prev

REMINDER: MACAU CONFERENCE CALL TODAY AT 2:30PM

We will host a conference call on Today, October 8 at 2:30PM ET to update our long Macau trade call, present analysis on the September numbers, discuss our updated model projections, outlook and Q3 earnings previews, and to provide a more quantitative look at the implications of a rapidly declining junket business.  As always, we will entertain questions at the end of the presentation.

 

RELEVANT TICKERS INCLUDE:

LVS, WYNN, MGM, MPEL, 0027.HK, 1128.HK, 1928.HK, 2282.HK, 6883.HK, and 0880.HK

 

DISCUSSION POINTS

  • Update to our recent long Macau trade call
  • Hedgeye company EBITDA estimates vs the Street for Q3, 2015, and 2016
  • Revised 2015/2016 monthly market projections
  • "True" Mass trends
  • Research Topic: What happens if the junkets go away? - a more quantitative look at this topic first presented in our February 2015 Macau conference call
  • Q&A

CALL DETAILS

Attendance on this call is limited. Ping  for more information


REPLAY | Q4 2015 Macro Themes Conference Call

We will be hosting our highly-anticipated Quarterly Macro Themes conference call TODAY, October 8th at 1:00PM ET. Led by CEO Keith McCullough, the presentation will detail the THREE MOST IMPORTANT MACRO TRENDS we have identified for the quarter and the associated investment implications.

 

WATCH THE REPLAY BELOW

Q4 2015 MACRO THEMES OVERVIEW:

  • #SuperLateCycle (USA): Slowing growth typifies the twilight of an economic expansion and negative 2nd derivative trends are creeping in across much of the domestic fundamental data. From labor and manufacturing markets to consumer and business confidence, leading indicators are beginning to roll as the late-cycle moves past peak. We'll detail why Slower-And-Lower-For-Longer remains the call. 
  • #GlobalSlowing: With the Street, IMF, World Bank and OECD all still forecasting global growth of around 3% for 2015, we find it appropriate to reiterate our call for global growth to come in at or below half that rate. Moreover, while China's August CNY devaluation effectively made our #EmergingOutflows theme a consensus bearish cog in the global economic outlook, we do not think investors are appropriately positioned for a likely trend of negative revisions to the respective growth outlooks in the U.S., Eurozone and Japan throughout the balance of the year.
  • #Crashing: Definitive crashes have occurred across many global macro markets in recent months. Those market participants on the wrong side of growth slowing and deflation are feeling the most pain. Crashing inflation expectations are perpetuating the pain across all asset classes and sectors levered to unrealistic growth expectations (energy, industrials, materials), as well as across the high-yield bond market, commodity markets, commodity currencies. Is the U.S. equity market next in line?

 

 

CALL DETAILS

  • Toll Free:
  • Toll:
  • Confirmation Number: 13621323
  • Materials: CLICK HERE

 

As always, our prepared remarks will be followed by a live, anonymous Q&A session. Please submit your questions to . Also, for those of you who cannot join us live, we will be distributing a replay video of the call shortly after it concludes.

 

Kind regards,

The Hedgeye Macro Team

 


Cartoon of the Day: Autumn Leaves

Cartoon of the Day: Autumn Leaves - Lower Highs cartoon10.07.2015

"Whether I’m an hour or a week early on another US equity SELL signal really doesn’t concern me," wrote Hedgeye CEO Keith McCullough in an Early Look this week. "I’m as focused as I’ve ever been in my career – focused on the research and quantitative signaling #process that has been working vs. consensus gone bad."

 


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.

YUM | HOLDING ONTO THE PAST

YUM is on the Hedgeye Restaurants Best Ideas list as a LONG.

 

The overall performance of Yum! Brands continues to be overshadowed by the poor results from the China segment. Yesterday, YUM released 3Q15 earnings that missed estimates on the top and bottom-line, mainly due to China. Company revenues were $3.43bn, short of consensus estimates of $3.67bn. Same-Store Sales (SSS) were strong in all segments except for China and India. China posted SSS of +2%, well short of consensus estimates of +9.6%, while India posted -18% SSS versus consensus at -6%. KFC on the other hand continued to perform well, posting +3% SSS versus estimates of +2.6%, Pizza Hut continued their flat trajectory with +1% comps versus estimates of +0.5%, and lastly, Taco Bell, put up a +4% comp against estimates of +3.9%. Even with the positive performance ex-China, YUM missed on the bottom-line, reporting Q3 FY15 EPS of $1.00 versus consensus estimates of $1.06.

 

THE NEW FULL YEAR GUIDANCE

With the continued pressure in the China business, management has decided to lower guidance, they now expect full year 2015 EPS growth to be in the low single-digit positive range. Versus guidance delivered during the 2Q15 call, of at least 10% EPS growth.

