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LNCE | Black Book Presentation Replay

Long LNCE – 8/19/15 Call Replay and Slides

Link to Audio Replay

Link to Video Replay

Link to Slide Deck

(If you have any issues accessing the replay, please email )

 

Our LONG thesis on LNCE is focused on three key points:

 

LNCE | Black Book Presentation Replay - chart 1

 

LNCE has repositioned their portfolio since the merger in 2010. They are now fully focused on branded products.

 

LNCE | Black Book Presentation Replay - chart 3

 

One of their biggest advantages is their Direct-Store-Delivery Distribution System (DSD). DSD is a big revenue driver, representing roughly 71% of sales.

 

LNCE | Black Book Presentation Replay - CHART 3b

 

LNCE has products for every occasion, from better-for-you to indulgent and everything in between.

 

LNCE | Black Book Presentation Replay - CHART 4

 

Snyder’s-Lance has gone through a period of broad based investments in infrastructure; they are now past this and shifting spending towards growing the top line.

 

LNCE | Black Book Presentation Replay - CHARt 5

 

LNCE has plenty of dry powder to do a deal, and they are looking.

 

LNCE | Black Book Presentation Replay - CHART 6

 

Our projected top line growth yields strong results.

 

LNCE | Black Book Presentation Replay - CHART 7

 

Margins are going to expand as LNCE leverages their newly remodeled system.

 

LNCE | Black Book Presentation Replay - CHART 8

LNCE | Black Book Presentation Replay - CHART 9

 

We see a solid 25%+ upside to the name without accounting for accretive acquisitions.

 

LNCE | Black Book Presentation Replay - CHART 10

 

Please call or e-mail with any questions.

 

Howard Penney

Managing Director

 

Shayne Laidlaw

Analyst

 

 


EHS | Better Than Beta

Takeaway: Tightening inventory conditions augur for further HPI acceleration in 2H15. When growth becomes scarce, asset classes with growth get bid.

Our Hedgeye Housing Compendium table (below) aspires to present the state of the housing market in a visually-friendly format that takes about 30 seconds to consume. 

 

EHS | Better Than Beta - Compendium 082015 

 

Today's Focus: July Existing Home Sales & MBA Purchase Apps

EHS in July rose +2.0% vs. downwardly revised June figures while accelerating +90 bps sequentially to +10.3% YoY as sales in the existing market made another new post-crisis high. Tight market conditions continue to support HPI with sales again growing at a premium to supply and inventory of existing homes declining on both a units and months-supply basis in the latest month

 

Some Considerations:

 

Better than Beta | When Good is Great:  Asset investibility is relative and when growth gets scarce, the growth that exists gets bid.  Housing’s rate-of-change transition from great to good in 3Q has proved a winner relative to the double decrement - from okay to bad -  in global growth and inflation trends.   Further, the recent retreat in rates – stemming largely from OUS turmoil – has further supported the relative case for domestic housing leverage over the nearer-term as affordability can tread water in the face of higher prices.  Even domestically, with business investment (still) flagging and rising personal savings stymieing an acceleration in domestic consumerism, housing and resi investment sit among a select set of absolute and relative macro performers.  Indeed,  the shelter component of inflation which represents ~32% of the CPI basket, remains the singular source of strength buttressing the headline and core CPI readings as disinflation/deflation prevail across the preponderance of goods and services prices (see 2nd chart below).    

 

Remember, this perfectly subjective gem of a question from the BLS anchors the CPI report and the Fed’s view of Inflation’s reality:

 

“If someone were to rent your home today, how much do you think it would rent for monthly, unfurnished and without utilities?”

 

EHS vs PHS (& Purchase Apps):  The 1st chart below plots Existing and Pending Sales and, as can be seen, the recent year trend has seen EHS re-couple in favor of Pending Sales following short-term dislocations.   Notably, this is the 1st month in a year in which reported EHS has eclipsed activity implied  by pending sales.  In prior instances, re-convergence has occurred via a retreat in EHS in the subsequent month.  Further, Purchase Applications were down -2.3% MoM in July and are tracking -2.8% MoM in August.  Collectively and absent a large-scale revision to the June PHS data or a surge in reported signed contract activity in July, the data suggests a balance of risk to the downside for EHS over the next month or two.  We’ll get the PHS data for July next Thursday, 8/27. 

