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ICI Fund Flow Survey | International Funds and Equity ETFs Reaping the Benefits

Takeaway: International equity funds and equity ETFs continue to benefit from domestic equity outflows.

Investment Company Institute Mutual Fund Data and ETF Money Flow:

In the most recent 5-day period ending July 22nd, investors continued to redeem funds from active domestic equity funds with the category losing another -$3.2 billion last week. Investors instead re-distributed these proceeds into international equity funds and domestic ETFs with inflows last week of +$5.0 billion and +$1.3 billion respectively. The shift to passive from active domestically has been pervasive with over +450 billion having moved into U.S. ETFs over the past 3 years against the -$175 billion drawn down from domestic funds. With $6.2 trillion remaining in domestic mutual funds versus $1.2 trillion in U.S. ETFs, there is plenty of track left for passives to gain share. With this secular opportunity for ETFs, we continue to remain bearish on shares of leading active managers including T. Rowe Price (see report here) and Janus Capital Group (see report here). 

 

ICI Fund Flow Survey | International Funds and Equity ETFs Reaping the Benefits - ICI19

 

In the most recent ICI survey for last week, all categories experienced modest inflows except for domestic mutual funds:


ICI Fund Flow Survey | International Funds and Equity ETFs Reaping the Benefits - ICI1


In the most recent 5-day period ending July 22nd, total equity mutual funds put up net inflows of +$1.9 billion, outpacing the year-to-date weekly average inflow of +$220 million and the 2014 average inflow of +$620 million. The inflow was composed of international stock fund contributions of +$5.1 billion and domestic stock fund withdrawals of -$3.2 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 inflows of +$1.6 billion, trailing the year-to-date weekly average inflow of +$1.9 billion but outpacing the 2014 average inflow of +$929 million. The inflow was composed of tax-free or municipal bond funds contributions of +$250 million and taxable bond funds contributions of +$1.3 billion.

 

Equity ETFs had net subscriptions of +$1.4 billion, trailing 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 +$1.7 billion, outpacing the year-to-date weekly average inflow of +$935 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:

 

ICI Fund Flow Survey | International Funds and Equity ETFs Reaping the Benefits - ICI2

 

ICI Fund Flow Survey | International Funds and Equity ETFs Reaping the Benefits - ICI3

 

ICI Fund Flow Survey | International Funds and Equity ETFs Reaping the Benefits - ICI4

 

ICI Fund Flow Survey | International Funds and Equity ETFs Reaping the Benefits - ICI5

 

ICI Fund Flow Survey | International Funds and Equity ETFs Reaping the Benefits - ICI6

 

 

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.

 

ICI Fund Flow Survey | International Funds and Equity ETFs Reaping the Benefits - ICI12

 

ICI Fund Flow Survey | International Funds and Equity ETFs Reaping the Benefits - ICI13

 

ICI Fund Flow Survey | International Funds and Equity ETFs Reaping the Benefits - ICI14

 

ICI Fund Flow Survey | International Funds and Equity ETFs Reaping the Benefits - ICI15

 

ICI Fund Flow Survey | International Funds and Equity ETFs Reaping the Benefits - ICI16

 

 

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:

 

ICI Fund Flow Survey | International Funds and Equity ETFs Reaping the Benefits - ICI7

 

ICI Fund Flow Survey | International Funds and Equity ETFs Reaping the Benefits - ICI8

 

 

Sector and Asset Class Weekly ETF and Year-to-Date Results: In sector SPDR callouts, the long treasury TLT ETF took in contributions of +$285 million or +6% as investors felt jitters over the lack of breadth in the equity market's recent highs.

 

ICI Fund Flow Survey | International Funds and Equity ETFs Reaping the Benefits - ICI9

 

 

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.

 

ICI Fund Flow Survey | International Funds and Equity ETFs Reaping the Benefits - ICI17

 

ICI Fund Flow Survey | International Funds and Equity ETFs Reaping the Benefits - ICI18

 

 

Net Results:

The net of total equity mutual fund and ETF flows against total bond mutual fund and ETF flows totaled a negative -$58 million spread for the week (+$3.2 billion of total equity inflow net of the +$3.3 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 +$1.8 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.)

  

ICI Fund Flow Survey | International Funds and Equity ETFs Reaping the Benefits - ICI10

 

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:

 

ICI Fund Flow Survey | International Funds and Equity ETFs Reaping the Benefits - ICI11 

 

 

Jonathan Casteleyn, CFA, CMT 

 

 

 

Joshua Steiner, CFA

 

 

 

 

 


The Macro Show Replay | July 30, 2015

 


July 30, 2015

July 30, 2015 - Slide1

 

BULLISH TRENDS

July 30, 2015 - Slide2

July 30, 2015 - Slide3

 

BEARISH TRENDS

July 30, 2015 - Slide4

July 30, 2015 - Slide5

July 30, 2015 - Slide6 

July 30, 2015 - Slide7

July 30, 2015 - Slide8

July 30, 2015 - Slide9

July 30, 2015 - Slide10

July 30, 2015 - Slide11
July 30, 2015 - Slide12

July 30, 2015 - Slide13


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Hedgeye CEO Keith McCullough handpicks the “best of the best” long and short ideas delivered to him by our team of over 30 research analysts across myriad sectors.

PNRA | THE EVOLUTION CONTINUES

The Panera Bread Company (PNRA) is on the Hedgeye Restaurants Best Ideas list as LONG. 