 

YUM | HOLDING ONTO THE PAST - chart 1

YUM | HOLDING ONTO THE PAST - chart 2

YUM | HOLDING ONTO THE PAST - chart 3

YUM | HOLDING ONTO THE PAST - chart 4

 

I asked Greg Creed at the analyst meeting last November what he wanted his legacy to be as CEO of YUM.  His answer: “to return YUM to the 10% EPS growth model of the past.”  While that may sound good given the track record of his predecessor, the world has changed and so should YUM.  Holding onto the past is a waste of energy, and serves no purpose in creating a new future for YUM.  It’s time for CEO, Greg Creed, to solidify his legacy as CEO of YUM and forge a new path for YUM that will better serve shareholders.

 

More to the point, YUM’s CHINA growth model has changed and will never look like it did in the past.  As opposed to 5 or 10 years ago, China represents a nasty mix for YUM – a business unit that is under significant pressure and it makes up a significant part of YUM’s financial performance.

 

The Board must do something to evolve the business model and reduce its exposure to China in a meaningful way.  The board can de-risk the business by selling off company-owned stores in China and returning the company to a GLOBAL QSR asset light model.

 

YUM is a great company with three great global brands.  The margin structure, balance sheet and cash flow of the company are envy to many global companies.  This is highlighted by the dividend raised by 12%, slightly better than what I thought they would have done.  The strength of the company can also be seen in the performance of KFC and Taco Bell, both concepts posted strong results, despite potential headwinds (KFC in emerging markets and MCD slowing Taco Bells performance). 

 

Despite these having significant number of positive attributes, the assets in China are now a liability, and the stock will trade that way until a new path forward is determined.  The clear evidence of this is how the stock traded today, down roughly 17%.  The message to the company is clear - shareholders want a new way forward. 

 

Please call or e-mail with any questions.

 

Howard Penney

Managing Director

 

Shayne Laidlaw

Analyst

 


ICI Fund Flow Survey | Cash is King; +$45 BB Build in Money Markets QTD

Takeaway: With renewed economic worries after the Fed delayed its rate hike, investors pulled funds from both equity and bonds while shoring up cash.

This note was originally published October 01, 2015 at 07:47 in Financials. If you'd like more info on our institutional research email sales@hedgeye.com.

Investment Company Institute Mutual Fund Data and ETF Money Flow:

In the 5-day period ending September 23rd, investors made net withdrawals from both total equity mutual funds and ETFs, which lost -$1.5 billion, and total bond mutual funds and ETFs, which lost -$778 million. Meanwhile, market participants shored up +$14 billion in money market funds during the week. This defensive reallocation came as the Fed's decision not to raise rates sparked fresh worries over the state of the economy and uncertainty about central bank policy going forward. One trend that has been consistent recently is this build of cash on the sidelines. Total money funds, according to ICI, has amassed a +$45 billion balance quarter-to-date after draw downs of -$18 billion in 2Q and -$92 billion in 1Q15. We continue to favor money fund manager Federated Investor (FII) as a Long position (see FII report) with emerging conservatism by investors and avoiding or Shorting the equity managers, Janus Capital and T. Rowe Price (See JNS and TROW reports).


ICI Fund Flow Survey | Cash is King; +$45 BB Build in Money Markets QTD - zzzzz fund flowz


In the most recent 5-day period ending September 23rd, total equity mutual funds put up net inflows of +$2.3 billion, outpacing the year-to-date weekly average outflow of -$229 million and the 2014 average inflow of +$620 million. The inflow was composed of international stock fund contributions of +$2.2 billion and domestic stock fund contributions of +$87 million. International equity funds have had positive flows in 46 of the last 52 weeks while domestic equity funds have had only 11 weeks of positive flows over the same time period.


Fixed income mutual funds put up net outflows of -$1.8 billion, trailing the year-to-date weekly average inflow of +$354 million and the 2014 average inflow of +$926 million. The outflow was composed of tax-free or municipal bond funds contributions of +$628 million and taxable bond funds withdrawals of -$2.4 billion.


Equity ETFs had net redemptions of -$3.9 billion, trailing the year-to-date weekly average inflow of +$1.8 billion and the 2014 average inflow of +$3.2 billion. Fixed income ETFs had net inflows of +$973 million, trailing the year-to-date weekly average inflow of +$1.1 billion and the 2014 average inflow of +$1.0 billion.


Mutual fund flow data is collected weekly from the Investment Company Institute (ICI) and represents a survey of 95% of the investment management industry's mutual fund assets. Mutual fund data largely reflects the actions of retail investors. Exchange traded fund (ETF) information is extracted from Bloomberg and is matched to the same weekly reporting schedule as the ICI mutual fund data. According to industry leader Blackrock (BLK), U.S. ETF participation is 60% institutional investors and 40% retail investors.



