• run with the bulls

    get your first month

    of hedgeye free



WhiteWave Foods (WWAV) is on the Hedgeye Consumer Staples Best Ideas list as a LONG



WWAV is set to report 2Q15 earnings this Friday; we are expecting to see another blockbuster quarter of robust organic growth in the high-single digits to low-double digits. Consensus estimates have EPS coming in at $0.25 an 8.7% increase YoY. Followed by total net sales of $928.1mm representing a 10.7% increase YoY. And gross income of $320mm which represents a 12.3% increase YoY and a 100 basis point margin expansion. To outperform these expectations would be tough, but realistically we believe that WWAV can match the street and that’s all they really need to do to.


During WWAV’s 1Q15 earnings call they raised adjusted diluted EPS guidance to $1.10 to $1.14 for the full-year 2015, increased from previous guidance of $1.08 to $1.12. Consensus estimates are currently projecting near the high end of the range at $1.13, leaving at least a penny of EPS on the table. We think WWAV will get the $1.14 and possibly more for the full year. 


Within this earnings will be another quarter of Horizon center-of-store products on the shelf, So Delicious, as well as a better read on the China JV. On the Horizon front I think we will see positive results, with increased sales, as premium milk buyers notice the trusted brand on center-of-store products.  So Delicious is such a dominating brand in the dairy-free category within the natural channel, and we really believe its success is really just beginning. The China JV admittedly is a wild card this quarter, although the sales will probably still be minor, the read they are getting on the business will be vital. We think it will be a positive outlook with some caution given the macro environment in the country.


It will be interesting to see if the droughts in the west continue to hamper the Earthbound crop. Although addressed in the 1Q15 call as a non-issue for 2015, conditions may have gotten worse than expected.


All-in-all we continue to believe that WWAV is performing without a hitch and that we will once again see strong organic growth within the business.



Turning onto possible investments in the near future, we continue to see consolidation within the food space, especially with smaller better-for-you brands. It is widely known that WWAV is on the hunt for smart acquisitions, and we believe Quorn would be the perfect fit.


Quorn is a meat alternative food producer that leads the market in the UK and has a rapidly growing presence in the U.S. In January it was stated that Quorn had £150mm in sales. Quorn would be a perfect fit into the WWAV portfolio and extend them into the increasingly popular meat alternative segment.


We highlighted this potential acquisition in our WWAV Black Book and have become more convinced it would be great for the company after Pinnacle Foods recently reported robust growth in their Gardein business. Plant-based alternative products across all segments are rising in popularity, and meat alternatives is a major segment in which WWAV does not participate at this time. There are a lot of potential targets in this industry but Quorn is currently one of the most recognized with a pre-built customer base. Additionally, Quorn’s UK business is their biggest driver of revenue making it a perfect tack on to WWAV’s Alpro business. This acquisition would yet again add a #1 or #2 player to WWAV’s robust portfolio that is built for consumer preferences that have yet to fully evolve. We continue to be long WWAV and excited about the multitude of acquisition that they can make out in the market.



ICI Fund Flow Survey | International Equity Funds Batting 1.000 in 2015

Takeaway: Investors continue to favor international equity funds, which took in +$3.8 billion last week maintaining a perfect inflow streak for 2015.

Investment Company Institute Mutual Fund Data and ETF Money Flow:

In the 5-day period ending July 29th, investors made net withdrawals from most asset classes but continued to allocate to international equity funds with a +$3.8 billion contribution. Investors have made positive subscriptions to international stock funds every week so far in 2015 aggregating to +$88.5 billion year-to-date. The source of funds continues to be domestic equities, with redemptions in 24 of 30 weeks so far in 2015. Year-to-date withdrawals in domestic stock funds now total -$83.5 billion, the worst 30 week start to any year this cycle. Additionally, investors have been backing off fixed income recently with fund flows to total fixed income mutual funds and ETFs having been negative in 6 out of the past 8 weeks.

