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FNGN: We Are Removing Financial Engines From Investing Ideas

Takeaway: We are removing Financial Engines from Investing Ideas today.

***Please note that we are removing Financial Engines (FNGN) from Investing Ideas today.

 

Hedgeye Financials co-sector head Jonathan Casteleyn doesn’t think the company is going to have a good quarter. In addition, Hedgeye CEO Keith McCullough does not like Financials or Small Caps from a style factor perspective enough to put Investing Ideas subscribers through the long-term "patience" exercise with respect to shares of FNGN. In other words, the embedded market risk doesn't match up favorably for investors right now. 

 

FNGN: We Are Removing Financial Engines From Investing Ideas - z yellow


Cartoon of the Day: Slow and Steady (Wins the Race) | $TLT

Cartoon of the Day: Slow and Steady (Wins the Race) | $TLT - TLT cartoon 10.12.2015

Hedgeye's macro team reiterates its contrarian bullish call on the Long Bond. 


Special Excerpt from Hedgeye’s Q4 Macro Themes Call: #GameOfSlowing

 

Last week, Hedgeye CEO Keith McCullough and our macro team hosted our live, highly-anticipated Quarterly Macro Themes conference call for our institutional subscribers. During the 73-slide presentation deck, Keith distilled the three most important macro trends our team has identified and their associated investment implications.

 

Keith, riffing off HBO’s Game of Thrones, compares equity markets in China and emerging markets to Eddard “Ned” Stark, who “died early and did not come back,” and the U.S. to Daenerys Targaryen, the “effervescent hope.” Here’s a small taste of what went down during the call.

 

Email sales@hedgye.com for more information.


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 80.28%
  • SHORT SIGNALS 78.51%

LEISURE LETTER (10/12/2015) - MPEL, BLOOMBERRY, AIRBNB, RCL, NCLH, UBER

TICKERS: MPEL, BLOOMBERRY, AIRBNB, RCL, NCLH, UBER 

COMPANY NEWS 

MPEL - Melco International Development Ltd says it will persist with a solo bid for a license to run a casino near the Spanish city of Barcelona.  Melco International told the Hong Kong Stock Exchange that one subsidiary no longer had a partnership with a Spanish company that had been pursuing a license, but that another subsidiary would press on with an independent bid.

ARTICLE HERE

 

BLOOMBERRY- Philippines casino operator Bloomberry Resorts Corp has acquired a 15,676-square-metre (168,735 sq feet) plot in Quezon City, one of the cities that make up Metro Manila, the national capital region of the Philippines.

 

The PHP1.98-billion ($43.16-million) acquisition – via Sureste Properties Inc, the hotel and resort development arm of Bloomberry Resorts – was announced on Friday in a filing to the Philippine Stock Exchange.  Previous news reports stated that the Vertis North project would include residential, office, retail and hotel space. There was no mention to casino facilities.

ARTICLE HERE

 

AIRBNB - Airbnb accounted for 5% of room revenue in NYC: New research compiled by PKF Hospitality Research found that Airbnb accounted for 5% of room revenue distribution in New York City during the second quarter of 2015.

 

The average rate charged by Airbnb units during that time was $157 compared to $276 by hotels.  The same research, unveiled Thursday at The Lodging Conference, reported 47,295 total Airbnb reservations in NYC during August. The alternative accommodations platform accounted for approximately 9% of hotel demand during that period. 

ARTICLE HERE

Takeaway: While a glut of supply drags on NYC, Airbnb has also peeled off demand. Paris is the city most impacted by Airbnb.

 

RCL - Royal Caribbean plans to dry dock the 3,634-guest Liberty of the Seas in January 2016. The dry dock will give the ship new upgrades pertaining to everything waterslides to cuisine. 26 new state rooms will also be added to the ship through the dry dock process.

ARTICLE HERE

 

NCLH - Norwegian Cruise Line will introduce the first purpose-built ship customized for the China market in 2017, NCLH CEO Frank Del Rio announced today during the CruiseWorld China summit in Shanghai.   

  • "Our new purpose-built ship for China will have characteristics that are authentic to Norwegian Cruise Line and yet distinctively Chinese in all of its sensibility," said Del Rio.  
  • "With this new ship, Norwegian will unquestionably offer our Chinese guests a superior product and introduce a new standard of innovation and excellence into the marketplace, with an unrivaled level of customization for the Chinese consumer.  It will perfectly suit what modern Chinese travelers value from an upscale cruise experience."

ARTICLE HERE

Takeaway: Supply continues to ramp up in China. 

 

UBER - HNA Group has joined Uber China’s rank of investors, and its investment has helped boost Uber China’s valuation to nearly $8 billion, according to media reports.  Uber has been actively attracting investors, and Uber’s CEO Travis Kalanick told Sina.com on September 7 that Uber China had already pocketed US$1.2 billion in its ongoing financing from Chinese investors like Baidu while other investors would also join further down the road.  By September 24 it was reported that Uber was seeking to raise up to US$2.5 billion for its China operations.

