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The Macro Show Replay | September 21, 2015

 


Dovish Fed

Client Talking Points

DAX

The Fed’s Dollar Devaluation (EUR/USD +2.5% month-over-month) thing isn’t appreciated by either the DAX or ECB President Mario Draghi (he testifies to European Parliament Wednesday). The DAX is down another -0.6% and keeping the crash (-20.4% since APR) in play, but signals immediate-term oversold here, for a trade.

OIL

Gold and Oil were +3.2% and +0.7%, respectively last week (vs. SPX -0.2%) and WTI is up another +1.5% to $45.34 this morning taking it to +5.7% in the last month (vs. SPX -6.6%) – is the new perma bull U.S. stock market catalyst “higher gas prices”?

YEN

Signaled immediate-term TRADE overbought on Friday as the USD was signaling oversold (and Gold immediate-term overbought); the risk ranges in all of these big FICC trades (USD, Rates, Oil) are narrowing now (leading indicator for lower highs in volatility).

 

**Tune into The Macro Show with Hedgeye CEO Keith McCullough at 9:00AM ET - CLICK HERE

Asset Allocation

CASH 70% US EQUITIES 0%
INTL EQUITIES 0% COMMODITIES 6%
FIXED INCOME 24% INTL CURRENCIES 0%

Top Long Ideas

Company Ticker Sector Duration
MCD

McDonald’s remains one of our Restaurant teams Best Ideas on the LONG side.  We continue to believe that 3Q15 will be the inflection point for the company’s turnaround and that we are going to be looking at a much different company 1-3 years from now.

 

Urgency has been instilled from the top down by new CEO Steve Easterbrook. He wants more speed and is encouraging people to get things done faster. The food and experience provided to the customer will greatly improve over the coming months as “Experience the Future” is implemented across the system. It won’t be instantaneous though, as MCD has a lot of work to do around changing the perception to bring back customers it may have lost.

PENN

Penn National Gaming continues to be our favorite Regional Gaming stock.

 

Regional numbers for August have come in soft, but we predicted the August weakness. September revenues should rebound and serve as a catalyst for the stock going into Q3 earnings. On the research side we have not altered our views of PENN’s long term growth story. We continue to see more upside from current price levels. 

TLT

Slower (and Lower) For Longer remains our non-consensus call. It's nice to see that the Fed is finally starting to see what the #GrowthSlowing late-cycle data does.

  1. GROWTH: is #LateCycle and will be slower (again) in Q3 than it was in Q2
  2. INFLATION: misreported, yes – in the area code of the Fed’s 2% “target”, no

Our estimate for Y/Y% GDP for Q3 is a range of 0.1% to 1.5%. Even the Q/Q SAAR # that consensus hangs on will be comping against a 3.7% Q/Q SAAR GDP print (second revision). Good luck positioning for a rate hike. Prepare for the fade…. AGAIN.

 

Three for the Road

TWEET OF THE DAY

VIDEO (2mins) Kaiser: Why Chesapeake May Be Headed to $0 | $CHK  https://app.hedgeye.com/insights/46425-kaiser-why-chesapeake-may-be-headed-to-0-chk… @HedgeyeEnergy

@KeithMcCullough

QUOTE OF THE DAY

What people say, what people do, and what they say they do are entirely different things.

Margaret Meade

STAT OF THE DAY

Total U.S. Equity Market Volume (including dark pool) was up +24% and +26% vs. its 1-month and 1-year averages, respectively.


September 21, 2015

September 21, 2015 - Slide1

 

BULLISH TRENDS

September 21, 2015 - Slide2

September 21, 2015 - Slide3

September 21, 2015 - Slide4

 

 

BEARISH TRENDS

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September 21, 2015 - Slide6 

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September 21, 2015 - Slide11


Daily Trading Ranges

20 Proprietary Risk Ranges

Daily Trading Ranges is designed to help you understand where you’re buying and selling within the risk range and help you make better sales at the top end of the range and purchases at the low end.

Monday Mashup

Monday Mashup - CHART 1

 

ADJUSTMENTS TO THE BEST IDEAS LIST

HABT: HABT is down 25% over that last three months and down 40% from its POST IPO high of $41.89 back on 12/12/14.  The declines in the stock price and the strong fundamentals now have the stock more reasonably valued at 12x NTM EV/EBITDA.  HABT is one of the recent IPO’s we have been tracking on the SHORT side but never really pulled the trigger to get more aggressive on the SHORT.  That being said, the stock might not be a great SHORT at this point.  We believe that the overall fundamentals of the company are sound and believe the stock could be setting up to be a LONG. The concept and management have always been great and valuations have come down to more modest levels. We are going to monitor and dig in a little further, and hopefully will be moving it above the line in the coming weeks.

