FLASHBACK | McCullough: Apple Is the Most Over-Owned Stock In Human History

Hedgeye CEO Keith McCullough didn't mince any words discussing Apple (AAPL) this past summer on Fox Business' Mornings with Maria. The following day McCullough told the London-based City A.M.:


"Apple is the most over-owned stock in human history." 


Here's a snippet from the conversation:


Do you think Apple and tech stocks in general are overvalued?


A) Apple isn’t a value stock – it’s the most over-owned stock in human historywhere “valuation” comes into the debate on down days. It’s actually a product-cycle stock, and all cycle stocks should look relatively “cheap” at the peak of a cycle


B) What Morgan Stanley calls “New Tech” trades at an average P/E of 149.5x forward earnings. Overvalued is an understatement. It’s obviously a bubble.


Is this another tech bubble? Does this look like the dotcom bubble?


Yes (see above).


Across market histories, from tulips to dot.bombs, every bubble is unique. Instead of the internet, I think we’ll call this one the cloud of expectations.

*  *  *  *  *

Here's a look at what's happened to Apple since.

FLASHBACK | McCullough: Apple Is the Most Over-Owned Stock In Human History  - apple


***On a related note, each morning in our Daily Trading Ranges product, Keith sends subscribers his updated risk ranges on myriad tickers including Apple. Here's a look at a handful today, including AAPL.


FLASHBACK | McCullough: Apple Is the Most Over-Owned Stock In Human History  - z aapl


Europe, Oil and China

Client Talking Points


Got growth slowing?  Europe’s economic heavyweight does.  Today the German economic ministry cut Germany’s 2016 growth forecast to 1.7% from 1.8% previously forecast. It also cut the 2016 export growth outlook to 3.2% vs prior 4.2% and lowered its outlook for import growth to 4.8% vs 5.3%. #EuropeSlowing


When an asset class that big moves that much that fast it leaves a mark on markets.  Equities correlation to oil has been building over the last year and has been ~0.97 over the last month.  Yesterday’s rally in equities followed the bounce in crude (& rumors of production cuts) only to be reversed after hours when API reported an 11.4 mm barrel build in inventory – the largest since 1996.  Demand is slowing, supply is building and as deflation continues to define the Trend despite manic, one-day countertrend price moves. 


Chinese industrial profits declined -4.9% Y/Y in December which is a sharp deceleration from -1.4% Y/Y in December. Whispers of fresh stimulus might be the only fading hope to delaying the flush of global overcapacity hanging on the “Chinese Demand” story.   

Asset Allocation


Top Long Ideas

Company Ticker Sector Duration

Utilities (XLU) continue to be the bright spot in the equity markets for 2016. XLU is up 1% this year, having edged out all other S&P 500 subsectors by a wide margin. Last week, XLU was down marginally but was still second best among the subsectors, beating all but Healthcare (XLV). Essentially, it's paying off to own low-beta XLU in a crashing market.


General Mills (GIS) has turned on its advertising for no artificial colors and flavors in its cereal, as well as an increased effort for its gluten free campaign. Click here to view the 30 second spot TV commercial.


These steps taken on cereal, coupled with improved merchandise planning across their portfolio in the second half should bode well for the company’s future performance. Additionally, General Mills fits neatly into the style factors that we like from a macro point of view, large cap, low beta and liquidity.


Rating agency S&P disclosed on Thursday three concerning stats as it relates to the wellness of credit oustanding:

  • More companies were at risk of having their credit ratings cut at the end of December than at the close of any other year since 2009
  • The number of potential downgrades was at 655, compared with 824 reported by the finish of 2009
  • The year-end total for 2015 was "exceptionally" higher than a yearly average of 613


Then on Friday, S&P followed with additional action:

  • Disclosure that oil-exporting countries face fresh downgrades as crude prices fall further and that it could repeat last year's move when it made a big group of cuts all at once
  • S&P currently has Azerbaijan, Bahrain, Kazakhstan, Oman, Russia, and Saudi Arabia on negative outlook in its Europe, Middle East and Africa region, as well as Brazil and Venezuela in Latin America

Moody’s echoed the shaky state of credit markets by announcing it was putting the ratings of 120 oil and gas companies on watch Friday.


Strap on your seatbelts as we expect that credit spreads will continue to widen. If the Fed pivots on its “4 rate hikes” in 2016 as the data continues to slow, Treasury bond yields get pushed lower and high-yield spreads widen into a late cycle deleveraging. This should continue to generate alpha in a Short JNK, Long TLT trade.

Three for the Road


NEW VIDEO | Under 60 Seconds: #McDonalds Earnings Report… @HedgeyeHWP $MCD @KeithMcCullough



We learn wisdom from failure much more than success. We often discover what we will do, by finding out what we will not do.

Samuel Smiles


In 2015 U.S. Universities raised a record $40.3 billion.

Casteleyn: M&A Has Peaked – ‘The Last Bastion Of Capital Is Gone’

In this brief excerpt from The Macro Show, Hedgeye Financials analyst Jonathan Casteleyn explains the precarious setup for any investor banking on M&A hitting another all-time high this year.

Attention Students...

Get The Macro Show and the Early Look now for only $29.95/month – a savings of 57% – with the Hedgeye Student Discount! In addition to those daily macro insights, you'll receive exclusive content tailor-made to augment what you learn in the classroom. Must be a current college or university student to qualify.

The Macro Show Replay | January 27, 2016



Here is today's asset allocation:

The Macro Show Replay | January 27, 2016 - Slide2

Cartoon of the Day: Running Scared

Cartoon of the Day: Running Scared - bear cartoon 01.26.2016


Tomorrow is the FOMC meeting announcement. We'll see if Yellen & Co. have anything to say about the recent stock selloff.

Under 60 Seconds: MCD’s Earnings Report


Hedgeye highlights the three key points from McDonald's strong quarter courtesy of our veteran Hedgeye Restaurants analyst Howard Penney in under one minute.


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