Cartoon of the Day: Market De-FANG-ed?

Cartoon of the Day: Market De-FANG-ed? - FANG cartoon 01.15.2016


Remember when the FANG, Facebook (FB), (AMZN), Netflix (NFLX) and Google (GOOGL), led the market last year?


Not this year.

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HedgeyeRetail (1/15) | 1 Retail Sales Bright Spot, WMT Store Closures

Takeaway: One Bright Spot In Retail Sales Print = Home Furnishings. WMT closing Super Centers. First time in 10 years.

One Bright Spot In Retail Sales Print - Home Furnishings


Headline miss ex. autos of 40bps with the discretionary bucket ex food, gas, and auto decelerating on a 1yr, 2yr, and 3yr basis. But, there was one bright spot and that was in Furniture and Home Furnishings which accelerated on a 2yr basis by 240bps against a tough comp in December of 2014.


Let's be clear as it relates to RH. We think the market opportunity for the company as it scales up its store base, expands its category collection and consolidates a highly fragmented market on the top end of the consumption period is much greater than the MSD category growth we saw throughout the year.


But, it does lend some support to category strength in spite of the commentary out of just about every CEO who competes in the space about the highly promotional/competitive environment. It's the 2nd positive data point we've seen since Holiday about strength in the category. Mastercard called out the category as the most positive in its 7.9% retail sales number.


If we look at it over a longer duration, Furniture and Home Furnishing sales are sitting 10% below its 2006 peaks compared to total retail sales which are 15% higher than 2008. We'd be much more concerned about the space if we were sitting at all time highs.

HedgeyeRetail (1/15)  |  1 Retail Sales Bright Spot, WMT Store Closures - 1 15 2016 chart1

HedgeyeRetail (1/15)  |  1 Retail Sales Bright Spot, WMT Store Closures - 1 15 2016 chart2


WMT - Walmart announces plans to close 269 stores globally -- 154 in U.S. and 115 abroad



Look at the WMT timeline in 2015 with the benefit of hindsight. Raise minimum wage across the employee base to $10, took earnings guidance to a point where we won't see 2015 earnings levels again until at least FY19. Now the company plans 269 store closures after a previously announced strategic review. 154 of those are in the US, with all of the 102 WMT Express doors being shuttered for good. That leaves 52 Super Center/ Neighborhood Market closures, the most in this economic cycle by far. In fact, WMT hasn't closed a Super Center since FY07 (calendar '06). If you want evidence that the US is at capacity from a square footage perspective, especially in the big box format look no further than this WMT release and, to a lesser extent, the 40 doors M intends to close which is 4x a normal year.


NKE - Nike Reaches $252 Million Deal to Extend Sponsorship at Ohio State






AMZN - Amazon Receives Ocean Freight License to Ship Packages From China By Sea



AMZN - Amazon Opens New 3500 sq ft Pickup Location at UC Berkeley



VNCE - Vince Names David Stefko Chief Financial Officer



E-commerce fulfillment costs for retailers still rising as UPS, FDX, USPS raise rates



LOW - Lowe's announced today that it's getting ready to hire 46,000 seasonal employees to help with the busy spring and summer season.



TIF - Luxury brand sales are slowing in Hong Kong, Paris

A decline in tourism amid Paris attacks, volatile currencies and political tensions hurt spending in key shopping destinations

HedgeyeRetail (1/15)  |  1 Retail Sales Bright Spot, WMT Store Closures - 1 15 2016 chart3



AdiBok - CCM Hockey reports 8% increase in equipment business in 2015, 18% sales growth over past 2 years



AdiBok - Designer Ronnie Fieg designs new Adidas shoes -- they are 'doomed'

HedgeyeRetail (1/15)  |  1 Retail Sales Bright Spot, WMT Store Closures - 1 15 2016 chart4



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Takeaway: We are adding MDRX to our Best Idea List as a Short with 30% downside from current levels



Allscripts (MDRX) is a tail Short with 30% downside from current levels.