ICI Fund Flow Survey | International Equity Funds Batting 1.000 in 2015 - ICI1


In the most recent 5-day period ending July 29th, total equity mutual funds put up net outflows of -$1.4 billion, trailing the year-to-date weekly average inflow of +$166 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 -$5.2 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 outflows of -$4.7 billion, trailing the year-to-date weekly average inflow of +$1.7 billion and the 2014 average inflow of +$929 million. The outflow was composed of tax-free or municipal bond funds withdrawals of -$88 million and taxable bond funds withdrawals of -$4.6 billion.


Equity ETFs had net redemptions of -$1.9 billion, trailing the year-to-date weekly average inflow of +$2.3 billion and the 2014 average inflow of +$3.2 billion. Fixed income ETFs had net inflows of +$384 million, trailing the year-to-date weekly average inflow of +$916 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 Equity Funds Batting 1.000 in 2015 - ICI2


ICI Fund Flow Survey | International Equity Funds Batting 1.000 in 2015 - ICI3


ICI Fund Flow Survey | International Equity Funds Batting 1.000 in 2015 - ICI4


ICI Fund Flow Survey | International Equity Funds Batting 1.000 in 2015 - ICI5


ICI Fund Flow Survey | International Equity Funds Batting 1.000 in 2015 - 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 Equity Funds Batting 1.000 in 2015 - ICI12


ICI Fund Flow Survey | International Equity Funds Batting 1.000 in 2015 - ICI13


ICI Fund Flow Survey | International Equity Funds Batting 1.000 in 2015 - ICI14


ICI Fund Flow Survey | International Equity Funds Batting 1.000 in 2015 - ICI15


ICI Fund Flow Survey | International Equity Funds Batting 1.000 in 2015 - 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 Equity Funds Batting 1.000 in 2015 - ICI7


ICI Fund Flow Survey | International Equity Funds Batting 1.000 in 2015 - ICI8



Sector and Asset Class Weekly ETF and Year-to-Date Results: In sector SPDR callouts, the materials XLB ETF saw the highest percentage net withdrawal last week of -3% or -$65 million.


ICI Fund Flow Survey | International Equity Funds Batting 1.000 in 2015 - 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 Equity Funds Batting 1.000 in 2015 - ICI17


ICI Fund Flow Survey | International Equity Funds Batting 1.000 in 2015 - ICI18



Net Results:

The net of total equity mutual fund and ETF flows against total bond mutual fund and ETF flows totaled a positive +$998 million spread for the week (-$3.3 billion of total equity outflow net of the -$4.3 billion outflow from fixed income; positive numbers imply greater money flow to stocks; negative numbers imply greater money flow to bonds). The 52-week moving average is +$1.7 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 Equity Funds Batting 1.000 in 2015 - 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 Equity Funds Batting 1.000 in 2015 - ICI11 



Jonathan Casteleyn, CFA, CMT 




Joshua Steiner, CFA






The Macro Show Replay | August 6, 2015


real-time alerts

real edge in real-time

This indispensable trading tool is based on a risk management signaling process Hedgeye CEO Keith McCullough developed during his years as a hedge fund manager and continues to refine. Nearly every trading day, you’ll receive Keith’s latest signals - buy, sell, short or cover.


Takeaway: Focus will now turn to 3Q15, the strongest quarter for net new customer wins.



We added CSLT to our Investment Ideas list as Long earlier in the week (Click Here for Note) based on the steep valuation discount to its forward growth rate and data sharing agreement with UNH setting stage for strong bookings growth in the back half of 2015.


Castlight Health (CSLT) reported Q2 2015 sales of $18.5 mill, beating consensus estimates of $17.8 mill.  Guidance for 3Q15 of 19.2-$19.5 mill (19.8 mill consensus) was a bit soft due to the implementation timing of sales to existing customers, which comprised a larger than expected portion of 1H15 bookings.  For the full year 2015, management stated they are on track to hit the mid point of their initial 2015 revenue guidance range of $74-77 mill.  With respect to profitability, subscription sales gross margin was 83.0% in 2Q15, a significant improvement compared to 69.6% in 2Q14, and supportive of management's long-term total gross margin guidance of 70-75%.