ARTICLE HERE

INDUSTRY NEWS    

Golden Week RevPAR - The average occupancy rate of Macau’s five-star hotels decreased to 88.69% during the National Day golden week of holidays in the mainland this month, 3.31% less than in the corresponding period last year, the Macau Government Tourist Office says.

  • The office’s data indicate that the occupancy rate decreased in spite of the average room rate in five-star hotels falling by 19.14% to MOP1,958 ($244.75).
  • The average room rates in across all chain scales fell, but the average occupancy rate rose only in four-star hotels, by 0.49% to 84.43%.

ARTICLE HERE

Takeaway: Wait until the new supply comes on line...

 

Golden Week Travel Data - A total of 526 million trips were made nationally in China over the National Day holidays and RMB421.3 billion was spent during the period, up 10.7% and 17.9% respectively compared with the same period last year, according to the China National Tourism Administration (CNTA).  Travel demand was released all at once during the holiday period. Of the 526 million visitors nation-wide during the holiday, 114 million were overnight stays and 412 million were day trips, up 14.7% and 9.8% y-o-y respectively.

ARTICLE HERE

Takeaway:  Strong visitation translated into better than expected table revenues for the casinos but still decidedly down from last year.

 

Atlanta Casino - Georgia Governor, Nathan Deal plans to oppose the gambling push now underway at the state Capitol, telling The Atlanta Journal-Constitution exclusively that he expects to take an active role against the effort. It’s the first time the governor has said as much — in previous comments, he indicated he would stand back despite a personal opposition to the idea. 

  • Deal left open the possibility he would change his mind, but only if the industry agreed to a significantly higher tax rate than the 12 percent currently proposed.
  • “If they’re willing to put anywhere from 24 to 35% of their gross revenue into education…as the (Georgia Lottery) does, that will be a totally different proposition,” Deal said. “I don’t think we’re going to see any of them take us up on the offer.”

ARTICLE HERE

Takeaway: MGM and LVS have been interested in casino project ATL. 

 

REGIONAL REVENUES (SEPT): 

  • NY Total GGR:  +5.7% YoY

REPLAY: MACAU UPDATE CALL

The Hedgeye Gaming, Lodging, and Leisure Team hosted a call last Thursday updating our Macau long trade call, analysis on the September numbers, and our outlook/forecast. Please see the links to the video and presentation materials below.  

 

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

click here for the presentation materials 

 


MONDAY MORNING RISK MONITOR | BAD NEWS IS GOOD NEWS (AGAIN)

Takeaway: Investors seemed to shift from fears about growth to relief over further accommodation by the Fed last week.

MONDAY MORNING RISK MONITOR | BAD NEWS IS GOOD NEWS (AGAIN) - Lower Highs cartoon10.07.2015

 

Key Takeaway:

The focus seemed to shift last week from the negatives of the U.S. jobs report the week prior to the positive effects from ongoing accommodative central bank policy. In other words, bad news once again became good news. With the Federal Reserve holding interest rates steady, CDS spreads tightened globally and the High Yield YTM fell -65 bps to 7.5%. Short-term readings in our heatmap below are mostly green. However, the intermediate term is the opposite with mostly negative warning signals, and long-term measures are mixed.

Current Ideas:


MONDAY MORNING RISK MONITOR | BAD NEWS IS GOOD NEWS (AGAIN) - RM19

 

Financial Risk Monitor Summary

• Short-term(WoW): Positive / 5 of 12 improved / 1 out of 12 worsened / 6 of 12 unchanged
• Intermediate-term(WoW): Negative / 1 of 12 improved / 6 out of 12 worsened / 5 of 12 unchanged
• Long-term(WoW): Negative / 2 of 12 improved / 2 out of 12 worsened / 8 of 12 unchanged

MONDAY MORNING RISK MONITOR | BAD NEWS IS GOOD NEWS (AGAIN) - RM15

 

1. U.S. Financial CDS – Swaps tightened for 24 out of 27 domestic financial institutions. With the Federal Reserve holding interest rates steady at its September policy meeting, insurance against default for domestic financial institutions got cheaper; the median CDS spread tightened from 94 bps to 87 bps.

Tightened the most WoW: ALL, CB, MTG
Widened the most/ tightened the least WoW: SLM, SLM, SLM
Tightened the most WoW: CB, ALL, ACE
Widened the most MoM: GNW, LNC, TRV

MONDAY MORNING RISK MONITOR | BAD NEWS IS GOOD NEWS (AGAIN) - RM1

 

2. European Financial CDS – Swaps mostly tightened among European financials last week, likely following the U.S.'s lead after Federal Reserve minutes showed rates being held steady for now.

