clear front runner.  In fact, Bush, Walker and Rubio are all basically in a statistical dead heat.   

5 Real Risks That Could Derail Hillary Clinton’s White House Bid - z dj2

From our perch, it feels like the Republicans need a candidate that is not white, middle-aged and male. In the front runner category, Rubio clearly fits that bill.  Latinos’ lack of support in 2012 (only 3 out of 10 votes) was noted as a key reason for Romney’s inability to win the election, so clearly this demographic will be key for the Republicans. Rubio (and to some extent Bush, given his Mexican born wife and bilingualism) has the best chance of increasing the Latino votes based on their backgrounds and policies.


4. Bill’s Gaffes – While there is no question that Bill Clinton is one of the most talented politicians of his generation, there is also no question he is (and maybe increasingly so) prone to putting his foot in his mouth. In today’s hyper-plugged in digital world, where no one is safe from a rogue iPhone recording a candidate’s every word, this may pose a delicate challenge for the former commander in chief.  Don’t forget that the key negative turning point for Romney in 2012 was his 47% quote:


“There are 47 percent of the people who will vote for the president no matter what … who are dependent upon government, who believe that they are victims. … These are people who pay no income tax. … and so my job is not to worry about those people. I’ll never convince them that they should take personal responsibility and care for their lives.”


Remember, Romney said this in the friendly confines of a Republican fundraiser. The lesson? No environment in the day of iPhones and social media is off limits in terms of quotable material.  Bill Clinton may have the political acumen to not have a major gaffe, but his historical penchant for the spotlight makes it difficult for him to stay out of the media.  


The most recent gaffe was his response to NBC’s Cynthia McFadden after she inquired about his enormous speaking fees ($500,000 and above). Clinton responded, “I gotta pay our bills.” That’ll play well in Peoria. While this quote won’t sink Hilary’s campaign, it does offer a taste of what may come from his mouth in the months ahead. It will certainly be used over and over by the Republicans to portray the Clintons as rich and out of touch.


5. Benghazi (and general track record) – In aggregate, Hillary Clinton’s role as Secretary of State is regarded favorably and without much controversy with one big elephant-in-the-room exception – Benghazi.  This was of course the unfortunate turn of events that led to the deaths of U.S. Ambassador J. Christopher Stevens and three other Americans when the U.S. diplomatic mission in Benghazi, Libya was attacked.   We are going to reserve analysis of the events, but believe this will become a major thorn in her side, especially as it gets into the nitty-gritty of the campaign post the nominating conventions.   The downside of having a track record is that in can and will be scrutinized under a microscope and Benghazi remains a major issue.


Despite these five key challenges to Clinton’s candidacy, make no mistake about it: this remains her race to lose.


Daryl Jones is the Director of Research at Hedgeye Risk Management.



Takeaway: It seems that absent a complete derailment of the growth story, the probability of mass capitulation on the long side is low.

This note was originally published May 14, 2015 at 07:28 in Healthcare 



We have had numerous discussions about ATHN over the last several weeks with some of the top shareholders and most prominent bears.  What is clear from these discussions is that there is a large duration mismatch between the timing and expectations of how the bull and bear thesis play out.  Many of the metrics the bears are looking to as catalysts in the short-term are known to long-term shareholders, but largely dismissed due to greater emphasis on the TAM. This lack of consensus among investor types appears to be the reason why the forward 12-mo excess return of the stock is positively correlated with short-interest.  It seems that absent a complete derailment of the growth story, the probability of mass capitulation on the long side is low.  



We have summarized the bear and bull arguments from our discussions below. Please let us know if you would like to dig deeper on any of these points.

