Editor's Note: Please note that our Financials analyst Jonathan Casteleyn will send out a full report outlining our high-conviction long thesis next week. In the meantime, below is a brief summary of our thesis sent today by Hedgeye CEO Keith McCullough in Real-Time Alerts.
With long-term bond yields signaling immediate-term TRADE oversold (within bearish yield TREND view), I'm going to signal buy here on red on one of the few Financials (XLF down another -1.2% today, crushing the bulls) our Jonathan Casteleyn likes right now: CME Group (CME).
"CME Group (CME), one of the few stocks that sits on our Best Ideas list as a long, put up a decent fourth quarter earnings print with a slight revenue and earnings beat. Not that we put much weight on what happened last quarter but trends into the new operating period are looking even better. The exchange guided to just a +1% operating expense increase for 2016, guided to slightly lower annual taxes for '16 (with more activity coming from abroad), and again announced that open interest was setting a new record, at over 111 million contracts.
Even assuming some mean reversion to just over 16.5 million contracts (depending on product group), 1Q is running at ~$1.20 per share in earnings, which means the Street will need to perk up its current $1.06 estimate. Simply put, this is one of the few growth stories in the current macro environment within Financials."