 

Inventory & Price:  Units of inventory declined -0.4% MoM in June to 2.24 mm and with sales growing at a premium to supply for a third month, inventory on a month-supply basis dropped -2.4% to 4.81-months – representing a third month of tightening supply and the 35th month below the balanced market level of 6-months.  Tight - and tightening - supply in the 90% of the market that is EHS remains supportive of improving HPI trends and the acceleration in price growth observed across the CoreLogic and FHFA price series in recent months.  Again, improving 2nd derivative trends in HPI augurs positively for housing related equities given the strong contemporaneous relationship between the two. 

 

1st-time buyers:  First-time buyers represented 28% of the market in July, down from 30% in June and 29% a year ago.  Sales to first-timers grew +6.5% YoY, down from +17.2% YoY and June and representing the slowest pace of growth in 9-months.  The NAR posited rising prices and declining affordability as the cause of slowing 1st-time buyer demand.  This likely represents a partial truth and stands at odds to their trumpeting of the return of 1st-time buyers just two months ago when their share of total hit a multi-year high of 32%.  We take a trend view of the data as the month-to-month data is noisy and volatile. So long as the labor/income fundamentals continue to improve across the 20-35YOA age demographic, rising headship rates and single-family purchase demand should manifest on a moderate lag.   

 

 

EHS | Better Than Beta - EHS vs PHS

 

EHS | Better Than Beta - CPI Shelter vs Ex Shelter

 

EHS | Better Than Beta - EHS Inventory Months Supply

 

EHS | Better Than Beta - EHS Inventory Units

 

EHS | Better Than Beta - EHS LT

 

EHS | Better Than Beta - EHS Price Regional YoY

 

EHS | Better Than Beta - EHS Units   YoY TTM

 

EHS | Better Than Beta - EHS Regional YoY

 

 

 

 

About Existing Home Sales:

The National Association of Realtors’ Existing Home Sales index measures the number of closed resales of homes, townhomes, condominiums, and co-ops. Existing home sales do not take into account the sale of newly constructed homes. Existing home sales account for 85-95% of all home sales (new home sales account for the remainder). Therefore, increases in existing home sales tend to signify increasing consumer confidence in the market. Additionally, Existing Home Sales is a lagging series, as it measures the closing of homes that were pending home sales between 1 and 2 months earlier.

 

Frequency:

The NAR’s Existing Home Sales index is published between the 20th and the 22nd of each month. The index covers data from the prior month.

 

About MBA Mortgage Applications:

The Mortgage Bankers’ Association’s mortgage applications index covers more than 75% of mortgage applications originated through retail and consumer direct channels. It does not include loans delivered through wholesale broker and correspondent channels. The MBA mortgage purchase applications index is considered a leading indicator of single-family home sales and construction. Moreover, it is the only housing index that is released on a weekly basis. 

 

Frequency:

The MBA Purchase Apps index is released every Wednesday morning at 7 am EST.

 

  

Joshua Steiner, CFA

 

Christian B. Drake


Special Extended Edition RTA Live: August 20, 2015

Watch the replay below.

 

 


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On The Macro Show today, Hedgeye CEO Keith McCullough takes central planners to task for their countless failed attempts to outsmart economic cycles and recession by cutting rates and devaluing currencies.

 

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

 

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INITIAL JOBLESS CLAIMS | BACKING UP OFF OF HISTORICAL LOWS

Takeaway: Both rolling and spot SA claims are now on the way upwards after each hitting 42-year lows.

Both rolling and spot SA claims are now on the way upwards after each hitting 42-year lows. Spot claims hit their low of 255k five weeks ago. Since then, the reading has risen to 277k. Rolling claims hit their low of 266k two weeks ago and rose to 272k last week. The recent 42-year lows exemplify extreme strength in the labor market. However, the subsequent upward movement in claims exemplifies the point we continue to highlight; the economy faces a high degree of resistance against continued improvement from here.

 

In energy-heavy states, the labor market worsened in the week ending August 8 versus the U.S. as a whole. The chart below shows that as oil prices continued to fall, the spread between indexed claims in energy states versus the US increased from 9 to 11 week over week.

