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INITIAL CLAIMS | CONTINUING AT 15-YR LOWS

Takeaway: Claims continue to show strength, posting the best numbers since April 15th, 2000.

Below is the breakdown of this morning's initial claims data from Joshua Steiner and the Hedgeye Financials team. If you would like to setup a call with Josh or Jonathan or trial their research, please contact 

 

New Lows...& A Cycle Reminder:  Seasonally adjusted jobless claims came in at 274k last week, slightly higher than expectations for 270k. Even with the slight miss, this is a strong print. The rolling 4-week SA figure dropped to 266.3k. This is the lowest rolling SA figure since the week ending April 15th, 2000, which also came in at 266.3k. In the first chart below, the 4/15/00 data is circled in red. It is important to bear in mind, though, that that date also corresponded to the peak in equities two cycles ago.

 

In the second chart below, indexed claims in energy heavy states improved more than the country as a whole in the week ending May 9th. The spread between the two series fell from 25 to 21.

 

INITIAL CLAIMS | CONTINUING AT 15-YR LOWS - Claims9 2

 

INITIAL CLAIMS | CONTINUING AT 15-YR LOWS - Claims18 normal  2

 

The Data

Initial jobless claims rose 10k to 274k from 264k WoW, as the prior week's number was unrevised. Meanwhile, the 4-week rolling average of seasonally-adjusted claims fell -5.5k WoW to 266.25k.

 

The 4-week rolling average of NSA claims, another way of evaluating the data, was -16.5% lower YoY, which is a sequential improvement versus the previous week's YoY change of -14.2%

 

INITIAL CLAIMS | CONTINUING AT 15-YR LOWS - Claims2 normal  1

 

INITIAL CLAIMS | CONTINUING AT 15-YR LOWS - Claims3 normal  1

 

INITIAL CLAIMS | CONTINUING AT 15-YR LOWS - Claims4 normal  1

 

INITIAL CLAIMS | CONTINUING AT 15-YR LOWS - Claims5 normal  1

 

INITIAL CLAIMS | CONTINUING AT 15-YR LOWS - Claims6 normal  2

 

 

 

Joshua Steiner, CFA

 

Jonathan Casteleyn, CFA, CMT

 



Cartoon of the Day: Currency War Chronicles (Fighting Fire With Fire)

Cartoon of the Day: Currency War Chronicles (Fighting Fire With Fire) - burning euro cartoon 05.01.2015


HAIN – HAIN UK IS ANYTHING BUT ORGANIC

Takeaway: Less than 30% of HAIN’s brands are “organic”

HAIN is on the HEDGEYE Best Ideas list as a SHORT

 

We have just returned from three days of marketing in London.  In short, there is a stark contrast between the investment communities in the UK and the U.S. when it comes to the outlook on HAIN.  Basically, UK doesn’t get the hype over HAIN and the long-term opportunity.  Ironically, during our visit HAIN management was also in London for a conference, management took many members of the UK investment community on a Tilda plant visit and a store tour.

 

Our summary thoughts from the people we met only confirm our SHORT thesis.  Our view is that HAIN’s UK business is misunderstood by U.S. investors.  Basically, HAIN’s UK business is nothing more than a private label business with a collection of non-organic brands. 

 

Looking at the entire company, only 40% of HAIN’s products in the U.S. are “organic.”  Therefore, looking at the U.S. and UK business in total, less than 30% of HAIN’s brands are “organic.”  Having said that in the U.S. today, HAIN boasts that “99% of our products are GMO free,” which is not a bad thing but it’s not a long term competitive advantage.  Why this roll-up story trades at a significant premium to other food companies is a complete mystery.  Our sum-of-the parts suggest that there is close to 50% downside in the name. 

 

The following are some comments from Irwin Simon Chairman, President & Chief Executive Officer, of HAIN at the UK presentation:

 

LOWER MARGINS FOR LONGER

Irwin Simon Chairman, President & Chief Executive Officer, HAIN  - “So, don't look at us as our margins to be the same as every other food company out there because they're not going to be. But at the end of the day I'd love to see our EBITDA margins in the 15% to 18%, as we continue to scale our business, get efficiency, get SG&A efficiencies out there. And most important, is to get that top line growth, organic growth that can drive it down to the margin and bottom line level”

 

HEDGEYE – On one hand the CEO of HAIN says “don't look at us as our margins to be the same as every other food company out there because they're not going to be.”  But then he says he want his EBITDA margins to approach 15-18%, which would look more like the companies he says “they’re not going to be.” Looking out to FY16-FY18, HAIN will be challenged to improve operating margins given the pressure on gross margins. 

