Takeaway: Investors withdrew -$11.5 billion from active domestic equity funds last week, the largest weekly withdrawal since August 2011.
Investment Company Institute Mutual Fund Data and ETF Money Flow:
The standout in the most recent ICI mutual fund survey was that investors withdrew -$11.5 billion from domestic equity funds in the five day period ending July 15th. This amounts to the largest weekly withdrawal from the asset class since August 2011 and now amounts to the worst start year-to-date in the public ICI data for U.S. stock funds. Cumulative outflows in 2015 have now reached -$75.1 billion in the first 28 weeks of the year, over -$12 billion worse than the 28 week start in 2012 where -$63 billion left the active domestic equity mutual fund category (and over -$20 billion worse than the draconian 2008 period). Conversely, investors continue to pour money into World or International stock funds with cumulative 2015 inflows tallying +$79.6 billion. That is good enough for a +$3 billion better start than the prior best 28 week period in 2013, where the first 6.5 months generated +$76.2 billion in investor inflow.
In the most recent 5-day period ending July 15th, total equity mutual funds put up net outflows of -$7.7 billion, trailing the year-to-date weekly average inflow of +$161 million and the 2014 average inflow of +$620 million. The outflow was composed of international stock fund contributions of +$3.8 billion and domestic stock fund withdrawals of -$11.5 billion. International equity funds have had positive flows in 48 of the last 52 weeks while domestic equity funds have had only 10 weeks of positive flows over the same time period.
Fixed income mutual funds put up net outflows of -$487 million, trailing the year-to-date weekly average inflow of +$1.9 billion and the 2014 average inflow of +$929 million. The outflow was composed of tax-free or municipal bond funds withdrawals of -$35 million and taxable bond funds withdrawals of -$452 million.
Equity ETFs had net subscriptions of +$7.8 billion, outpacing the year-to-date weekly average inflow of +$2.5 billion and the 2014 average inflow of +$3.2 billion. Fixed income ETFs had net inflows of +$2.6 billion, outpacing the year-to-date weekly average inflow of +$907 million and the 2014 average inflow of +$1.0 billion.
Mutual fund flow data is collected weekly from the Investment Company Institute (ICI) and represents a survey of 95% of the investment management industry's mutual fund assets. Mutual fund data largely reflects the actions of retail investors. Exchange traded fund (ETF) information is extracted from Bloomberg and is matched to the same weekly reporting schedule as the ICI mutual fund data. According to industry leader Blackrock (BLK), U.S. ETF participation is 60% institutional investors and 40% retail investors.
Most Recent 12 Week Flow in Millions by Mutual Fund Product: Chart data is the most recent 12 weeks from the ICI mutual fund survey and includes the weekly average for 2014 and the weekly year-to-date average for 2015:
Cumulative Annual Flow in Millions by Mutual Fund Product: Chart data is the cumulative fund flow from the ICI mutual fund survey for each year starting with 2008.
Most Recent 12 Week Flow within Equity and Fixed Income Exchange Traded Funds: Chart data is the most recent 12 weeks from Bloomberg's ETF database (matched to the Wednesday to Wednesday reporting format of the ICI), the weekly average for 2014, and the weekly year-to-date average for 2015. In the third table are the results of the weekly flows into and out of the major market and sector SPDRs:
Sector and Asset Class Weekly ETF and Year-to-Date Results: In sector SPDR callouts, the Financials XLF ETF lost -$1.5 billion or -7% to redemptions. The large outflow was likely due in part to dovish comments by Fed Chair Janet Yellen on July 15th. In addition, the iShares 20 year Treasury ETF had a better week with the TLT gathering $176 million in new assets, good for a +4% increase in AUM.
Cumulative Annual Flow in Millions within Equity and Fixed Income Exchange Traded Funds: Chart data is the cumulative fund flow from Bloomberg's ETF database for each year starting with 2013.
The net of total equity mutual fund and ETF flows against total bond mutual fund and ETF flows totaled a negative -$2.0 billion spread for the week (+$173 million of total equity inflow net of the +$2.1 billion inflow to fixed income; positive numbers imply greater money flow to stocks; negative numbers imply greater money flow to bonds). The 52-week moving average is +$1.6 billion (more positive money flow to equities) with a 52-week high of +$27.9 billion (more positive money flow to equities) and a 52-week low of -$18.1 billion (negative numbers imply more positive money flow to bonds for the week.)
