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Cartoon of the Day: Poison?

Cartoon of the Day: Poison? - rate hike poison cartoon 09 14.2015

 

Hedgeye CEO Keith McCullough in today's Early Look:

 

...And while the “dots” on a rate hike continue to be pushed out (anyone remember they were “supposed to hike” in June?), Mr. Macro Market’s most immediate-term message to the Federal Reserve (Fed Fund Futures < 30% probability of a SEP hike) is don’t do it (again).

 

What if they do? You know, “just to get off of zero because it’s time”, or something like that...

 


BABA: Stumbling into the Party (Barron's)

Takeaway: We spoke with Barron's at length on our bearish BABA thesis back in April. Thankfully, we weren't mentioned when it twisted our analysis.

Editor's note: This brief research note below was written earlier today by our Internet & Media analyst Hesham Shaaban. If you're an institutional investor interested in learning more about how you can subscribe to his research please email to sales@hedgeye.com.

BABA: Stumbling into the Party (Barron's) - Alibaba cartoon 01.29.2015

KEY POINTS

  1. ARRIVING LATE TO THE PARTY: There isn't much that we all didn't already know.  GMV growth has slowed precipitously, the subsidiary structure is complicated, counterfeit goods are a concern, China macro is headwind, and so on and so forth.  But Barron's bear case is not so much on the above factors, but rather the implication that BABA is making up its reported metrics.  Its basis is largely driven off a quote from another BABA analyst, and a rather weak comparison of BABA's reported metrics to China demographic data.
  2. AFTER ONE TOO MANY: Barron's first takes issue with the fact that BABA's active buyers are roughly the same size as the Chinese e-commerce population reported by CNNIC (Dec 2014).  Remember that BABA has +80% market share, so this shouldn't be a surprise to any of us.  Second, Barron's twisted the demographic analysis we shared with them: that BABA's average consumer spends well in excess of what the average Chinese consumer could afford.  That doesn't mean that BABA is fudging the numbers as the article implies, it just means that China's Elite and/or Group Buying is driving BABA's GMV.  We explained this to the author, he chose to omit it.

 

Note that we have covered our short position in BABA, but we have included a set of notes below that covers the major themes behind our bearish thesis.  Let us know if you have any questions, or would like to discuss in more detail.  

 

Hesham Shaaban, CFA
203-562-6500
hshaaban@hedgeye.com
@HedgeyeInternet 

 

 

BABA: What the Street is Missing
11/26/14 08:03 AM EST
[click here]

 

BABA: Model Facing Secular Pressure
12/04/14 09:17 AM EST
[click here]

 

BABA: The Mobile Debate
03/04/15 10:34 AM EST
[click here]

 

BABA: Solid Pushback → Same Conclusion
03/31/15 08:12 AM EDT
[click here]


BABA: Stumbling into the Party (Barron's)

Takeaway: We spoke with Barron's at length on our bearish BABA thesis back in April. Thankfully, we weren't mentioned when it twisted our analysis.

KEY POINTS

  1. ARRIVING LATE TO THE PARTY: There isn't much that we all didn't already know.  GMV growth has slowed precipitously, the subsidiary structure is complicated, counterfeit goods are a concern, China macro is headwind, and so on and so forth.  But Barron's bear case is not so much on the above factors, but rather the implication that BABA is making up its reported metrics.  Its basis is largely driven off a quote from another BABA analyst, and a rather weak comparison of BABA's reported metrics to China demographic data.
  2. AFTER ONE TOO MANY: Barron's first takes issue with the fact that BABA's active buyers are roughly the same size as the Chinese e-commerce population reported by CNNIC (Dec 2014).  Remember that BABA has +80% market share, so this shouldn't be a surprise to any of us.  Second, Barron's twisted the demographic analysis we shared with them: that BABA's average consumer spends well in excess of what the average Chinese consumer could afford.  That doesn't mean that BABA is fudging the numbers as the article implies, it just means that China's Elite and/or Group Buying is driving BABA's GMV.  We explained this to the author, he chose to omit it.

 

Note that we have covered our short position in BABA, but we have included a set of notes below that covers the major themes behind our bearish thesis.  Let us know if you have any questions, or would like to discuss in more detail.  

 

Hesham Shaaban, CFA


@HedgeyeInternet 

 

 

BABA: What the Street is Missing
11/26/14 08:03 AM EST
[click here]

 

BABA: Model Facing Secular Pressure
12/04/14 09:17 AM EST
[click here]

 

BABA: The Mobile Debate
03/04/15 10:34 AM EST
[click here]

 

BABA: Solid Pushback → Same Conclusion
03/31/15 08:12 AM EDT
[click here]


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What’s Moving Oil Prices? Supply And Demand or The Dollar?