The guidance looks low, given the pattern of beats in recent quarters and our model.  Based on the short interest at 31% and deeply discounted valuation, meeting or slightly beating estimates should translate as a significant positive.


CSLT | 2Q15 Earnings | TOO SHORT AND TOO CHEAP FOR A BEAT - 2015 08 06 CSLT Guidance II



On the new business front, CSLT's 2015 bookings year-to-date have come from cross-sells, which is a positive reflection of the company's R&D efforts. 25% of customers have purchased at least 3 products, with a few signing on for 4 to 5 products. The company only signed 7 net new customers in the quarter (down from 16 customers signed in 2Q14), bringing total customers signed to 181.  Helping offset lower customer adds is a larger average deal size, with the company signing 3 Fortune 500 companies in the quarter.  


CSLT | 2Q15 Earnings | TOO SHORT AND TOO CHEAP FOR A BEAT - 2015 08 06 CSLT Customers


We attribute the year-over-year decline in net customer wins to sales force disruptions as part of a broader reorganization effort that started at the beginning of the year. However, we continue to believe that the UNH data sharing agreement sets them up nicely for net new customer wins in the seasonally strong back-half of the year.  


On the margin, management commentary on the sales effort sounded sequentially more positive on the 2Q15 call, in our view.


"Clearly on the new logo front, we saw less new logo addition than we were looking for in the first half of the year but not totally unexpected given the transition of the sales force, and we're really looking to the third quarter to accelerate customer adds and new logos. And we think we're in a good position to do that." - CFO Q3 Earnings Call



Overall, it was a forgettable quarter with no big surprises.  Attention will now turn to 3Q15, as it is typically the strongest quarter for net new customer wins.  CSLT's success in driving new bookings growth for the remainder of the year will depend on how quickly they can get trained reps out in the field and how effectively they manage the sales force transition from here.  With the stock trading at 46% discount to its sales growth rate relative to peers and 31% short interest, the hurdle is low and appears beatable.  In the short term, we are willing to look past some of the weakness and instead focus on the long-term growth opportunity ahead. 


CSLT | 2Q15 Earnings | TOO SHORT AND TOO CHEAP FOR A BEAT - 2015 07 31 CSLT Peer Valuation


Please call or e-mail with any questions.


Thomas Tobin
Managing Director 



Andrew Freedman




LEISURE LETTER (08/6/2015) - 880.HK, NCLH, RCL





August 6: 8:30am: MPEL 2Q CC ; PW: MPEL

August 6: 8:30-1pm: RCL INVESTOR DAY (NYSE)

August 7: 11:00am: Hedgeye Macau Call 

August 11: 4:30pm: STN 2Q CC

August 12: 7:00am: 880.HK 2Q CC 

August 13: 6:00am: G13.SI 2Q CC

August 19: 7:00am: 27.HK 2Q CC 


880.HK - SJM Holdings Ltd’s chief executive, Ambrose So Shui Fai, has called on the authorities not to ban smoking lounges from casinos in Macau.  
  • “Having smoking lounges inside casinos does not run contrary to the [government's proposed] total smoking ban,” the senior executive of the Macau gaming operator told reporters on Wednesday.  
  • Macau’s Secretary for Social Affairs and Culture, Alexis Tam Chong Weng, who oversees smoking control policies, has said several times that smoking lounges inside casinos are not completely effective in preventing non-smokers being exposed to secondhand smoke.



Paradise Co. LTD - Second quarter net profit for South Korean casino operator Paradise Co Ltd fell 47.1% YoY. Their profit was approximately KRW12.65 billion ($10.8 million) compared to approximately KRW23.93 billion in the year-prior period, the company said in a filing to the Korea Exchange on Thursday.  

  • During the reporting period, the number of “visiting days” by VIP gamblers from mainland China at Paradise Co properties fell 30.7% to 18,854 days, compared to 27,192 days in the second quarter in 2014.  
  • Paradise Co defines VIP visiting days as the daily accumulated number of high roller guests that participated in table games (excluding slot machine guests). In the second quarter 2015, mainland Chinese VIPs accounted for 44.9 percent of the 41,973 VIP visiting days recorded.
  • The rate of YoY decline in the firm’s casino revenue feel 50.2%, it said in a filing on July 6.


