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Daily Market Data Dump: Friday

Takeaway: A closer look at global macro market developments.

Editor's Note: Below are complimentary charts highlighting global equity market developments, S&P 500 sector performance, volume on U.S. stock exchanges, and rates and bond spreads. It's on the house. For more information on how Hedgeye can help you better understand the markets and economy (and stay ahead of consensus) check out our array of investing products

 

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Daily Market Data Dump: Friday - world equity 5 6

 

Daily Market Data Dump: Friday - sector performance 5 6

 

Daily Market Data Dump: Friday - volume 5 6

 

Daily Market Data Dump: Friday - rates and spreads 5 6


YELP | More Red Flags (1Q16)

Takeaway: What drove the 1Q beat will likely come back bite them by year-end. We remain short, but need to monitor consensus to time next catalyst

KEY POINTS

  1. 1Q16 = LOOKED REALLY GOOD: YELP beat consensus 1Q revenue estimates, with Local beating consensus for the first time since 2014.  YELP raised 2016 revenue guidance inline with the 1Q beat, and issued 2Q revenue guidance with the high end above consensus.  YELP produced accelerating Local Ad Revenue growth of 40% (vs. 35% in 4Q15 ), while producing a surge in 1Q16 new account growth (34% vs. 22% in 4Q15).  AdSense didn’t drive the Local Ad beat as we suspected might be the case; mgmt clarified that revenue was recognized in Other Services.  Mgmt attributed the upside to better ad "budget fulfillment", which it suggested was due to a combination of better ad targeting and improvement in its auto-bidding algorithm (see link for context).
  2. BUT DRIVER CONCERNING: In short, better ad budget fulfillment means ARPU, which accelerated despite its declining q/q customer repeat rate, which is a natural ARPU headwind given the lower percentage of accounts paying a full quarter's worth of revenue.  Further, the promotions (discounts) around its self-service accounts, which drove a "meaningful percentage" of its net account growth, further exacerbates the ARPU drag.  Yet ARPU still accelerated, so net-net the ARPU increase on its repeating customers was a lot higher than its reported metrics would suggest at first glance.  Translating back to English, that basically means YELP's customers are now either paying more in monthly advertising expense, or getting less ad clicks on that spend due to YELP's sudden algorithmic changes.  
  3. MORE RED FLAGS: Remember the problem with the model is ROI.  Local Ad customers aren't getting enough conversion off their ad spend, leading to YELP's rampant attrition issues (see note below).  Algorithmic changes to jack up that CPC only makes the ROI problem worse, and is just another example of YELP's short-sighted attempts to chase consesnus at all costs.  Futher, we're left wondering what "meaningful percentage" means when it comes to the self-serve portion of its net account growth.  Remember self-serve by definition has nothing to do with YELP's salesforce, which continues to grow at a faster pace than YELP's new account growth (self-serve included).  That said, we're wondering what 1Q16 new account growth would have been without these promotional add-ons, how many will remain into 2Q, and at what ARPU.  We remain short, but need to monitor consensus estimates to time the next catalyst.

 

Let us know if you have questions, or would like to discuss in more detail. 

 

Hesham Shaaban, CFA
Managing Director


@HedgeyeInternet

 

 

YELP: Grand Tales of ROI

02/13/15 01:34 PM EST
[click here]

 

YELP | More Red Flags (1Q16) - YELP   New Acct vs. Sales 1Q16 v3

YELP | More Red Flags (1Q16) - YELP   New Acct vs. ARPU


McCullough Denounces Trump On Dollar

 

In this brief excerpt from The Macro Show yesterday, Hedgeye CEO Keith McCullough denounces Donald Trump who reportedly said that a strong dollar is a big problem. “If you think a strong dollar is a problem, you’re a jackass,” McCullough said. “Strengthening the purchasing power of the people is the answer.” 


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Trump’s Path To The Presidency

 

Hedgeye Director of Research Daryl Jones sits down with Hedgeye Potomac Chief Political Strategist JT Taylor to discuss the path forward for the presumptive Republican and Democratic nominees.


Crash Mode: Shanghai Composite Casino Down -44% Since July

Takeaway: Just a few months ago "accelerating" economic data signaled a bottom in equities, according to Old Wall economists. Yeah, well, not so much.

Crash Mode: Shanghai Composite Casino Down -44% Since July - China cartoon 01.07.2016

 

Headfake

 

That's the most appropriate word to describe supposedly "accelerating" economic data around the globe a few months ago. The headfake is becoming more evident and is taking the hatchet to some global equity markets.

 

Below is analysis via Hedgeye CEO Keith McCullough in a note sent to subscribers earlier this morning: 

 

China evidently has not 'bottomed' – neither the made-up Chinese data nor the stock market is healthy right now; Shanghai Comp hammered for a -2.8% loss overnight and remains in #crash mode -44% since July of 2015 (Italy -26% and Nasdaq -10% since then)

 

 

Here's the Nasdaq chart...

