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Cartoon of the Day: Explosion Ahead?

Cartoon of the Day: Explosion Ahead? - Rate hike cartoon 09.04.2015

As Hedgeye CEO Keith McCullough wrote earlier this morning, "Fed, I dare you to hike into a #LateCycle slowdown. You'll blow this entire thing up."


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


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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 sales@hedgeye.com.

*  *  *  *  *

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.


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