  • Rising % of capitalized R&D to ~18% in 1Q15 <- 1Q15 elevated due to recent acquisitions.  Investing in the business to drive growth.  Company guided ~16% cash R&D expense (~6% capitalized) as they develop their inpatient offering.
  • Slowing physician growth <- Not focused on quarter-to-quarter doc adds... more concerned about long-term adoption and strategic direction of the company.
  • Company is going to miss consensus estimates for doc adds because they are unreasonably high <- Probably right... but that doesn't mean they will miss revenue guidance for the year or next. It is a shame that the Sell Side hasn't figured out how to accurately model the company given the transparency and metrics they provide.
  • Not a SAAS company, does not deserve SAAS multiple <- Company's offering is the definition of SAAS, subscription based software service with a single instance, multi-tenant delivery platform.  Outsourcing component provides competitive advantage and high multiple deserved given growth and margin opportunity.
  • Increased competition from CERN, MDRX and EPIC <- Competition is always a risk, but precedent exists where SAAS companies take significant share quickly away from legacy providers in market's outside of healthcare that are even more penetrated and competitive.  Additionally, ATHN's market reputation is high in RCM outsourcing, other companies have tried and failed.  Enough share exists outside of EPIC where ATHN can continue to grow and become a dominant player.
  • Increased reliance on new products and inpatient opportunity to drive growth <- Ambulatory opportunity remains significant, continued cross selling, while the company is taking the right approach in tackling the inpatient opportunity.  Under 100 bed hospital market is large and underserved, EPIC not a major player, and ATHN can take share by altering the cost curve and value proposition.
  • West Penn Allegheny ~600 athenaCollector customer disconnecting <- Not concerned with variability in doc adds in the short-term.
  • Jonathan Bush commentary on 1Q15 earnings call related to lack of urgency due to no government mandates causing drop in close rates <- Largely expected given lack of federal mandate.  Core business is Revenue Cycle Management and is much less dependent on EHR incentives. ICD-10 is likely to be a short-term catalyst.
  • Jonathan Bush commentary around variability in Enterprise bookings <- Enterprise bookings are lumpy, this is a known fact, and something the company has been very straight forward about over the years.
  • Epocrates has been a disappointment with sales declines in excess of -20% in 2014  <- Epocrates is doing what it was meant to do... That is, provide the company with access to a network of over 300k physicians, spread awareness and drive lead generation for core, athenahealth branded products.  Epcorates sales actually grew 2% YoY in 1Q15 and positive bookings commentary is encouraging.  Much of the sales decline was due to management deciding to walk away from certain parts of the business.
  • Not getting any traction with Enterprise Coordinator <- Still early days with population health and they have a really good product.  Change in go-to-market strategy makes sense and should lead to shorter sales cycles by splitting the referral management and population health components.  
  • They are a phone bank with little operating leverage <- athenaCollector gross margin is running in the mid-70s.  If you look at the company's P&L on a unit cost basis (e.g., # physicians per direct employee) you can see similar leverage to other SAAS companies. Long-term profitability targets established by the company are attainable. 
  • Change in revenue recognition timing on Imp & Other boosted sales growth <- Better matches revenue with implementation expense, rather than amortize over the estimated life of the customer.
  • Significant cash burn in 1Q15 <- Excluding acquisitions, in-line with seasonal trends due to timing of cash bonuses... cash balance builds through Q4.
  • Low KLAS rating for athenaClinicals <- athenaCollector is their core product and is ranked Best in KLAS. 43% of athenaCollector physicians are using athenaClinicals and management is addressing the issue with the roll out of a new interface sometime this year.
  • They are giving it away for free <- Industry standard to provide Enterprise clients with discounts... Take rate has increased from 3.7% in 1Q09 to 4.5% in 1Q15.

ownership analysis

We believe it is important to consider ownership before taking a long or short position.  Our hopeful thinking is that we better our chances of being right by understanding what drives the buy and sell decisions of those responsible for the stock's fate, and based on the results of our own due-diligence process, align ourselves accordingly. 