 

PNRA reported 2Q15 results Tuesday after the close, followed by a rather extensive call yesterday morning. There continues to be plenty of noise within the results as management pulls certain levers and drives key growth initiatives. EPS for the quarter declined 7.5% YoY to $1.61 versus consensus estimates of $1.63. Revenue came in under estimates, reporting $676.7 million versus consensus of $679.5 million, growing 7.2% YoY. Company-owned comparable net bakery-café sales (SSS) increased 2.4% matching consensus, comprised of YoY transaction growth of 1.1% and average check growth of 1.3%. Very important to note that 3Q15 to date (first 27 days) company-owned comparable net bakery-café sales are up 4.7%, continuing the sequential monthly growth momentum (SSS were up 1.9% in April, 2.1% in May and 3.4% in June).

 

PNRA | THE EVOLUTION CONTINUES - PNRA CHART 1

PNRA | THE EVOLUTION CONTINUES - PNRA CHART 2

 

This quarter marked the 5th consecutive quarter of traffic growth for PNRA, showing strong performance versus the competition beating Black Box Intelligence traffic metrics by 290 basis points in 2Q.

PNRA | THE EVOLUTION CONTINUES - PNRA CHART 3

 

Management is showing great responsibility with price increases, modestly increasing prices to offset inflation, but keeping increases well below the competition. Black Box per person average check is up roughly ~3.4% for the quarter, largely reflective of wage pressures and minor commodity pressures across all markets and segments.

PNRA | THE EVOLUTION CONTINUES - PNRA CHART 4

 

PANERA 2.0 UPDATE

Strong progress is being made in converting stores to the Panera 2.0 concept, 77 conversions made in Q2 making it 181 total conversion in FY15 to date. In the 2H management is expecting to complete an additional 225 conversion, bringing the total for FY15 to ~400 stores. Performance of the three stores with 2.0 implemented for the longest period of time, 10 quarters, has been impressive, cumulative gross retail sales increased 33.6% or roughly 10% per year. As the team works on converting more stores, the longer they are in market the larger their impact, three to four quarters seems to be the sweet spot to realize strong growth. Panera 2.0 continues to be a strong growth initiative, projected to make a meaningful large scale impact by the 2H FY16.

 

OTHER GROWTH DRIVERS

Catering grew 9.2% in the quarter, strongest growth seen in some time. Catering now has a focused sales team, and utilizes the delivery hub where possible to take friction out of the store. Delivery continues to be a focus for the company, opened 15 delivery hubs in 2014, bringing the total to 29. Consumer packaged goods is growing and profitable, expected to have $175mm in retail sales in 2015, with a 3-year growth rate of 58% management is expecting this segment to be a $1bn business sometime in the future.

 

MANAGEMENT GUIDANCE

Management maintained guidance for the full year, of EPS to be flat to down mid- to high-single digits when compared to full year fiscal 2014. Full year SSS of 2-3.5%, operating margin contraction of 100-175 basis points, and G&A won’t be as favorable as it was in Q2. New unit expansion of 105-115 new bakery-cafes producing $43-$45k average weekly sales. Q3 comps are expected to come in a bit higher given the strong first 27 days. And management will continue to accelerate the pace of Panera 2.0 conversion in Q3.

 

HEDGEYE OUTLOOK

Management continuously mentioned an 18 month time frame till they start to see the positive effects of all their investments. We are even more confident than management and believe they are being conservative. We think PNRA will see an inflection point in about 12 months or 2Q16. At this point you will see an acceleration of earnings growth, and a clear line of sight to strong investment payback.


A Risk Manager's Response to Today’s Fed Announcement

Editor’s Note: Below is an abridged commentary culled from various tweets posted by Hedgeye CEO Keith McCullough shortly after today’s Fed announcement.

*  *  *  *  *

A Risk Manager's Response to Today’s Fed Announcement - Yellen cartoon 09.17.2014NEW

 

BREAKING: no change #FOMC

 

Anyone who understands cyclical growth slowing and deflation understands that the Fed made the right move. If they were to hike into a slowdown, they would be the catalyst for the next US recession.

 

Hedgeye reiterates the Slower (and Lower) for longer view

 

For those of you who were calling for the SEP hike = #wrong

 

"hike appropriate when we have labor and INFLATION improvement" July = #Deflation

 

We are just one more bad jobs report away from no DEC hike either.

 

USD and Rates should probably stay higher into what the manic media will read as a "good" GDP.  Don't trade the headline - look for the next catalyst.

 

I guess the Fed thinks Oil crashing (-22% in the last month) is "stability." Here's a chart of Oil instability (OVX = 30-40, sustained!) 

 

A Risk Manager's Response to Today’s Fed Announcement - z keith oil chart

 

Newsflash: the "pace of job gains" always peaks at the end of an economic cycle. Non-farm payroll "pace" of gains stopped accelerating in FEB. 

 

A Risk Manager's Response to Today’s Fed Announcement - z keith nfp chart

 

In other news, Biotech $IBB -1.9% on an up day - hyper growth expectations finally slowing too.

 

Where the real action is at today is on the "easy money" trade - Housing $ITB ripping +1.6%

 

This is the joke that has become Wall St selling "bullish economic" research- stocks only fly on slowing economic news!

 

 


McCullough: Roger Goodell Is The Biggest Loser In #DeflateGate

FOX Sports NFL Insider Mark Garafalo, Hedgeye CEO Keith McCullough and FBN’s Sandra Smith debate the fallout from Deflategate with Fox Business anchor Maria Bartiromo. 

 

According to McCullough, "I have a problem with any central planner, in this case Goodell, head of a cartel, taking advantage of his position of power and manipulating the media."


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 80.65%
  • SHORT SIGNALS 78.64%
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