 

ACQUISITIONS ARE DILUTIVE TO MARGINS

Irwin Simon Chairman, President & Chief Executive Officer, HAIN - “We've done over 50 acquisitions.  So, we have 6,300 employees around the world, 33 manufacturing facilities. As you heard me say before, our world headquarters in New York and these are where all our distribution centers are and all our manufacturing facilities.”

 

HEDGEYE – The best part of the HAIN roll-up story is in the rear view mirror.  The last three acquisitions produce operating margins that are high-single digit versus the core U.S. business that is 17%.  We expect that this trend will continue, making it nearly impossible for the company to generate 15% EBITDA margins. 

 

HAIN IS GIVING BACK TO SHAREHOLDERS?

Irwin Simon Chairman, President & Chief Executive Officer, HAIN  - “So, from Hain's standpoint, we're about brands, we're about people, we're about hug our customers, and at the end we're about returning money back to our shareholders.”

 

HEDGEYE – As far as I know the company does not pay a dividend.  The company is also not returning stock to shareholders in the form of a stock buyback that reduces the outstanding share count.  From my vantage point this is a throwaway line that suggests that the CEO will say anything to prop up the stock.

 

DON’T LOOK AT US QUARTER TO QUARTER

Irwin Simon Chairman, President & Chief Executive Officer, HAIN - “So I always tells people, don't buy Hain if you want to look at us quarter-to-quarter. You've got to look at the 20 years of growth. You got to look at the industry and look where we're growing. On our last conference call, we've discussed over 100,000 new points of distribution, which will drive consumption.

 

HEDGEYE – Why should we not look at HAIN quarter-to-quarter?  Right, it’s all about the big picture.  The big picture says that less than 40% of HAIN’s products are organic.  Also, why is 100,000 points of distribution good news?  What if it should have been 200,000?  The new 100,000 points of distribution is on a base of what?

 

ROSY FUTURE

Irwin Simon Chairman, President & Chief Executive Officer, HAIN – “So if you go back and you look at my slide right here, basically, that is $3.5 billion in 2018 and if you look where we're going to end the year this year, $2.7 billion, if you annualized your acquisitions, we're close to a $3 billion business. So growing 7% to 10% organically is what we're looking for but we – this year, we did three acquisitions. We're looking to do at least $100 million in acquisitions each year and that's something around the world I think we can do.” 

 

HEDGEYE – The HAIN CEO is on record saying that the company will show 7-10% growth organically thru fiscal 2018.  That would be unprecedented growth for any company, let alone a food company.  Given that the UK business looks more like a traditional food company, with 1-2% organic growth (maybe).  This suggests that the U.S. and the rest of the world will need to grow 13-14% to offset the slower growth in the UK.  Also, on a base of $3.0 billion in revenues, $100 million in revenues does not move the needle for HAIN any more.  Trading at $62 the stock fully discounts the company’s ability to generate $3.5 billion in sales and $2.45 in calendar 2018 EPS.

 

The following two charts show HAIN UK revenue and operating profit growth for the next 5 quarters.  Needless to say, this looks like mature food company and not a company growing 7-10% organically.

 

HAIN – HAIN UK IS ANYTHING BUT ORGANIC - Hain Chart 7

HAIN – HAIN UK IS ANYTHING BUT ORGANIC - Hain Chart 8

    

       


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Is the Government Lying To You? McCullough Weighs In on The Macro Show

 

In this one-minute excerpt from today's edition of The Macro Show, Hedgeye CEO Keith McCullough lampoons government number crunchers who change the calculations when they don’t like what the numbers reveal. Don’t like the results? Just move the goalposts!

 

Subscribe to The Macro Show today for full access to this and all other episodes.


INITIAL CLAIMS | This Is a Strong Print. But...

Takeaway: Claims continue to show strength, posting the best numbers since April 15th, 2000.

This research note was originally published May 21, 2015 at 09:44 in Financials. Click here for more information on Hedgeye and how you can become a subscriber.