We've schedule a call to review our short thesis for Thursday January 21st, 2016 at 11 AM ET.  Contact for further information.  An invite with dial-in instructions will be sent to subscribers ahead of the conference call.




INVITE (MDRX) | BEST IDEA SHORT - 2015 01 06 EHR Share Gain Loss


We continue to spend a significant amount of time analyzing a dataset that shows us a highly detailed and large list of customers for each vendor down to the physician level.  Our work so far has identified several large Allscripts customers who are at significant risk for replacement in coming years. 

Now that we know who to target, the workflow is to reach out to speak with key people to confirm the data and collect additional anecdotes about current and future plans around vendor selection, a process that we began yesterday.  


While we are only at the starting line with this data process, the information we’ve gathered has already given us greater conviction in our short call.  These data sets are huge and we’ll be refining the analysis as we go, so look for more on this as we progress through 2016.




    Data continues to show ambulatory and inpatient share losses.  We expect this trend to continue as large health systems consolidate and value based reimbursement drives the need for a single inpatient EHR.  On the ambulatory side (~50% sales), Allscripts will continue to lose business (prospective and current) to peers athenahealth and eClinicalWorks, both of whom surpass Allscripts in interoperability and outsourcing capabilities.  We will be receiving quarterly market share updates from SK&A to monitor our thesis, and will continue update our proprietary trackers.
    While Allscripts reputation has markedly improved since the dark days of 2012-2013, the reality is that the damage is already done.  Many Hospital Executives refuse to include Allscripts in RFPs and estimates of mind share vs. market share do not bode well for bookings growth.  Based on industry ratings and anecdotes, the probability of Allscripts unseating the current acute care EMR vendor at any large IDN is low.  We will continue to collect anecdotes from industry participants, including current Allscripts customers. 
    Current valuation appears to be supported by accelerating sales growth in 2018-2019 from low single digits to mid-teens.  In order for this to occur, bookings would need to sustain +25% growth and backlog conversion accelerate.  With system sales in secular decline, new contract lengths ranging from 5-10 years and for the reasons outlined above, we find this unlikely.




INVITE (MDRX) | BEST IDEA SHORT - 2015 01 06 too high

bull/bear summary

Based on our interactions with investors, it is clear that the Allscripts (MDRX) story is a contentious one and is partially reflected in the short interest.  Below is a summary of what we believe to be both sides the debate.  While many elements of the bull case are true, we think the fundamental reality is not accurately reflected in the current stock price.


INVITE (MDRX) | BEST IDEA SHORT - 2015 01 06 Bull Bear


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Thomas Tobin
Managing Director 



Andrew Freedman



The Unintended Consequences Of ZIRP On Commodities

Takeaway: We are loudly reiterating our call that the unwind of ZIRP and QE will continue to deflate the easy money credit boom it fabricated.

Editor's Note: Curious about what will happen during the Great Unwinding of the Federal Reserve's zero interest rate policy (ZIRP)? Below is a brief excerpt from a research note written by Hedgeye Macro analyst Ben Ryan sent to institutional subscribers last week. To read the note in its entirety ping


... And click here to join us on The Macro Show today with Hedgeye CEO Keith McCullough. It's free


The Unintended Consequences Of ZIRP On Commodities - money funds


According to Ryan: 


The excessive amount of capital in play in commodity industries is only beginning to decelerate and inflect.


Using a sample of 34 different producers in 4 different sub-sectors, commodity producer debt as a % of corporate credit outstanding has multiplied ~2.5x in 10 years. This group’s aggregate debt level is up ~5x in 10 years. The chart below shows the jump in commodity producer debt as a share of aggregate corporate debt levels.   


Click image below to enlarge 

The Unintended Consequences Of ZIRP On Commodities - commod leverage

SPECIAL EDITION of The Macro Show: Why Markets Are Crashing