CSX: What Happened To The "Smart" Activists?

I've been harping about how ridiculous this CSX hedge fund story is and how it was conveniently marked at a May month end high of $69.06. I'm not saying that anyone in particular marked it there. I am saying it looks suspect. Today the stock closed -11.8% lower than that day of May 30th. What a difference a month makes...

"Me-Too" activist investing is a by-product of the leverage cycle. As cost of capital increases, and access to capital tightens, some of these concentrated "activist" funds will just go away.

(chart courtesy of

Myriad (MYGN): The Day After, big +12.9% alpha move!

Our new head of Healthcare at Research Edge, Tom Tobin, issued the following note before the open yesterday to his exclusive network. Big alpha day for Tom. I'm psyched to be partnered with him again!

If you're interested in our Healthcare research, please email Tom at

Here's his MYGN note from the morning of 6/30/08:

"The exclamation points are probably not necessary given the near universal dismissal of the compound. What's left is a fast growing, profitable, bankers dream of a diagnostics company.

I am sure there are pitch books on the desks of company management discussing the merits of splitting the Pharmaceutical and Molecular Diagnostics companies. I agree with the move. Management is killing the Flurizan development program after $68M in costs and they should probably kill drug development altogether and get on with the business of genetic testing.

Molecular Diagnostics revenue growth is running above 50% with EBITDA margins at 51%, and EBITDA of $29M for the March quarter. MYGN shares look like they will open around 42, or 12X EV/EBITDA on just the Molecular Diagnostics business. With the short interest at 30% of the float, I'd bet the shares are higher from here.

Tom Tobin
Managing Director

(Chart courtesy of

LEH +4.9% on the day... See, I Can Buy Things!

I fielded my fair share of questions as to how I could be so bearish as to think Lehman was going to $20, but received zero emails after I bought it there. Such is life in the fishbowl!

Oh, and by the way, there was no "take under" today.

*Full Disclosure: I am long LEH

(chart courtesy of

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Eye On Populism...

The State employees of Utah are moving to a 4 day work week, allegedly...

This just in from USA of all places: "Utah this summer will become what experts say is the first state to institute a mandatory four-day work week for most state employees, joining local governments across the nation that are altering schedules to save money, energy and resources"...


KKD - You can't make this stuff up!

The opportunity to take KKD private has come and gone. Daryl Brewster, the Ex CEO, had one shot and he did not get it done. At current prices, KKD is trading at 13x LTM TEV/EBITDA and the EBITDA is not growing, but declining. It's hard to find another restaurant company that is more expensive than KKD. So why would some unknown asset management firm try to buy the company at $7.50? This has to be a joke. If this bid is real, I wish I could short the company buying it.

The best part of the whole story is what is being reported by the Winston-Salem Journal. The article questions the legitimacy of Dee Guess, the managing director of MGL Asset Management. Apparently, Mr. Guess has had multiple lawsuits filed against him and has used known aliases including Mario Guess, J.D. Guess and Jerry D. Guess. The paper also said, "There is no listing of principals in the company, no companies under MGL's management or ownership, and no track record of the principals managing and owning businesses." MGL was listed as incorporating in January on the N.C. Secretary of State's Web site.

There is nothing better than a warm glazed Krispy Kreme doughnut. Unfortunately, stiff competition, razor thin margins and rising commodity costs put significant pressure on the business model. The international opportunity is real, but not enough to offset the pending pressure on the domestic business.

Eye on "Meme Machines"...

There is a great article in "WIRED" today, recapping how natural selection accounts for evolution, titled "July 1, 1858: Darwin and Wallace Shift the Paradigm." I think it's very appropriate material for investors to noodle over as they try to figure out what to do next.

Wallace said, "It suddenly flashed upon me ... in every generation the inferior would inevitably be killed off and the superior would remain -- that is, the fittest would survive."

In a market oversupplied with hedge funds who are replicating one another's investment styles, the power of the "Meme Machine" is going to have inevitable fallout effects.

We are in the midst of a paradigm shift in global stock markets. Patience will pay. Those who have a risk managed process will survive, and new financial industry leaders will be the result.
Photo: Bettmann/Corbis

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