Seasonally adjusted jobless claims came in at 274,000 last week, slightly higher than expectations for 270,000. Even with the slight miss, this is a strong print. The rolling 4-week Seasonally Adjusted (SA) figure dropped to 266,300. This is the lowest rolling SA figure since the week ending April 15th, 2000, which also came in at 266,300.

 

In the first chart below, the 4/15/00 data is circled in red. It is important to bear in mind, though, that that date also corresponded to the peak in equities two cycles ago.

 

In the second chart below, indexed claims in energy heavy states improved more than the country as a whole in the week ending May 9th. The spread between the two series fell from 25 to 21.

 

INITIAL CLAIMS | This Is a Strong Print. But... - Claims9 2

 

INITIAL CLAIMS | This Is a Strong Print. But... - Claims18

 

The Data

Initial jobless claims rose 10k to 274k from 264k WoW, as the prior week's number was unrevised. Meanwhile, the 4-week rolling average of seasonally-adjusted claims fell -5.5k WoW to 266.25k.

 

The 4-week rolling average of NSA claims, another way of evaluating the data, was -16.5% lower YoY, which is a sequential improvement versus the previous week's YoY change of -14.2%

  

INITIAL CLAIMS | This Is a Strong Print. But... - Claims2

 

INITIAL CLAIMS | This Is a Strong Print. But... - Claims3

 

Joshua Steiner, CFA

203-562-6500

jsteiner@hedgeye.com

 

Jonathan Casteleyn, CFA, CMT

203-562-6500

jcasteleyn@hedgeye.com

 


HedgeyeTV Announces Move to Over-The-Top (OTT) Subscription Model with The Macro Show

FOR IMMEDIATE RELEASE


STAMFORD, Conn., May 22, 2015 -- Hedgeye Risk Management, one of America’s leading independent investment research and media companies, announced today the official launch of The Macro Show, a live, fully interactive morning market discussion hosted by CEO Keith McCullough and analysts from the firm. The show distils the most significant market and economic developments and is followed by a live Q&A session featuring questions submitted from subscribers.

 

“By far, the most precious asset allocation for investors today is time. My team and I recognize this and created a product that delivers a ton of value in less than thirty minutes,” said CEO Keith McCullough. “Global Macro risk is dynamic, non-linear and constantly changing. My primary job as a risk manager is to prepare my subscribers as best I can and get in front of them everything they need to know before the market opens.”

 

Hedgeye has hosted a morning macro conference call exclusively for its institutional investor customers since the firm's inception.  Each show takes a close look at current asset allocation, followed by McCullough’s “Top-3 Things” that matter most in the markets, the “Grind” (a systematic look at various key market levels) and a brief market commentary. Each show concludes with a question and answer session. The introductory price is $39.95 for a monthly subscription.

 

“With the introduction of the Morning Macro show, HedgeyeTV is not only launching its first premium subscription product, but we are also opening up to the wider investing community a hallmark event in the day of many hedge fund and Wall Street investment firms,” said Hedgeye President Michael Blum. “For the first time ever, smaller investors are now able to see what happens behind closed doors at Wall Street firms on every trading day.”

 

HedgeyeTV was launched in 2013 and produces daily video content, including programs such as Real Conversations which has featured notable guests including investor Mario Gabelli, national bestselling “Currency Wars” author James Rickards, Jim Grant, founder of Grant’s Interest Rate Observer, Liz Ann Sonders, chief investment strategist at Charles Schwab & Co. and Stephen Roach, Yale University professor and former Chairman of Morgan Stanley Asia.

 

Here’s a link to a brief explanatory video about the Macro Show.

 

 

About Hedgeye

 

Hedgeye Risk Management is an independent investment research and media firm. Focused exclusively on generating and delivering actionable investment ideas in a proven buy-side process, the firm combines quantitative, bottom-up and macro analysis with an emphasis on timing. The Hedgeye team features some of the world's most regarded research analysts, all with buy-side experience, covering Macro, Financials, Energy, Healthcare, Retail, Gaming, Lodging & Leisure (GLL), Restaurants, Industrials, Consumer Staples, Internet & Media. The firm is united around a vision of uncompromised real-time investment research as a service.

 

Visit the Hedgeye website for more information.


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