MONDAY MORNING RISK MONITOR | BAD NEWS IS GOOD NEWS (AGAIN) - RM2

 

3. Asian Financial CDS – Investors looked favorably on central bank policy last week with CDS spreads in Asia tightening, likely in reaction to both the U.S. Federal Reserve holding rates steady and a top Chinese central banker stating that the PBOC would allow the yuan exchange rate to be more flexible. In the past, China allowing its currency to depreciate has stirred fears of slowing economic growth; however, the focus last week seemed to be more on the positive effects of accommodative monetary policy.

MONDAY MORNING RISK MONITOR | BAD NEWS IS GOOD NEWS (AGAIN) - RM17

 

4. Sovereign CDS – Sovereign swaps were flat to tighter on the week. Spanish sovereign swaps tightened the most, by -5 bps to 103.

MONDAY MORNING RISK MONITOR | BAD NEWS IS GOOD NEWS (AGAIN) - RM18

 

MONDAY MORNING RISK MONITOR | BAD NEWS IS GOOD NEWS (AGAIN) - RM3

 

MONDAY MORNING RISK MONITOR | BAD NEWS IS GOOD NEWS (AGAIN) - RM4


5. Emerging Market Sovereign CDS – With commodity prices rising last week, emerging market swaps tightened across the board. Russian swaps tightened the most, by -51 bps to 320, followed by Turkish swaps, which tightened by -48 bps to 266.

MONDAY MORNING RISK MONITOR | BAD NEWS IS GOOD NEWS (AGAIN) - RM16

MONDAY MORNING RISK MONITOR | BAD NEWS IS GOOD NEWS (AGAIN) - RM20

6. High Yield (YTM) Monitor – High Yield rates fell 65 bps last week, ending the week at 7.51% versus 8.16% the prior week.

MONDAY MORNING RISK MONITOR | BAD NEWS IS GOOD NEWS (AGAIN) - RM5

7. Leveraged Loan Index Monitor  – The Leveraged Loan Index rose 5.0 points last week, ending at 1844.

MONDAY MORNING RISK MONITOR | BAD NEWS IS GOOD NEWS (AGAIN) - RM6

8. TED Spread Monitor  – The TED spread fell 1 basis point last week, ending the week at 32 bps this week versus last week’s print of 33 bps.

MONDAY MORNING RISK MONITOR | BAD NEWS IS GOOD NEWS (AGAIN) - RM7

9. CRB Commodity Price Index – The CRB index rose 4.6%, ending the week at 203 versus 194 the prior week. As compared with the prior month, commodity prices have increased 3.0%. We generally regard changes in commodity prices on the margin as having meaningful consumption implications.

MONDAY MORNING RISK MONITOR | BAD NEWS IS GOOD NEWS (AGAIN) - RM8

10. Euribor-OIS Spread – The Euribor-OIS spread (the difference between the euro interbank lending rate and overnight indexed swaps) measures bank counterparty risk in the Eurozone. The OIS is analogous to the effective Fed Funds rate in the United States.  Banks lending at the OIS do not swap principal, so counterparty risk in the OIS is minimal.  By contrast, the Euribor rate is the rate offered for unsecured interbank lending.  Thus, the spread between the two isolates counterparty risk. The Euribor-OIS spread was unchanged at 10 bps.

MONDAY MORNING RISK MONITOR | BAD NEWS IS GOOD NEWS (AGAIN) - RM9

11. Chinese Interbank Rate (Shifon Index) –  The Shifon Index fell 8 basis points last week, ending the week at 1.91% versus last week’s print of 1.99%. The Shifon Index measures banks’ overnight lending rates to one another, a gauge of systemic stress in the Chinese banking system.

MONDAY MORNING RISK MONITOR | BAD NEWS IS GOOD NEWS (AGAIN) - RM10

12. Chinese Steel – Steel prices in China fell 0.5% last week, or 11 yuan/ton, to 2176 yuan/ton. We use Chinese steel rebar prices to gauge Chinese construction activity and, by extension, the health of the Chinese economy.

MONDAY MORNING RISK MONITOR | BAD NEWS IS GOOD NEWS (AGAIN) - RM12

13. 2-10 Spread – Last week the 2-10 spread widened to 145 bps, 4 bps wider than a week ago. We track the 2-10 spread as an indicator of bank margin pressure.

MONDAY MORNING RISK MONITOR | BAD NEWS IS GOOD NEWS (AGAIN) - RM13

14. XLF Macro Quantitative Setup – Our Macro team’s quantitative setup in the XLF shows 1.9% upside to TRADE resistance and 4.6% downside to TRADE support.

MONDAY MORNING RISK MONITOR | BAD NEWS IS GOOD NEWS (AGAIN) - RM14


Joshua Steiner, CFA



Jonathan Casteleyn, CFA, CMT


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