FMHQ (Friday Morning Housing Quant)

Takeaway: NVR, one of our top two names for the quarter, continues to lead the group at +15.1% QTD and +10.3% on NTM earnings estimate revisions.

Our FMHQ (Friday Morning Housing Quant) tables present the state of the publicly traded homebuilders in a visually-friendly, quantitative format that takes about 60 seconds to consume. 


Quick Quant Takeaways: 

  • Performance Roundup: The broader Housing complex has been outperforming the Homebuilders QTD.  While the S&P 500 is down 6.8% QTD through mid-day, the ITB (+0.8%) and XHB (-1.8%) are mixed. The average and median QTD returns for the 11 homebuilders we include in our table, however, are down -6.0% and -4.4%, respectively. The best performing homebuilder this quarter is NVR with a +15.1% QTD gain. NVR was one of two builders we favored for 3Q15. The other was Toll Brothers, which is down -3.2% for the QTD. The worst performing builders this quarter include HOV (-34.2%) and BZH (-18.1%). 
  • Estimate Revisions: NVR continues to lead the pack in terms of NTM earnings estimate revisions over the last 3mos (+10.3%), followed by DHI (+6.6%) and LEN (+5.9%). At the other end of things, HOV and BZH have seen NTM estimates cut by -14.2% and -5.3% over the last 3mos. 
  • Housing Macro | Employment:  Employment growth within housing’s key demand demographic of 25-34 year olds was flat sequentially at +2.3% YoY while accelerating payroll growth in the 20-24 YOA bucket drove acceleration in the aggregate 20-34 YOA group. Resi Construction employment was also flat sequentially with year-over-year growth decelerating -60bps to +4.0%. There are a couple takeaways:  First, employment growth on both the supply and demand sides of housing continue to outperform the broader averages.  Second, tightening resi labor market conditions are finding flow through to price with earnings growth for residential construction workers and single-family GC’s running at a notable premium to the broader average. Hourly earnings grew +4.8% YoY in the latest month for resi construction workers while growing 2.2% YoY in the private sector in aggregate and +2.4% for NonSupervisory & Production workers (who the BLS estimates = ~80 of the labor force).


  • *Bonus Bullet:  Completely unrelatedly, this week’s Friday Morning Housing Quant devolved into the Friday Afternoon Housing Quant due solely to our spontaneous over-reminiscing about the Karate Kid (see this morning’s Early Look).


    A quick compilation for your holiday weekend enjoyment:

    The Crane Kick >> HERE

    Johnny’s Back! >> HERE

    Daniel is the Real Bully >> HERE




FMHQ (Friday Morning Housing Quant) - Buiider Quant 1 QTD with edits 


FMHQ (Friday Morning Housing Quant) - Buiider Quant 2


FMHQ (Friday Morning Housing Quant) - Buiider Quant 3 with edits


FMHQ (Friday Morning Housing Quant) - Compendium 090415


FMHQ (Friday Morning Housing Quant) - U.S. Eco Summary Table


FMHQ (Friday Morning Housing Quant) - 20 34 YOA Employment


FMHQ (Friday Morning Housing Quant) - Resi Construction Employment


FMHQ (Friday Morning Housing Quant) - Resi Construction Earnings




Joshua Steiner, CFA


Christian B. Drake

ZBH: We Are Adding Zimmer Biomet to Investing Ideas (Short Side)

Takeaway: We are adding Zimmer Biomet to Investing Ideas on the short side.

Please note that we are adding Zimmer Biomet (ZBH) to Investing Ideas on the short side today.


Our Healthcare sector analyst team (Tom Tobin and Andrew Freedman) will send out a detailed stock report outlining our bear case for ZBH next week.


ZBH: We Are Adding Zimmer Biomet to Investing Ideas (Short Side) - z zim

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.

VIRT: We Are Removing Virtu Financial From Investing Ideas (Bear Side)

Takeaway: We are removing VIRT from Investing Ideas.

Please be advised that we are removing Virtu Financial (VIRT) from Investing Ideas (Bear Side) today.


"Stock imploded on the recent quarter, but has since seen its business improve, sequentially, with market volatility," writes Hedgeye CEO Keith McCullough. "I want to come back to this on the short side after we get the current quarter out of the way."


VIRT: We Are Removing Virtu Financial From Investing Ideas (Bear Side) - z virt 1


Why Hedgeye’s Howard Penney Is Advising Investors to Short Hain Celestial | $HAIN

Editor’s Note: Below is an abridged excerpt of a recent research note written by Hedgeye Managing Director Howard Penney. If you’re an institutional investor and would like more info on how you can subscribe to Howard’s Restaurants and Consumer Staples research please email

*  *  *  *  *

Hain Celestial Group (HAIN)  remains on our Best Idea list as a SHORT.