In the case of ATHN, 85% of shares outstanding are owned by the top 10 institutional shareholders with the majority being large mutual funds with long investment horizons.  More specific, 60% of shares are owned by funds with a holding period between 2-4 years and 35% have a holding period greater than 4+ years.  We compared ATHN to VRX in the chart below to provide context.


ATHN | SHORTS FIGHTING AN UPHILL BATTLE? - 2015 05 13 ATHN Holders Distribution




It seems that absent a complete derailment of the growth story, the probability of mass capitulation on the long side is low.  Meanwhile, the positive correlation between short interest and forward excess return suggests that while the bears may control the narrative in the short-term, over the long-run, bulls are often right. 




Please call or e-mail with any questions.


Andrew Freedman





Thomas Tobin
Managing Director 



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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 80.46%
  • SHORT SIGNALS 78.35%

RTA Live: May 20, 2015

Here is the replay of today's edition of RTA Live.



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U.S. Dollar, Oil and the German DAX

Client Talking Points


The 1-day drop in the EUR/USD on the European central plan to “front-load” QE shows little to no follow through this morning, and the European Equity market doesn’t appreciate that. The USD Index has plenty of resistance at around 96 (that’s also the low-of our EUR/USD 1.10-1.14 immediate-term risk range).


We made an intraday call to buy Oil on the Up Dollar commodities pullback yesterday as WTI was signaling immediate-term TRADE oversold. WTI experienced a +1.5% bounce this morning to $58.83 and has no resistance to $61.37. Your catalyst on Down Dollar, Up Oil is the May 29th U.S. GDP report, then the June 5th jobs report (Fed meeting June 17th should be dovish too). 


The German DAX doesn’t show any follow through this morning as the German economic data continues to be weak (yesterday was a ZEW miss/slowdown; this morning it’s a -1.5% year-over-year PPI which is somewhat deflationary); German stocks are on our buy list, but they don’t have to be forever; watching how they act very closely here.

Asset Allocation


Top Long Ideas

Company Ticker Sector Duration

One way to invest in Lower-For-Longer, from an equity perspective, is being long U.S. REITS (VNQ). The reality is that we are in a #LateCycle slowdown and the jockeying around each incremental data point will continue to get more and more intense as the Fed’s only ammo for suspending the cycle that has unfolded many times over is to push out the dots on a rate hike. #LowerForLonger.


The ITB turned in modest positive absolute and relative performance in the latest week as the advance in interest rates ebbed and the high frequency mortgage purchase application data continued to reflect improving housing demand trends. This is a data heavy week for housing. NAHB Builder Confidence dropped for the 4th time in 5 months, dipping -2pts sequentially in May to an Index reading of 54.   Confidence currently sits +9 pts higher than May of last year and is basically right on the average reading of 55 observed over the last three expansionary periods.  Further, at  the current reading of 54, the index remains well above the Better-Worse Mendoza line of 50, signaling builders continue to view conditions favorably.


The counter-TREND moves in the USD and commodities have been extensive and now confirmed: 1) U.S. Dollar: Down another 1.20% week-over-week to complete its BULLISH to BEARISH TREND Reversal. The dollar is now BULLISH on a TAIL duration (three years or less) and BEARISH on a TREND duration (3-Months or more) 2) CRB Index: +2.0% week-over-week and +5.5% 1-Month Change. The CRB is now BULLISH on a TREND duration and BEARISH on a TAIL duration.

Three for the Road


VIDEO (2mins) 'There's No Inflation, But It Costs $127,000 to Go to Harvard for Two Years'… via @hedgeye



The counter-TREND moves in the USD and commodities have been extensive and now confirmed: 1) U.S. Dollar: Down another 1.20% week-over-week to complete its BULLISH to BEARISH TREND Reversal. The dollar is now BULLISH on a TAIL duration (three years or less) and BEARISH on a TREND duration (3-Months or more) 2) CRB Index: +2.0% week-over-week and +5.5% 1-Month Change. The CRB is now BULLISH on a TREND duration and BEARISH on a TAIL duration.



