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The Macro Show Replay | July 14, 2015

 


July 14, 2015

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BULLISH TRENDS

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BEARISH TRENDS

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KATE: Removing Kate Spade from Investing Ideas

Takeaway: We are removing Kate Spade from Investing Ideas today.

Please note we are removing Kate Spade (KATE) from Investing Ideas today. According to Hedgeye CEO Keith McCullough:

 

This is a PM’s call. Our Retail Sector Head Brian McGough’s research view hasn’t changed. But I’d much rather come back to an idea like this once the style factors and macro risks to the #LateCycle consumer play out.

 

While I'm glad I didn't have you capitulate and sell last week's lows in KATE, I'll be less glad if we don't take this bounce to lower-highs as a selling opportunity. Small cap, high beta - not the Style Factors in the market I want to be chasing and/or holding onto here.

 

KATE: Removing Kate Spade from Investing Ideas - z ka

 


Three Reasons Why Howard Penney Is Now Bullish on McDonald’s

After spending almost four years being bearish on McDonald’s, Hedgeye Managing Director and Restaurants Sector Head Howard Penney has turned positive on shares of MCD.

 

Three Reasons Why Howard Penney Is Now Bullish on McDonald’s - z mcd

 

Penney recently presented his granular Best Long Idea Black Book outlining his bullish case for the company. His bullish call is predicated on three key points:

 

  1. The worst is behind us with a favorable risk/reward setup and a plan in place, now  it’s all about execution;
  2. MCD is putting the customer first by optimizing the menu, decreasing the number of items, improving products, adjusting pricing, and adding new technology to enhance the customer experience
  3. MCD is lowering the cost structure through a number of key initiatives that will start hitting the P&L in 3Q15 at the same time sales driven initiatives hit the top-line.

 

Penney sees approximately 15%-30% upside in McDonald’s from here.

 

***If you’re an institutional investor and would like to see the MCD Black Book from July 10th or any other additional research from Howard please email sales@hedgeye.com


ACA TRACKER UPDATE | PER ENROLLEE SPENDING REMAINS ELEVATED

Takeaway: Medicaid spending still strong through 2Q15, positive for earnings.

ACA Medicaid enrollment and spending

The data through 2Q15 shows a persistent positive consumption trend driven by the Medicaid expansion under the ACA.  Per enrollee spending remains elevated, which is consistent with pent-up demand of the newly insured.  Below, we forecast Medicaid enrollment through 2016 using the rate of change for the most recent months of enrollment data.  We expect growth of Medicaid enrollment to slow into 2H15 while continuing to monitor per enrollee spending for signs of a reversion to Pre-ACA levels.  Slowing enrollment and negative per enrollee spending in future periods remains a key risk for the US Medical Economy.

 

ACA TRACKER  UPDATE |  PER ENROLLEE SPENDING REMAINS ELEVATED - MCAID enrollment and spending

ACA TRACKER  UPDATE |  PER ENROLLEE SPENDING REMAINS ELEVATED - MCAID per enrollee spending

ACA TRACKER  UPDATE |  PER ENROLLEE SPENDING REMAINS ELEVATED - Medicaid enrollment

 

Please call or e-mail with questions.

 

Thomas Tobin

Managing Director 

@HedgeyeHC

 

Andrew Freedman

Analyst

@HedgeyeHIT


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