Most Recent 12 Week Flow in Millions by Mutual Fund Product: Chart data is the most recent 12 weeks from the ICI mutual fund survey and includes the weekly average for 2014 and the weekly year-to-date average for 2015:


ICI Fund Flow Survey | Cash is King; +$45 BB Build in Money Markets QTD - ICI2


ICI Fund Flow Survey | Cash is King; +$45 BB Build in Money Markets QTD - ICI3


ICI Fund Flow Survey | Cash is King; +$45 BB Build in Money Markets QTD - ICI4


ICI Fund Flow Survey | Cash is King; +$45 BB Build in Money Markets QTD - ICI5


ICI Fund Flow Survey | Cash is King; +$45 BB Build in Money Markets QTD - ICI6



Cumulative Annual Flow in Millions by Mutual Fund Product: Chart data is the cumulative fund flow from the ICI mutual fund survey for each year starting with 2008.

 

ICI Fund Flow Survey | Cash is King; +$45 BB Build in Money Markets QTD - ICI12


ICI Fund Flow Survey | Cash is King; +$45 BB Build in Money Markets QTD - ICI13


ICI Fund Flow Survey | Cash is King; +$45 BB Build in Money Markets QTD - ICI14


ICI Fund Flow Survey | Cash is King; +$45 BB Build in Money Markets QTD - ICI15


ICI Fund Flow Survey | Cash is King; +$45 BB Build in Money Markets QTD - ICI16



Most Recent 12 Week Flow within Equity and Fixed Income Exchange Traded Funds: Chart data is the most recent 12 weeks from Bloomberg's ETF database (matched to the Wednesday to Wednesday reporting format of the ICI), the weekly average for 2014, and the weekly year-to-date average for 2015. In the third table are the results of the weekly flows into and out of the major market and sector SPDRs:


ICI Fund Flow Survey | Cash is King; +$45 BB Build in Money Markets QTD - ICI7


ICI Fund Flow Survey | Cash is King; +$45 BB Build in Money Markets QTD - ICI8



Sector and Asset Class Weekly ETF and Year-to-Date Results: In sector SPDR callouts, investors pulled -$7.5 billion or -4% from the broad-market SPY last week as the Fed's decision not to raise rates sparked fresh fears over the state of the economy. Meanwhile, investors sought the safety of treasury bonds, contributing +5% or +$303 million to the long treasury TLT ETF.


ICI Fund Flow Survey | Cash is King; +$45 BB Build in Money Markets QTD - ICI9



Cumulative Annual Flow in Millions within Equity and Fixed Income Exchange Traded Funds: Chart data is the cumulative fund flow from Bloomberg's ETF database for each year starting with 2013.


ICI Fund Flow Survey | Cash is King; +$45 BB Build in Money Markets QTD - ICI17


ICI Fund Flow Survey | Cash is King; +$45 BB Build in Money Markets QTD - ICI18



Net Results:

The net of total equity mutual fund and ETF flows against total bond mutual fund and ETF flows totaled a negative -$742 million spread for the week (-$1.5 billion of total equity outflow net of the -$778 million outflow from fixed income; positive numbers imply greater money flow to stocks; negative numbers imply greater money flow to bonds). The 52-week moving average is +$1.5 billion (more positive money flow to equities) with a 52-week high of +$27.9 billion (more positive money flow to equities) and a 52-week low of -$18.8 billion (negative numbers imply more positive money flow to bonds for the week.)

  

ICI Fund Flow Survey | Cash is King; +$45 BB Build in Money Markets QTD - ICI10



Exposures:
The weekly data herein is important for the public asset managers with trends in mutual funds and ETFs impacting the companies with the following estimated revenue impact:


ICI Fund Flow Survey | Cash is King; +$45 BB Build in Money Markets QTD - ICI11 



Jonathan Casteleyn, CFA, CMT 

203-562-6500 

jcasteleyn@hedgeye.com 


Joshua Steiner, CFA

203-562-6500

jsteiner@hedgeye.com







Here’s Why Industrials Are Up (And Why That May Be a Bearish Omen) | $XLI

In this brief excerpt from RTA Live earlier this week, Hedgeye CEO Keith McCullough weighs in on activist investor Nelson Peltz’s move on General Electric (GE) and why that may spell trouble ahead.

 

Subscribe to Real-Time Alerts today for access to this and all other episodes. 

 

Subscribe to Hedgeye on YouTube for all of our free video content.

 


Hedgeye Statistics

The total percentage of successful long and short trading signals since the inception of Real-Time Alerts in August of 2008.

  • LONG SIGNALS 80.65%
  • SHORT SIGNALS 78.64%
next