Takeaway: Ugly Q for Paradise, but MERS largely to blame for the slow down in visitation. 


Belle Corp. - Belle Corp, an investor at the City of Dreams Manila casino resort in the Philippines, is to raise approximately PHP1 billion ($21.9 million) by selling its remaining 47.85 million shares in Pacific Online Systems Corp to a Belle subsidiary.  In a filing on Wednesday to the Philippine Stock Exchange, Belle said it plans to use the sale proceeds “mostly for debt repayment”.


Takeaway: This sale comes at a tough time for Belle as they just reported a 50% YoY drop in net profit.  


NCLH - Norwegian Cruise Line is sending a new ship to Port Tampa Bay for next year's fall and winter cruises to the Caribbean: the Norwegian Jade.  

  • According to an announcement Wednesday, when the Norwegian Jade arrives in the Tampa Bay area in November 2016, it will sail seven- and eight-day itineraries in the Western Caribbean and 10- and 11-day cruises in the Eastern Caribbean.  
  • "We have strong demand from our guests to sail from Tampa," said Norwegian President and COO Andy Stuart in a prepared statement.



RCL -  TUI Cruises has started to promote its upcoming Asia cruises under the tagline: Book Today, Smile Tomorrow: Asia is Waiting. Sailing from Marina Bay in Singapore, Mein Schiff 1 will be offering series of alternating seven-day cruises to Malaysia, Thailand and Vietnam from November though March.  Rates start at 696 euro per person double occupancy for an inside stateroom or from 1,695 including round trip airfare from Germany. 



Chinese Business Travel Market- The campaign against corruption and slower economic growth in the mainland are curbing growth in the market for business aircraft in Greater China, consulting firm Asian Sky Group says.  

  • The firm’s annual report on business jet fleets in the Asia-Pacific region says Greater China’s fleet grew by 59 aircraft last year, having grown by 64 the year before.  
  • Reluctance to spend money caused by the mainland’s campaign against corruption and economic performance will probably keep deterring investment in business aircraft this year, the report says.


Takeaway: Growth is slowing across most metrics in China. However, per the Ctrip.com earnings call, business travel via high speed rail is showing signs of steady growth, and leisure travel across all transportation methods is equally strong.


Macau Property Market - Centaline Macau Property Agency Ltd believes only half as many homes were sold in Macau last month as the month before, and expects the number of sales to keep falling until the end of September. 

  • Centaline director Jackey Shek Po Tak told reporters that the fall was due to buyers and sellers taking their summer holidays and to turbulence in the stock market deterring investment in housing.
  • Shek forecast no immediate decrease in prices and an increase in the fourth quarter of this year.



Singapore Jubilee Weekend - Large crowds are expected at the Marina Bay area during the Jubilee weekend between Aug 7 and 10, due to the many activities held there.  The police said in a statement on Thursday that the Float @ Marina Bay, Esplanade Waterfront Promenade, Merlion Park, Promontory, Marina Bay Sands Waterfront, Gardens by the Bay and Marina Barrage are expected to be crowded. 





California - A pilot program by the California Lottery in which gamblers can buy lottery tickets at gas pumps in the Sacramento area is being embraced by players. 

  • “Play at the Pump” lets motorists buy up to $20 worth of Quick Pick tickets when they pay with a credit or debit card at the gas pump. 
  • The program – which started about a year ago in Roseville – has spread to 86 other locations in the region and Southern California. The plan is to expand to about 100 stations. Only California and North Carolina have the option, but other states are considering it.


Takeaway: Lower gas prices and initiatives like this will continue to drive lottery sales. FY2014 was a banner year for domestic lotteries. 



Hedgeye Macro Team is incrementally bearish on U.S. consumption growth, based on the consumer's continued efforts to deleverage their household balance sheet combined with the peaking of consumer confidence and stagnating labor productivity.   