2-to-3 are the early odds on American Pharoah winning the Belmont Stakes and capturing the first Triple Crown since Affirmed in 1978.

LEISURE LETTER (5/20/2015)

Tickers:  NCLH, ALL.AX, MGM


  • May 19-21: G2E Asia at Venetian Macau
  • May 25: 11pm - Aristocrat 1H 2015 earnings: (; pw: 8770122)
  • June 4- CCL: special press announcement in NYC


  • Double whammy for NCLH 
    • $20m secondary by leading shareholders. The changes in share ownership is below:

LEISURE LETTER (5/20/2015) - NCLH1 

    • Norwegian Dawn had a temporary malfunction of its steering system at 5pm last night, causing the ship to sail slightly off course as the ship was departing Bermuda, resulting in the vessel making contact with the sea bed. All guests and crew are safe and there were absolutely no injuries.

Takeaway: The secondary is larger than the last one ($12.5m) and more will come. Norwegian has to play damage control with the Dawn incident.


Bloomberry- The ongoing slump in GGR in Macau is not good news for other Asian gaming jurisdictions, says Tom Arasi, president and COO of Bloomberry Resorts Corp. “It is a general downtrend… [People should] try to assess it with all the major markets throughout Asia Pacific and see if overall [regional GGR] is growing. I suspect not.” He acknowledged however that the Philippines still has a “public relations problem” with Chinese VIPs when it comes to safety and infrastructure perceptions.


The casino executive added that the Solaire property currently has an “amazing 50:50 balance” between high rollers and mass players, with the majority of VIP play coming from overseas gamblers.


Solaire – which first opened in March 2013 – had signed 84 junket operators, of whom 35 were active in the first quarter of 2015. Mass gaming continued to achieve what the firm called “sustainable growth” registering a 17% increase from the prior-year period.  But the firm reported an 100% increase during the reporting period in allowance for “doubtful accounts”, mostly linked to casino operations.


Takeaway: Cautious commentary from Solaire's boss although is property is on a nice trajectory


MGM - William Scott, who has served as executive vice president of corporate strategy and special counsel at MGM Resorts since July 2010 described any notion of selling down or selling off its 51% stake in Macau casino operator MGM China Holdings Ltd as “a very bad idea”. "MGM [Resorts] would like to increase its stake in MGM Macau [MGM China]. We’d like to make broader investments in MGM Macau," he said.



Aristocrat - Aristocrat is “heavily involved” in several of the upcoming casino openings and floor expansions taking place across the region, said managing director for Asia Pacific at Aristocrat Leisure Ltd, Vincent Kelly. 


When Galaxy Macau Phase 1 opened in May 2011, Aristocrat said it had achieved a floor share of about 70%, which it claimed at the time was “a record for any casino opening in Macau”. Mr Kelly did not provide floor share estimates for Aristocrat at Phase 2. ”


Aristocrat is now introducing to Asia Pacific its newest Hyperlink product, called ‘Fortune Tree’. The Chinese New Year-themed link launched with titles ‘5 Dragons Deluxe’, ‘Fortune King Deluxe’ and ’50 Dragons Deluxe’.


In addition, Aristocrat is deploying the first units of its latest cabinet, the Helix, in Asia. Mr Kelly said he expects the distinctive features of Helix – including the LED backlit full HD displays and rear surface ambient lighting – will play well with Chinese gamblers.



Thomas Cook Group -

    • The company notes that Summer 2015 holiday bookings across the group are encouraging, especially for Q4, which is offsetting some weakness in Q3.
    • The UK business and Airlines Germany continue to trade particularly well, our Northern European business has proven resilient in a difficult market, while our German tour operating business continues to experience tough trading conditions.
    • It expects further growth in FY15, consistent with expectations on a constant currency basis. 