Why Hedgeye’s Howard Penney Is Advising Investors to Short Hain Celestial | $HAIN - z red


We continue to believe that the company is a collection of brands and businesses that are not deserving of its current premium valuation.  The company is only one of a few that participate in the “better-for-you” space, but not all companies are created equal.  HAIN’s business model is a risky roll-up story whose better days are in the past. 


Why Hedgeye’s Howard Penney Is Advising Investors to Short Hain Celestial | $HAIN - z hain 1


The most recently reported 4Q15 only confirms this belief. The issues the company faces today are very relevant to the future of the company.


  • Business trends and a sum of the part analysis suggest that the UK business is overvalued
  • The drive to cut costs increases business risk
  • The quality of earnings is the lowest in the Consumer Staples sector


As our analyst team has demonstrated in our past Black Books, HAIN is less than forthcoming with detailed information on how the core business is performing and clearly overstates the positive business trends.  This past quarter is just another example of the company hiding what the true organic growth is of the UK business.

Jobs, Yields and the Eurozone

Client Talking Points


Consensus is looking for +217K on headline NFP – what hyper-sophisticated, super secret quant gets you to that number? …. Carry July’s year-over-year growth rate to August and calculate the implied month-over-month change.  #Wahlah.  NFP growth peaked in February, net monthly payroll gains have transitioned from great (2014 =260K) to good (2015 YTD = 211K) and Initial Jobless claims hit their low watermark ~6 weeks ago.  Economic cycle tops are process but we’re late-cycle currently and the clock tick is getting louder on the current expansion.  Today’s Jobs data and the read-through to policy notwithstanding, slower-for-longer remains the intermediate-term call.  


The Fed has never hiked into a slowdown and, with both global and domestic growth decelerating, a policy mistake looks more likely to drive yield spread compression than not.  In high yield land, Deflation’s Dominoes land in Junk and spread risk remains alive and investible.  We took the other side of Fischer yesterday and shorted JNK in RTA.  


German Factory Orders fell (-1.4% in JUL year-over-year vs. -0.6% forecast and +1.8% prior) and August Retail PMIs across the Eurozone, Germany, France, and Italy all declined versus the prior month.  Mario Draghi attempted to stoke the prospect of increasing the ECB’s QE program yesterday, but we continue to state that the trend of #EuropeSlowing cannot be fixed simply by magical QE fairy dust. Eurozone equities are all down a solid -1% to -2.5% today following central bank speak.  


**Tune into The Macro Show...special jobs report edition with Macro Analyst Christian Drake 9:00AM ET - CLICK HERE

Asset Allocation


Top Long Ideas

Company Ticker Sector Duration

We recently tried out the "Create Your Taste" experience at the newly remodeled McDonald’s location in Midtown East on the corner of 58th street and 3rd Ave. Walking into the newly remodeled MCD, we were greeted by the brand new self-order kiosks with attentive staff there to assist you. Customers were very interested in using the kiosks, and everyone using them seemed to be having an easy time with it.


For it being only two weeks into the process we were very impressed by the efficiency and mastery the staff is already displaying. We plan to head back to the same McDonalds location and check on their progress.


Our Gaming, Lodging & Leisure team is going to furnish a new update following their recent meeting with Penn National Gaming's management. They note that the stock has held up quite well despite increased market volatility. The bullish thesis on shares of PENN remains intact. Regional revenues remain strong in addition to the 2-year growth story, etc. Stay tuned.


As we outlined through various channels, we expect that high levels of volatility are here to stay for the foreseeable future. The biggest shift last week that we’ll call out is a bullish to more neutral intermediate-term view on the U.S. dollar which is why we added GLD to investing ideas in replace of UUP. To be clear, if growth continues to slow we want to be long of bonds (that view hasn’t changed in a year and a half).


From an asset allocation perspective here is the set-up:

  • Growth slowing: Long bonds and low-beta yield chasing sectors (TLT, EDV, XLU)
  • Shift to more dovish policy: long of GOLD as the shift weakens the value of the USD

We re-iterate the same view we’ve had since the beginning of 2014: Growth is slowing, and deflation remains a real risk (central bankers can’t solve this by talking down the currency). The fed will continue to push out the dots on “policy normalization.”

Three for the Road


In 2016 if $MCD does 5% same-store sales it will generate over $1.5B in incremental system-wide sales. No one is immune from the ADB pain..



In 2016 if $MCD does 5% same-store sales it will generate over $1.5B in incremental system-wide sales. No one is immune from the ADB pain..



TV ad spending alone is expected to reach $4.4 billion (including the general election campaign). The total spent so far by the GOP campaigns and the outside groups backing them: about $14 million.

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