 

DFRG: This stock has been beaten to a pulp, down ~30% over the last three months. We are starting to feel that at 6x EV / NTM EBITDA all the bad news has been priced into the name. Management recently spoke about changes to the operating model that should improve profitability in 2016.  Specifically, slowing growth of “The Grille” and closing two unprofitable locations are good news. These two events will help put a floor on the stock, and will ultimately help sentiment and improve profitability.  Unfortunately, the company's strongest brand, The Double Eagle, is seeing slowing sales trends due to market volatility and the associated decline in banquet business. As for the changes within their control, this is exactly what we want them to be doing, and we believe that they will get the Grille concept running smoothly.

 

RECENT NOTES

9/16/15 SHORT SMALL-CAP BURGER CHAINS | QUICK SERVICE CAN’T AFFORD $15 MINIMUM WAGE

9/15/15 August Restaurant Sales and Employment Trends

9/15/15 SONC | FIRST MISS – EXPECT MORE TO COME

9/01/15 MCD | ALL DAY BREAKFAST IS OFFICIALLY LAUNCHING ON 10/6

 

RECENT NEWS FLOW

Thursday, September 17

JMBA | Announced the signing of a 13 store refranchising deal in southern California, 88% of their stores are now franchised (ARTICLE HERE)

BWLD | Will stop airing commercials with spokesman Steve Rannazzisi after he made up a story of being at the World Trade Center during the terrorist attacks (ARTICLE HERE)

 

Wednesday, September 16

CBRL | Reported 4Q15 that disappointed on the top-line, reporting revenue of $719mm versus consensus of $726, as well as FY2016 guidance that came in below consensus estimates (ARTICLE HERE)

DFRG | Opened a new Grille location in Little Rock, AR, this marks the 20th Del Frisco’s Grille (ARTICLE HERE)

 

Tuesday, September 15

YUM | Taco Bell is opening first ‘Cantina” units with alcohol in Chicago and San Francisco that are meant to appeal more to the millennial generation (ARTICLE HERE)

 

Monday, September 14

QSR | Tim Hortons has improved its lunch offering, adding four new sandwiches to the menu in an effort to entice afternoon customers to buy food and not just drinks (ARTICLE HERE)

 

SECTOR PERFORMANCE

Casual Dining and Quick Service stocks that we follow widely underperformed the XLY last week. The XLY was down -0.1%, top performers on a relative basis from casual dining were DFRG and RUTH posting an increase of +3.7% and +1.9%, respectively, while NDLS and JMBA led the quick service group this week up +6.6% and +6.1%, respectively.

Monday Mashup - CHART 2

Monday Mashup - CHART 3

 

XLY VERSUS THE MARKET

The XLY has fared better than most other sectors in the YTD time period and as of late especially. In the last five trading days while the SPX was down -0.2% the XLY was down only -0.1%, outperformed only by XLP (Consumer Staples), XLV (Healthcare), and lastly XLU (Utilities).

Monday Mashup - CHART 4

 

QUANTITATIVE SETUP

From a quantitative perspective, the XLY looks bearish from a TRADE and TREND perspective, TRADE support is 73.64.

Monday Mashup - CHART 5

 

CASUAL DINING RESTAURANTS

Monday Mashup - CHART 6

Monday Mashup - CHART 7

Monday Mashup - CHART 8

 

QUICK SERVICE RESTAURANTS

Monday Mashup - CHART 9

Monday Mashup - CHART 10

Monday Mashup - CHART 11

 

Keith’s Three Morning Bullets

Dovish Fed = Oil, Gold, EM all up last wk; Rate Sensitive Stocks (Utes, REITS) outperformed big time too:

 

  1. DAX – the Fed’s Dollar Devaluation (EUR/USD +2.5% m/m) thing isn’t appreciated by either the DAX or Draghi (he testifies to European Parliament Wed); DAX down another -0.6% w/ keeping the crash (-20.4% since APR) in play, but signals immediate-term oversold here, for a trade
  2. OIL – Gold and Oil were +3.2% and +0.7%, respectively last week (vs. SPX -0.2%) and WTI is up another +1.5% to $45.34 this morning taking it to +5.7% in the last month (vs. SPX -6.6%) – is the new perma bull US stock market catalyst “higher gas prices”?
  3. YEN – signaled immediate-term TRADE overbought on Friday as the USD was signaling oversold (and Gold immediate-term overbought); the risk ranges in all of these big FICC trades (USD, Rates, Oil) are narrowing now (leading indicator for lower highs in volatility)

 

SPX immediate-term risk range = 1; UST 10yr Yield 2.11-2.21%

 

Please call or e-mail with any questions.

 

Howard Penney

Managing Director

 

Shayne Laidlaw

Analyst

 



The Week Ahead

The Economic Data calendar for the week of the 21st of September through the 25th of September is full of critical releases and events.  Here is a snapshot of some of the headline numbers that we will be focused on.

 

CLICK IMAGE TO ENLARGE.

The Week Ahead  - zz cha cha 09.18.15 Week Ahead


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