Exposures: The weekly data herein is important for the public asset managers with trends in mutual funds and ETFs impacting the companies with the following estimated revenue impact:
Jonathan Casteleyn, CFA, CMT
Joshua Steiner, CFA
Starts off discussing the Cape Verde investment, and calls it his first step in diversifying outside of Macau.
Published a profit warning a week ago, and briefly cited the weakening gaming market in Macau
They feel comfortable with their positioning in Macau particularly within the mass market segment
Cape Verde is also a former Portuguese colony
They believe Cape Verde is well positioned for tourism expansion from markets like Europe, South Africa, Western Africa and South America
Main Airport is 10 mins from their property site
Site will be in Praia the capital city, on the main island of Santiago
They view it is as the next Macau. Say the govt. is into new alternatives for growth.
They'd like to bring about the same themes as Macau
They are aiming for completion of the integrated resort in 3 years
They received the Island's 2nd license for land based gaming. HLT has the first license.
Macau Legend now holds the exclusive license for online gambling/gaming and betting
They look to continue to build off the Portuguese culture and go where there are competitive tax rates, growing and established tourism, but look to help other countries grow and prosper along the way
Capital budget for the project 250 million euros, and will use the same contractors as they use in Macau. Reason being is they want to minimize execution risk
Property will include beach access and will also have island access.
150 hotel rooms, and additional Boutique hotel will be on the property
Cape Verde room rates and occupancy were cited as strong
They were awarded two land leases, one for beach and for the island, both are 75 year long leases and offer favorable terms (which were not disclosed).
Taxes for their land based casino operations will be as follows
10% on GGR for Mass
7.5% on GGR for VIP
Cape Verde government is using Macau gaming laws as a basis for their laws
Comments on Cape Verde as Country
Noted as a safe and stable place
Relatively developed and growing
They have been enjoying a serious ramp in visitation, mostly from Europe and Africa
Flight times to Europe 3-6 hours
Flight times to Brazil 3 hours
Lots of Chinese in the surrounding areas
Europeans do not need visas
Macau citizens do not need visas
Chinese citizens can obtain visas, process cited as "very simple and fast"
The project will include shopping and attempt to mix in Asian culture
They will be rolling out online betting and gaming site which will open prior to the land based casino
They have plenty of financing available and have been approached by many firms and local banks that want to underwrite the financing on the project
Q & A
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Takeaway: StreetAccount consensus estimates for Q2 net physician adds were just released and they look reasonable.
StreetAccount consensus estimates for Q2 net physician adds were just released and they look reasonable. Relative to consensus, our estimate comes within a margin of error for athenaCollector and athenaClinicals, which are the most important products when gauging the health of the business. We are ~500 lower for athenaCommunicator after adjusting our mix assumptions due to several quarters of coming in higher than actual results. However, we don't think it will make a difference as our model is forecasting above consensus Sales and Non-GAAP EPS of $229.3 mill ($227.0 mill Consensus) and $0.30 ($0.25 Consensus), respectively. Chart above above shows the build up and break down of how we arrived at the net physician count for the quarter.
We will get into the details of our process and provide a comprehensive review of our long thesis in a Best Idea Update Call tomorrow at 11:00 am ET. As a reminder, the company will be reporting earnings after the close that day.
Please call or email with questions.
"It’s probably different this time," Hedgeye CEO Keith McCullough wrote in an Early Look earlier this week. "Post a 6yr equity ramp shouldn’t you pay 351x earnings for Netflix or chase QQQs? I’m hearing the charts 'look good.' They did in 2000 and 2007 too."
Takeaway: We doubt anyone left thinking P had the upper hand yesterday, but what we learned is P is largely on its own, and SX is going for its throat
Let us know if you have any questions, or would like to discuss in more detail.
Hesham Shaaban, CFA
P: Losing the Critical Debate?
04/08/15 08:53 AM EDT
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