WWAV | DON’T PANIC, BUY MORE…HAIN | PANIC, SHORT MORE

WhiteWave Foods (WWAV) is on our Hedgeye Consumer Staples Best Ideas list as a LONG and Hain Celestial (HAIN) is on the Consumer Staples Best Ideas list as a SHORT.

 

With both stocks down roughly -11% over the past week, we wanted to give you our update.

 

HAIN IS STILL A SHORT. HAIN reported a soft quarter this week that saw a significant slowdown in the organic growth rate to 6%.  In addition, the quality of the HAIN’s quarter was extremely weak with a significant increase in the rate of “adjustments” to make the number and a significantly lower tax rate.  Given all that, HAIN just barley met consensus numbers. 

 

Both stocks are weak today given the significant slowdown in the natural channel.  On this front, HAIN has significantly more exposure to the natural channel.  In fact, as WWAV points out HAIN is not even one of the largest 25 companies in conventional channels.  While this may provide some upside for future growth, the company is facing significantly greater “better-for-you” competition in that channel. 

 

WWAV | DON’T PANIC, BUY MORE…HAIN | PANIC, SHORT MORE - CHART bash hain

 

Another area of concern for HAIN is the UK.  The company reported flat revenue growth on a constant currency basis.  Given the maturity of the core brands in the UK, at best this business has little organic growth.  On a sum-of-the-parts basis, we believe the HAIN UK business is significantly overvalued. 

 

WWAV IS STILL A BUY. In our Black Book presentation we called out the fact that there were going to be short term dips in the stock price. This is one of those dips, and we view it as a Black Friday Super Sale. The stock has come down from $50/share to $44/share in just five trading days.

 

We feel this stock is being unfairly dinged due to its perceived high correlation with the Natural channel stores such as Whole Foods Market (WFM). In fact, Wal-Mart and its subsidiaries is their largest customer, accounting for 14.6% of total sales, with the top 10 customers together accounting for roughly 44% of sales, making them very well diversified from a customer perspective. Moreover, their brands are leaders in every category they participate; few CPG companies can make that claim, although some will try (HAIN).

 

Bottom-line, WWAV is still on our Hedgeye Consumer Staples Best Ideas list, and will probably be on the list until it is acquired.

 

Please call or e-mail with any questions.

 

Howard Penney

Managing Director

 

Shayne Laidlaw

Analyst

 


7 Tweets Summing Up What You Need to Know About Today's GDP Report

"There's a tremendous opportunity to educate people in our profession on how GDP is stated and projected," Hedgeye CEO Keith McCullough wrote today. Here's everything you need to know about today's GDP report.

read more

Cartoon of the Day: Crash Test Bear

In the past six months, U.S. stock indices are up between +12% and +18%.

read more

GOLD: A Deep Dive on What’s Next with a Top Commodities Strategist

“If you saved in gold over the past 20 to 25 years rather than any currency anywhere in the world, gold has outperformed all these currencies,” says Stefan Wieler, Vice President of Goldmoney in this edition of Real Conversations.

read more

Exact Sciences Up +24% This Week... What's Next? | $EXAS

We remain long Exact Sciences in the Hedgeye Healthcare Position Monitor.

read more

Inside the Atlanta Fed's Flawed GDP Tracker

"The Atlanta Fed’s GDPNowcast model, while useful at amalgamating investor consensus on one singular GDP estimate for any given quarter, is certainly not the end-all-be-all of forecasting U.S. GDP," writes Hedgeye Senior Macro analyst Darius Dale.

read more

Cartoon of the Day: Acrophobia

"Most people who are making a ton of money right now are focused on growth companies seeing accelerations," Hedgeye CEO Keith McCullough wrote in today's Early Look. "That’s what happens in Quad 1."

read more

People's Bank of China Spins China’s Bad-Loan Data

PBoC Deputy Governor Yi says China's non-performing loan problem has “pretty much stabilized." "Yi is spinning. China’s bad-debt problem remains serious," write Benn Steil and Emma Smith, Council on Foreign Relations.

read more

UnderArmour: 'I Am Much More Bearish Than I Was 3 Hours Ago'

“The consumer has a short memory.” Yes, Plank actually said this," writes Hedgeye Retail analyst Brian McGough. "Last time I heard such arrogance was Ron Johnson."

read more

Buffalo Wild Wings: Complacency & Lack of Leadership (by Howard Penney)

"Buffalo Wild Wings has been plagued by complacency and a continued lack of adequate leadership," writes Hedgeye Restaurants analyst Howard Penney.

read more

Todd Jordan on Las Vegas Sands Earnings

"The quarter actually beat lowered expectations. Overall, the mass segment performed well although base mass lagging is a concern," writes Hedgeye Gaming, Lodging & Leisure analyst Todd Jordan on Las Vegas Sands.

read more

An Update on Defense Spending by Lt. Gen Emo Gardner

"Congress' FY17 omnibus appropriation will fully fund the Pentagon's original budget request plus $15B of its $30B supplemental request," writes Hedgeye Potomac Defense Policy analyst Lt. Gen Emerson "Emo" Gardner USMC Ret.

read more

Got Process? Zero Hedge Sells Fear, Not Truth

Fear sells. Always has. Look no further than Zero Hedge.

read more