 

In response to a subscriber’s question on The Macro Show this morning, Hedgeye CEO Keith McCullough explains his thinking and process on the move in oil prices.

 

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McCullough: Quick Thought Heading Into Thursday's Fed Meeting

Takeaway: Bets continue to mount on a dovish Fed meeting…

Here’s a quick, general market observation: the U.S. stock market looks increasingly suspect heading into Thursday’s Fed meeting. (I can get you to 32 VIX, no problem).

 

Question: What if people start reading "bad" economic news as bad?

 

McCullough: Quick Thought Heading Into Thursday's Fed Meeting - Fed tightening cartoon 09.09.2015

 

If the Fed goes dovish (they should), our omnipotent policymakers will have to tell the truth about a slowing economy.

 

That should scare people.

 

On a related note, the US Dollar Index closed on its low for the week (down -1.1% ). What’s most interesting about that is that on 30-day correlation, the S&P 500 has a POSITIVE correlation to USD of +0.8.

 

In other words, a dovish Fed could be bad news for stocks.

 

*  *  *  *  *

 

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Monday Mashup

Monday Mashup - CHART 1

 

RECENT NOTES

9/11/15 REPLAY | GOING LONG UNFI BLACK BOOK

9/04/15 GIS | Sends the Jolly Green Giant Packing

9/02/15 HSY | THE CURRENT SET UP IS LEANING LONG

8/31/15 HAIN | LOW QUALITY & INCREASED BUSINESS RISK

 

RECENT NEWS FLOW

Friday, September 11

MNST | Board of Directors have authorized a new share repurchase program of up to $500mm (click here for article)

PEP / SODA | PepsiCo is expanding its distribution partnership with SodaStream (click here for article)

 

Thursday, September 10

MDLZ | Provided an update on cost savings initiative and reaffirmed 2015 guidance (click here for article)

 

Wednesday, September 9

FLO | Announced the acquisition of Alpine Valley Bread Company, for $120mm in cash. FLO anticipates FY16 sales for the Alpine business to be $85mm - $95mm, the business has been growing at a CAGR of 51% over the last three years (click here for article)

 

Tuesday, September 8

MKC | Plans to expand organic and non-GMO offerings in 2016 (click here for article)

Angie’s | Adding popcorn production capacity in Reno, NV as the competition in RTE-popcorn heats up (click here for article)

 

SECTOR PERFORMANCE

Food and organic stocks that we follow outperformed the XLP last week. The XLP was down -0.4% last week, the top performers on a relative basis from our list were B&G Foods (BGS) and United Natural Foods (UNFI) posting increases of +6.3% and +4.7%, respectively. The worst performing company on a relative basis on our list was Lifeway (LWAY), which was down -2.8%.

Monday Mashup - CHART 2

 

QUANTITATIVE SETUP

From a quantitative perspective, the XLP is bearish on a TRADE and TREND duration.

Monday Mashup - CHART 3

 

Food and Organic Companies

Monday Mashup - CHART 4

Monday Mashup - CHART 5

Monday Mashup - CHART 6

 

Keith’s Three Morning Bullets

Bets continue to mount on a Dovish Fed meeting…

 

  1. USD – US Dollar Index closed on its low for the wk (-1.1% on the wk) and is seeing follow through selling this morning vs. both Euros and Yens – what’s most interesting about this to me is that on 30-day correlation, SPX has a POSITIVE correlation to USD of +0.8 (meaning a Dovish Fed could be bad for stocks)
  2. JAPAN – Down Dollar is definitely bad for Japanese Stocks – that INVERSE correlation has not changed; Yen +0.3% took another -1.6% out of the Nikkei overnight – it’s -12.5% in the last month with the US Dollar -2.7% (and Yen +3.8%)
  3. UST 2yr – yield tested a “breakout” above 0.75% for the 6th time in 6 months last wk… and failed; back down to 0.71% on Dovish Fed spec this morning and, with Fed Fund Futures this low, I still think the Fed could train wreck macro markets if they tighten

 

SPX immediate-term risk range = 1; UST 10yr Yield 2.13-2.24%

 

Please call or e-mail with any questions.

 

Howard Penney

Managing Director

 

Shayne Laidlaw

Analyst

 


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