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November 19, 2015

 

  • Bullish Trend
  • Bearish Trend
  • Neutral

INDEX BUY TRADE SELL TRADE PREV. CLOSE
UST10Y
10-Year U.S. Treasury Yield
2.30 2.18 2.27
SPX
S&P 500
2,020 2,110 2,083
RUT
Russell 2000
1,135 1,190 1,171
COMPQ
NASDAQ Composite
4,917 5,151 5,075
NIKK
Nikkei 225 Index
19,015 19,964 19,649
DAX
German DAX Composite
10,668 11,165 10,959
VIX
Volatility Index
14.11 20.83 16.85
DXY
U.S. Dollar Index
98.47 100.08 99.75
EURUSD
Euro
1.05 1.07 1.06
USDJPY
Japanese Yen
121.82 123.90 123.58
WTIC
Light Crude Oil Spot Price
39.71 44.23 41.98
NATGAS
Natural Gas Spot Price
2.23 2.40 2.33
GOLD
Gold Spot Price
1,066 1,098 1,069
COPPER
Copper Spot Price
2.05 2.17 2.07
AAPL
Apple Inc.
110 119 117
PCLN
Priceline.com Inc.
1,205 1,333 1,278
VRX
Valeant Pharmaceuticals International, Inc.
67.111 78.73 72.60
FB
Facebook, Inc.
103 110 107
TGT
Target Corp.
68.99 72.76 69.78
JPM
J.P. Morgan Chase & Co.
65.20 68.63 67.45

 

 


Cartoon of the Day: A Key Question For Janet Yellen

Cartoon of the Day: A Key Question For Janet Yellen - Yellen data dependent cartoon 11.18.2015

 

Buried in the Fed minutes today was yet more indecisiveness about the likelihood of December rate hike. Among the "appreciable downside risks" cited by the Fed was below target inflation. In today's Early Look, Hedgeye CEO Keith McCullough wrote: 

 

"Have you been of the view that the money that was printed was going to create a “velocity” of money or behavioral distrust? If the short-term policy was to create the illusion of growth (inflation expectations), isn’t the long-term risk a #Deflation of those expectations?"


Rubio Versus The Fed

 

 

In this excerpt from The Macro Show this morning, Hedgeye CEO Keith McCullough talks about Presidential hopeful Marco Rubio’s recent comment that the Fed’s policies often “dramatically alter the economy in very negative ways.”

 

Subscribe to The Macro Show today for access to this and all other episodes. 

 

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


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Risk Managed Long Term Investing for Pros

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McCullough: Fed Needs An Economic Reality Check

 

In this excerpt from The Macro Show this morning, Hedgeye CEO Keith McCullough responds to a subscriber’s question about the likelihood of the Fed raising rates in December. 

 

 

Subscribe to The Macro Show today for access to this and all other episodes. 

 

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


Stop the Presses! Did Beijing's Grand Poobah Just Tell the Truth on China Slowdown?

Chinese President Xi Jinping had some rather interesting things to say about his nation's economy earlier today.

 

Stop the Presses! Did Beijing's Grand Poobah Just Tell the Truth on China Slowdown? - xi

 

Here's an excerpt from a note sent to subscribers by Hedgeye CEO Keith McCullough in response:

 

"Our man Xi was being way too honest overnight admitting the Chinese economy faces “considerable downward pressure” right now. They didn’t like that in Shanghai, closing the index down -1% as EM Asia continues to trade terribly (Thailand -1.1%)."

 

As you can see there was "considerable pressure" on Shanghai Composite shares. 

 

Stop the Presses! Did Beijing's Grand Poobah Just Tell the Truth on China Slowdown? - shanghai

 

Here's the full quote from President Xi who was speaking at the annual Asia-Pacific Economic Cooperation meeting: 

 

“The Chinese economy is still coping with a complicated internal and external environment, considerable downward pressure and the temporary pains of deep reforms,” Mr. Xi said. “The opportunities are unprecedented and the challenges are unprecedented.”

 

Investors are "coping" with their own "unprecedented challenges" as well. That of course is interpreting China's inherently suspect economic data. That's why Xi's candor here was so telling. 

 

Stop the Presses! Did Beijing's Grand Poobah Just Tell the Truth on China Slowdown? - China cartoon 10.19.2015


CAG | SMOOTH MOVES

ConAgra Foods (CAG) is on the Hedgeye Consumer Staples Best Ideas list as a LONG.

 

Today CAG announced their intentions to separate their business into two independent publicly traded companies. One will be comprised of their branded business named, ConAgra Brands, and the other consisting of their foodservice portfolio which is largely their frozen potato business called Lamb Weston.

THE TRANSACTION

The spin-off will be tax free to both the company and its shareholders. After the transaction current CAG shareholders will own 100% of both ConAgra Brands and Lamb Weston. Management is currently targeting to complete the transaction in the fall of 2016, subject to final approval by the Company’s Board of Directors, other customary approvals and receipt of an opinion from tax counsel on the tax-free nature of the spin-off.

 

This transaction coupled with the sale of the private brands business and the previously announced $300 million efficiency plan have CAG headed in the right direction. The steps that CAG have taken in such a short time period really demonstrate that this management team and Board are prepared to act on anything that creates long-term shareholder value.

CONAGRA BRANDS

The new company, called ConAgra Brands, will primarily consist of the branded business, currently reported as the Company’s Consumer Food segment, which generated approximately $7.2bn in fiscal year 2015. In addition ConAgra Brands will absorb some foodservice operations and certain private label products, which generated about $1.8bn in fiscal year 2015. ConAgra Brands is also expected to retain the company’s stake in the Ardent Mills joint venture

 

ConAgra Brands will focus on strengthening their branded position on the shelf while driving innovation and improving margins. They will be flexible in their ability to pursue acquisitions and possibly divest brands as well. In addition the new company intends to maintain an investment grade credit rating. Sean Connolly will be CEO and it will be headquartered in Chicago.

LAMB WESTON

Lamb Weston’s portfolio will consist of frozen potato, sweet potato, appetizers and other vegetable products, as well as a continued presence in retail frozen products under licensed brands and private label. In fiscal year 2015 Lamb Weston generated $2.9bn in revenue.

 

Management team and capital structure will be announced at a later date.

HEDGEYE OPINION

We view the separation of these two businesses as a large positive for the creation of long-term value. But we do question the reasoning behind the spin-off of Lamb Weston versus an outright sale of the business. The decision most likely came down to tax implications, it is our assumption that the sale of Lamb Weston would have created a large tax leakage, which is what made this route the best. As two public companies, the respective management teams will have greater focus on their respective goals which will lead to improved performance. The newly created ConAgra Brands will be predominately branded with a lesser private label and foodservice division. We expect to see management stay active on the M&A front within ConAgra brands, divesting non-core assets while acquiring more appealing brands.

 

Please call or e-mail with any questions.

 

Howard Penney

Managing Director

 

Shayne Laidlaw

Analyst

 

 


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