 

INITIAL JOBLESS CLAIMS | BACKING UP OFF OF HISTORICAL LOWS - Claims18

 

Additionally, to emphasize the weakness in the oil industry, we provide the following chart, courtesy of Ben Ryan from our Macro Team. Year-over-year growth in overall oil industry employment has been accelerating downward since December 2014 and entered contraction territory this March. Furthermore, we expect this reading to fall further. As we shared a few weeks ago, our Energy Sector Head, Kevin Kaiser, pointed out that many energy companies are hedged through year-end 2015, implying that later this year/early next year (assuming no bounce in energy) we'll see a second wave of job cuts from Energy.

 

INITIAL JOBLESS CLAIMS | BACKING UP OFF OF HISTORICAL LOWS - Claims20

 

The Data

Prior to revision, initial jobless claims rose 3k to 277k from 274k WoW, as the prior week's number was revised down by -1k to 273k.

 

The headline (unrevised) number shows claims were higher by 4k WoW. Meanwhile, the 4-week rolling average of seasonally-adjusted claims rose 5.5k WoW to 271.5k.

 

The 4-week rolling average of NSA claims, another way of evaluating the data, was -9.9% lower YoY, which is consistent with the previous week's YoY change.

 

INITIAL JOBLESS CLAIMS | BACKING UP OFF OF HISTORICAL LOWS - Claims2

 

INITIAL JOBLESS CLAIMS | BACKING UP OFF OF HISTORICAL LOWS - Claims3

 

INITIAL JOBLESS CLAIMS | BACKING UP OFF OF HISTORICAL LOWS - Claims4

 

INITIAL JOBLESS CLAIMS | BACKING UP OFF OF HISTORICAL LOWS - Claims5

 

INITIAL JOBLESS CLAIMS | BACKING UP OFF OF HISTORICAL LOWS - Claims6

 

INITIAL JOBLESS CLAIMS | BACKING UP OFF OF HISTORICAL LOWS - Claims7

 

INITIAL JOBLESS CLAIMS | BACKING UP OFF OF HISTORICAL LOWS - Claims8

 

INITIAL JOBLESS CLAIMS | BACKING UP OFF OF HISTORICAL LOWS - Claims9

 

INITIAL JOBLESS CLAIMS | BACKING UP OFF OF HISTORICAL LOWS - Claims10

 

INITIAL JOBLESS CLAIMS | BACKING UP OFF OF HISTORICAL LOWS - Claims11

 

INITIAL JOBLESS CLAIMS | BACKING UP OFF OF HISTORICAL LOWS - Claims19

 

Yield Spreads

The 2-10 spread fell -2 basis points WoW to 146 bps. 3Q15TD, the 2-10 spread is averaging 159 bps, which is higher by 1 bps relative to 2Q15.

 

INITIAL JOBLESS CLAIMS | BACKING UP OFF OF HISTORICAL LOWS - Claims15

 

INITIAL JOBLESS CLAIMS | BACKING UP OFF OF HISTORICAL LOWS - Claims16

 

Joshua Steiner, CFA

 

Jonathan Casteleyn, CFA, CMT

 

 

 

 


Today's Top-8 Tweets From Keith McCullough

Below is a quick highlight reel from Hedgeye CEO Keith McCullough's Twitter feed from earlier this morning. As you can see by the timestamps on the tweets, Keith is at his desk working while most people are still in REM sleep.

 

Today's Top-8 Tweets From Keith McCullough - z 56

 

(If you like what you see here, you'll really like our Early Look (morning market newsletter), Investing Ideas (our analysts' top ideas curated by Keith) and The Macro Show (our live and interactive morning market show). 

*  *  *  *  * 

Today's Top-8 Tweets From Keith McCullough - z chart 2

 

Today's Top-8 Tweets From Keith McCullough - z chart 3

 

Today's Top-8 Tweets From Keith McCullough - z chart 4

 

Today's Top-8 Tweets From Keith McCullough - z chart 5

 

Today's Top-8 Tweets From Keith McCullough - z chart 6

 

Today's Top-8 Tweets From Keith McCullough - z chart 7

 

Today's Top-8 Tweets From Keith McCullough - z chart 8

 

Today's Top-8 Tweets From Keith McCullough - z chart 9


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