Takeaway: Leisure travel remains choppy and mixed in European markets


GS - Moody National REIT Inc will buy 149 limited-service hotels from GS's Whitehall Street real estate unit. 




  • Acquisition Highlights:

    • 9-hotel portfolio consists of 8 select-service hotels and 1 full-service hotel with 1,251 total rooms for $224 million
    • Purchase price equates to an estimated forward 12-month cap rate of 7.5% and an estimated forward 12-month EBITDA multiple of 11.6x
    • Average price per key  ($179,000 per key)
    • Well-located and diversified portfolio proximate to stable demand generators
    • Relatively new assets with average age of 7 years
    • Remington Lodging to take over property management at closing


Extra Golden Week - Last week, the State Council of China designated September 3 as a national holiday to mark the ‘70th anniversary of the Chinese People’s Anti-Japanese War and the World Anti-Fascist War Victory Commemoration Day’. Thus, the Macau Government Tourist Office will assess whether this date and the weekend that follows could be another peak travel time for Mainland Chinese visitors visiting the MSAR, MGTO Director Maria Helena de Senna Fernandes said.


“For the Mainland, it [the September 3 holiday] will be arranged in a way that Chinese residents can have a vacation of three days in a row,” Ms. Fernandes told media on the sidelines of the Boao Asia Development Forum yesterday.
She explained that September 4, which is a Friday, is designated by the Mainland authorities as a holiday as its policy is to form a consecutive three-day holiday for citizens. “In this respect, we will assess whether this holiday will be a peak travel time [for Mainland visitors],” said the MGTO head, noting that the different government departments here will communicate on how to deal with visitor flow.


Takeaway: This extra holiday could boost visitation in September ahead of Golden Week in October.

Visitor expenditure survey 1Q 2015 - total spending (excluding gaming expenses) of visitors in the first quarter of 2015 amounted to MOP13.36 billion, down by 16.2% from MOP15.95 billion in the first quarter of 2014. Visitors spent mainly on Shopping (48.3%), Accommodation (25.6%) and Food & Beverage (18.8%).


Total spending of Mainland visitors reached MOP10.81 billion, of which spending of those from Guangdong Province (MOP3.59 billion) accounted for 33.2%. Per-capita spending of Mainland visitors was MOP2,152, down by 15.1% YoY.

Per-capita spending of Mainland visitors travelling under the Individual Visit Scheme (IVS) decreased by 14.3% YoY to MOP2,279; spending of Guangdong (MOP1,721) and Fujian visitors (MOP2,811) dropped by 3.4% and 15.9% respectively.


Analysed by place of residence, 27.2% of the visitors from Hong Kong came to Macao mainly for gaming activities, higher than that of other countries and regions.


LEISURE LETTER (5/20/2015) - m1

LEISURE LETTER (5/20/2015) - m2


 Takeaway: Not surprisingly, non-gaming spend was lower in Q1 2015


NJ Lottery-  The lottery is now expected to generate $930 million in revenue this fiscal year, down from the state’s original forecast of $1.04 billion. Treasurer Andrew Sidamon-Eristoff said he’s satisfied with Northstar’s performance under the contract but that doesn’t mean he’s happy about it.  “We’re not meeting our expectations, but I think it’s fair to note we are in the middle of a very significant national downturn in lotteries.” Democratic Budget Committee Chairman Paul Sarlo said, “The younger generations don’t play the lottery."

Takeaway: Not good news for SGMS's NorthStar JV but NJ has already been struggling. US lottery is having similar demographic issues as slots.


Hedgeye Macro Team remains negative Europe, their bottom-up, qualitative analysis (Growth/Inflation/Policy framework) indicates that the Eurozone is setting up to enter the ugly Quad4 in Q4 (equating to growth decelerates and inflation decelerates) = Europe Slowing.

Takeaway:  European pricing has been a tailwind for CCL and RCL but a negative pivot here looks increasingly likely in 2015.

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