Takeaway:  For now, US regional gaming slowed in June but North American cruise pricing still doing well.

USD, Oil and UST 10YR

Client Talking Points


Signaling immediate-term TRADE overbought on both the USD Index and vs. the Euro – and another #slowing (rate of change) jobs report should be good (very short term) for everything that is correlating inversely to USD.


The most obvious oversold signal we have this morning on USD overbought is WTI – anything sub $45 looks like a cover/buy (for a trade if you’re bearish on #LateCycle jobs like the ADP numbers have been); everything from Russian stocks to the XLE and XOP signaling oversold too…


Easiest thing to do post yesterday’s bounce to lower-highs in yields is buy A) Long Term Bonds and B) stocks that look like Bonds – Utilities (XLU) and REITS (VNQ) could easily rip higher on a bad jobs report.


**The Macro Show - CLICK HERE to watch today's edition at 8:30AM ET.

Asset Allocation


Top Long Ideas

Company Ticker Sector Duration

HOLX’s earnings release were as good as we expected, and in some spots, much better than our optimistic view. Given the move in the price, we did begin to do some work on Hologic’s Diagnostic segment. We touched base with a lab Director who currently does his testing on Hologic/Gen-Probe’s Panther system. During the call management made some positive comments about uptake of the systems and rising utilization per box. Our contact suggested the benefit from the Affordable Care Act was substantial  over the last 12 months, pushing volume up to a mid-teens growth rate, but that trends were flattening. But on the positive side Qiagen continues to cede share with an out of date test and the alternatives are primarily Roche and Hologic, but not Cepheid’s system. The bottom line is that we may be too conservative with our estimates for Diagnostics, which we’ve been assuming treads water from here.  However, we’re starting to think there is some incremental acceleration that’s possible, which would be welcome news indeed. 


After attending PENN’s analyst day at the Plainridge Casino in Massachusetts our Gaming, Lodging & Leisure Team struggled to find any negative takeaways. The property opened very strong in late June, and the strength continued in July. We are now raising our win per day per slot assumption to $500 from $400. Terrific highway access, a lower gaming tax rate and garage parking provide a competitive advantage in what seems to be a deeper market than the consensus view. Our 2015 and 2016 estimates are materially above the Street for EBITDA and EPS. Most importantly, we think PENN should generate an ROI of 28% on Plainridge, much higher than the Street anticipates.


As largely expected a sequential acceleration in GDP from Q1 to Q2 on a seasonally adjusted annual basis pulled forward the market’s expectation for a rate hike which = USD strength. The USD finished positive on the week (+0.50% on Thursday’s print alone).

  • U.S. GDP reported Thursday for Q2 came in at +2.3% on a Q/Q seasonally-adjusted annual rate and the market took it as a positive print à rate hike expectations pulled forward.
  •  Remember that 1) Consensus focuses on this SAAR number and 2) The GDP acceleration came off of an awful Q1 print (Q1 revised to a measly +0.60% for Q1 vs. initially reported -0.20%)
  • On a Y/Y basis (crazy Hedgeye speak) GDP for Q2 actually decelerated to +2.3% YY vs. 2.9% prior
  • With very difficult base effects in our model for 2H 2015 GDP we expect Q2 data (especially the GDP print) to provide support for the USD
  • Our expectation for Y/Y GDP in Q3/Q4 are +1.6% Y/Y (+1.4% Q/Q SAAR) and +1.5% Y/Y (+1.7% Q/Q SAAR) respectively; These prints (Q3 will come in October) will stoke a relatively more dovish FED for a short time (USD headwind) but until then we’ll ride the Q2 data train. 

Three for the Road


VIDEO | @KeithMcCullough: Just Say "No" To Losing Money https://app.hedgeye.com/insights/45666-mccullough-just-say-no-to-losing-money… @HedgeyeTV



It's not the will to win that matters—everyone has that. It's the will to prepare to win that matters.

Paul "Bear" Bryant


Greek unemployment came in at 25% for May, however it is 51.8% for those between 15 to 24 years old.