prev

Cartoon of the Day: Inflation?

Cartoon of the Day: Inflation? - Inflation cartoon 07.27.2015

 

***Below is a brief excerpt from this morning's Early Look by Hedgeye CEO Keith McCullough.

 

...Uh, maybe we should be long, “decoupling”? Nope. We’ll stick with the #Quad4 asset allocations, which should have you long low-beta and yield chasing sectors (short Commodities). Currently I like Healthcare (XLV), REITS (VNQ), and Utilities (XLU); not the following:

 

  1. Inflation expectations (5yr breakevens) dropped another -13bps = down -28 bps in the last month (1.42%)
  2. Energy (XLE) and Basic Material (XLB) stocks down -4.0% and -5.4% (-9.1-9.3% in the last month) respectively
  3. Industrial stocks (XLI) deflated another -3.7% to -6.5% YTD (down -4.5% month-over-month)

 

If you’re levered long to inflation expectations another way to look at your risk... 


UUP: Adding U.S. Dollar to Investing Ideas

Takeaway: We are adding the U.S. Dollar to Investing Ideas on the long side.

Editor's Note: The note below was written by Hedgeye CEO Keith McCullough.

*  *  *  *  *

UUP: Adding U.S. Dollar to Investing Ideas - z doll

With the Euro overbought here, the US Dollar Index is signaling immediate-term TRADE oversold within it's bullish intermediate-term TREND. 

 

Catalyst for the US Dollar this week could be the GDP report (Thursday). It's obviously a lagging report (it's a Q2 report and most of the economic #deflation has been in Q3) but the way Wall St reads it is sequentially vs. the Q1 bomb. That report will be good.

 

It won't be until Q3 GDP is reported that GDP looks as bad as it did in Q1 (to headline chasers). Net net, being bearish on Euros and Yens (and Emerging Market FX) keeps us long-term bullish on USD anyway.

KM


ZOES + FNGN: Adding Zoe's Kitchen and Financial Engines Back to Investing Ideas

Takeaway: We are adding Zoe's Kitchen and Financial Engines back to Investing Ideas.

Editor's Note: The note below was written by Hedgeye CEO Keith McCullough.

*  *  *  *  *

Fundamental research views from our analysts Howard Penney (Restaurants/Consumer Staples) and Jonathan Casteleyn (Financials) didn’t change. I was trying to help risk manage what ended up being a 5% correction in the Russell 2000 (small cap) and High-Beta as a risk management Style Factor.

 

Going forward, we don’t plan on removing names from Investing Ideas unless the fundamental story (from our analysts' perspective) changes.

 

Thanks for bearing with us as we evolve the Investing Ideas product. We’re always trying to learn from our mistakes.

 

KM

ZOES + FNGN: Adding Zoe's Kitchen and Financial Engines Back to Investing Ideas - z1


the macro show

what smart investors watch to win

Hosted by Hedgeye CEO Keith McCullough at 9:00am ET, this special online broadcast offers smart investors and traders of all stripes the sharpest insights and clearest market analysis available on Wall Street.

Monday Mashup

Monday Mashup - CHART 1

 

RECENT NOTES

7/27/15 HAIN | ORGANIC DECEPTION PART TWO

7/24/15 HAIN | COSMETIC DECEPTION

7/23/15 CPB | Analyst Day Notes

7/21/15 GIS | Green Giant Divestiture is the Worst Kept Secret

 

RECENT NEWS FLOW


Friday, July 24

DF | Resumed neutral at JPMorgan, target is $18.

HAIN | Acquires the Mona Group, a European plant-based drink manufacturer (click here for article) or for our take click here


Wednesday, July 22

UNFI | Downgraded to neutral from outperform at Wedbush; removed from Best Ideas list, target cut to $60 from $74

UNFI | Downgraded to equal-weight from overweight at Morgan Stanley, target cut to $63 from $78

 

Tuesday, July 21

KHC | Initiated outperform at RBC with $88 target

GIS | Upgraded to outperform from sector perform at RBC; target increased to $65 from $58

 

Monday, July 20

GIS | Rumor, Bounduelle prepares bid for Green Giant (click here for article) or for our take click here

UNFI | Announces early termination of distribution contract with Albertsons (click here for article)

 

SECTOR PERFORMANCE

Food and organic stocks that we follow, in aggregate, underperformed the XLP last week. The XLP was down -0.8%, the top performer from our list was MJN posting an increase of 3.2%, although MJN is down -14.8% for the year.

Monday Mashup - CHART 2

 

QUANTITATIVE SETUP

From a quantitative perspective, the XLP remains bullish on a TRADE and TREND duration.

Monday Mashup - CHART 3

 

Food and Organic Companies

Monday Mashup - CHART 4

Monday Mashup - CHART 5

 


McCullough: Coo! Coo!

In this excerpt from The Macro Show earlier this morning, Hedgeye CEO Keith McCullough responds to a subscriber’s question on how markets will react if the Fed decides against raising rates in September.

 

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

 

Subscribe to Hedgeye on YouTube for all of our free video content.

 

 


MCD | THE GAME CHANGER | ALL DAY BREAKFAST (ADB) SURVEY RESULTS

As we said in our recent MCD Black Book, 3Q15 will be a critical inflection point for the company.  It now looks like there is a major initiative underway that could be announced in late 2015 or early 2016 – ALL DAY BREAKFAST.  The trends MCD reported in 2Q15 now support the thesis that 3Q15 will be a key inflection point in the company’s turnaround.    

 

With clear visibility on an improved cost structure, fixing sales trends are a critical next step.  One way to get there is to serve some key breakfast items all day.  I would go so far as to say that if McDonald’s has figured a way to serve ALL DAY BREAKFAST it will be a game changer for the company and it will have significant industry implications. 

 

From the research we have done and the conversations we have had with people close to McDonald’s suggest that All Day Breakfast could be that silver bullet McDonald’s is looking for!

 

Early in his tenure as CEO, this initiative by Steve Easterbrook could define his legacy at MCD.  Does Mr. Easterbrook want to be the CEO who just couldn't make ALL DAY BREAKFAST happen, or will he be the CEO who made ALL DAY BREAKFAST work for the first time in McDonald's history. 

 

Currently, ADB is in a small test in Southern California.  I understand that the costs for changes to the kitchen will range from $10,000 - $20,000 and involve adding an egg-cooker.  As always, the cost will vary by restaurant depending on what other equipment they already have on hand.  I believe that if the costs exceed $20,000, it will be very difficult to sell it to franchisees.

 

I also believe that if McDonald’s does add some breakfast items to the menu it should be a part of a broader reduction in other menu items.  The question remains do they have the discipline to do it?  A complex menu is a complex menu whether it's beef, chicken, or breakfast egg products.  There is the possibility, that adding breakfast to the all-day menu might make ordering more confusing for the customer.

 

We went out and conducted a survey to gauge consumer interest in ADB and the outcome was pretty positive. When we asked 2,000 people whether they would go to MCD more often if they could get breakfast for lunch, 33.3% of people said yes. We weren’t expecting to see a number over 50%, we consider 33.3% to be a significant number. Not surprisingly, lower income people said yes more often as well, further confirming the need for MCD to deliver value to customers.

 

MCD | THE GAME CHANGER | ALL DAY BREAKFAST (ADB) SURVEY RESULTS - CHART ADB 


GET THE HEDGEYE MARKET BRIEF FREE

Enter your email address to receive our newsletter of 5 trending market topics. VIEW SAMPLE

By joining our email marketing list you agree to receive marketing emails from Hedgeye. You may unsubscribe at any time by clicking the unsubscribe link in one of the emails.

next