 

 

And Italy...

 


China, UST 10YR and Gold

Client Talking Points

CHINA

China evidently has not “bottomed” – neither the made-up Chinese data nor the stock market is healthy right now. The Shanghai Composite got hammered for a -2.8% loss overnight and remains in #crash mode -44% since July of 2015 (Italy -26% and Nasdaq -10% since then).

UST 10YR

Oh boy has the Bond Market been nailing it since both #TheCycle (U.S. GDP) and stocks peaked in July 2015 – going into the jobs report 1.74% smells a slow-down as we test new lows in the 10s/2s Yield Spread at 101 basis points.

GOLD

Gold alongside the Long Bond (TLT) and Utes (XLU), remains one of our Top 3 Macro Long Ideas. Gold is up +0.3% into the jobs report with Copper down as our boy Trump trashes the Dollar – he says he wants a weak one (long real estate, in Dollars) – so does Janet! America has never been “great” with a Weak Dollar Policy.

 

*Tune into The Macro Show with Hedgeye CEO Keith McCullough live in the studio at 9:00AM ET - CLICK HERE

Asset Allocation

CASH 58% US EQUITIES 4%
INTL EQUITIES 0% COMMODITIES 6%
FIXED INCOME 28% INTL CURRENCIES 4%

Top Long Ideas

Company Ticker Sector Duration
GIS

Please note we are removed General Mills (GIS) from Investing Ideas (long side) on Monday. Hedgeye CEO Keith McCullough wrote in Real-Time Alerts: "While I like GIS from a Style Factor perspective (it did its job last week, closing up in a down tape - doing its job again this a.m. +1%), it's:

A) Signaling a series of lower-highs from a long-term perspective

B) Not as well loved by my analyst team (Penney and Laidlaw)

 

While we still like the long-term story, the stock’s performance in 2016 has been nothing short of spectacular. Year-to-date GIS is up +7.8% versus +1.3% for the S&P 500. The company’s 3Q15 performance was mixed with the company missing on revenues and beating on EPS with the benefit of cost cutting.

 

That being said, there are a number of one-time items impacting volume growth that should self-correct in 4Q16 and FY17. GIS is currently trading at 13.9x EV / NTM EBITDA an all-time high for the company. Looking past GIS, the entire Consumer Staples space feel like there is a Safety Trade/ZBB/M&A bid underneath the entire group. We maintain our long-term bullish stance on GIS, but given the rapid acceleration to all-time highs in the YTD period, a correction is inevitable.

MCD

In a recent note to Real-Time Alerts subscribers, Hedgeye CEO Keith McCullough asked rhetorically, "What to buy?" "On pull backs to the low-end of my immediate-term risk range, I'd be buying more:

1. Long-duration Bond Exposures (TLT, ZROZ, EDV, etc)

2. Low-Beta Big Cap Stocks With Safe Yields (MCD, GIS, NKE, etc.)

3. Gold (GLD)"

 

McDonald's (MCD) has all the style factors we like for these turbulent markets, which explains why it's up 27% since we added it to Investing Ideas in August. Stick with it here.

TLT

Despite the weak U.S. GDP print, growth is very unlikely to rebound here in Q2. Don't get caught up in residual seasonality hopium. The confluence of steepening base effects amid the trending deterioration in economic momentum support our GIP Model forecast of a continued deceleration in the YoY growth rate of real GDP from +1.9% in 1Q16 to +1% in 2Q16E. The latter growth rate translates to +0.3% on a QoQ SAAR basis, which is up from our previous forecast of -0.5% (a lower base rate implies a smaller delta to get to the same numbers, all things being equal).

 

Assuming Q1 isn’t revised in any material way, our forecast for 1H16E is represents the slowest pace of domestic economic growth on a multi-quarter basis since 2H12. Any downside surprises from there will surely translate to renewed recession fears.” Giddy up for continued #GrowthSlowing!

 

The good thing about each of our active Macro positions (i.e. TLT, ZROZ, XLU and JNK) is that each of them typically works on an absolute return basis when growth slows.

Three for the Road

TWEET OF THE DAY

**NEW VIDEO

An Animated History Of U.S. #GrowthSlowing https://app.hedgeye.com/insights/50765-an-animated-history-of-u-s-growthslowing… via @KeithMcCullough #GDP #Economy

@Hedgeye

QUOTE OF THE DAY

Everyone is a genius; you just can’t judge a fish by its ability to climb a tree.

Einstein       

STAT OF THE DAY

The NHL’s Arizona Coyotes named John Chayka the team’s General Manager, making the 26-year-old the youngest GM in the league.


investing ideas

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