Oil Bulls Are Getting Pummeled as Long-Term Bears Get Paid

Takeaway: Oil bulls are getting pummeled while the long-term bears continue to get paid.

Double #Ouchy here - don’t look now but this morning’s drop towards the $40-handle for WTI puts it down -15% in the last month alone; was it the Dollar? Supply? Demand? A bird or a plane? With Durable Goods and Capex careening to the downside, the bullish narrative on “Global Cyclical Demand has bottomed” is very hard to follow. 


Oil Bulls Are Getting Pummeled as Long-Term Bears Get Paid - Oil cartoon 04.07.2016 


Editor's Note: The snippet above is from a note Hedgeye CEO Keith McCullough wrote for subscribers this morning. Click here to learn more.

July 29, 2016

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Hedgeye's Daily Trading Ranges are twenty immediate-term (TRADE) buy and sell levels, along with our intermediate-term (TREND) view.  Click HERE for a video from Hedgeye CEO Keith McCullough on how to use these risk ranges.

JT TAYLOR: Capital Brief

JT TAYLOR:  Capital Brief - JT   Potomac banner 2


"If your actions inspire others to dream more, learn more, do more and become more, you are a leader."

                       -   John Quincy Adams


CLINTON’S CONVENTION CONTRAST: Hillary Clinton took center stage last night and made a case to her fellow Democrats and the country why they should coalesce around and support her this November. In a three-day build up to last night, speakers cast Clinton as experienced, stable and committed in stark contrast to Donald Trump - but all lot of this boils down to whether voters can connect to her on a personal level. Chelsea Clinton’s introduction provided the perfect touch portraying her mother as a role model and grandmother to all and amplifying her father’s message earlier in the week. Clinton’s speech did what Donald Trump’s did not do – she addressed how she’ll provide strong and stable leadership and bring about economic change while at the same time conveying passion and dedication to the causes of millions of Americans. Clinton’s main objective was to neutralize her lingering negatives and appeal to Americans as an experienced hand and unifier by showcasing her career and persistent drive through decades of public service.  We see a requisite bump in the polls after a solid four days in Philly, but will she continue to excite her constituencies and sustain the momentum?


BIG-TICKET BENCH: Clinton has taken the last few days to show off how deep her bench runs – and if you didn’t know before, it’s very deep. From millionaires to minorities, disabled groups to veterans, current and former presidents - Team Clinton displayed that they have the strongest backing of who and what America really is – a melting pot. In contrast, Trump’s lineup was no where near as sturdy, and his Republican brethren know it. He’s just now beginning to make amends with the legions of people and groups he’s offended by backtracking on past statements - including retracting his John McCain war hero comments. Though he’s getting better in the let’s-be-friends department, he’s just not established as Clinton who has spent decades cultivating deep relationships and connections. We expect each campaign’s surrogates to play an increasingly important role in the coming months (no vacation for you Bernie Sanders), but we don’t see Trump’s loyalist crowd growing any time soon.


DEPENDING ON INDEPENDENTS: Uncommitted voters disenchanted with the two-party system continue to hold out on and with both conventions now complete, we wonder if either party has created enough enthusiasm for the ever-growing number of Independents to swing their way. Democrat-turned-Republican-turned-Independent Michael Bloomberg made the case against Trump for pro-business Independents who are wary of Clinton, but only time will tell if his endorsement is strong enough to shift voters her way. Bernie Sanders’s supporters hold the golden ticket, but with the curtain now closed on the convention, it comes down to the strength and passion of the party’s message and grassroots efforts.


RUSSIAN ROULETTE: Trump rattled off some of the more myopic statements on Russia since former AK Governor Sarah Palin reminded us that Russia can be seen from her house...Criticism from all corners is building for his outrageous remarks encouraging Russia to continue their hacking efforts to find Clinton’s missing emails. Whether it was sarcasm or not, it crystallized where Trump’s head is. Rather than focusing on party themes and policy differences, like the ones he will see in debates, he sticks to the personal attacks that helped him thrive in the primaries. We heard promises that the Republican convention would be a turning point for Trump, after which he would buckle down and get serious, but instead he continues to fall back on ridicule, innuendo and attention-getting headlines. While most of the country finally realizes that this is a change election - his rhetoric will only get him so far until he digs deeper on substance and focuses on solutions mattering most to the American people.


DISSECTING THE PARTY PLATFORMS: Both the Republican Convention and the Democratic Convention have now concluded. We put together a comparison of each party’s platform to help you better understand the differences and similarities in the policy agendas for the coming year. You can read the comparison here.


A Special Super Show with Keith McCullough Replay | July 29, 2016

In light of big economic news and recent market developments, Hedgeye CEO Keith McCullough is hosting a special Super Show Friday morning exclusively for subscribers. Keith will review the investing implications of the Q2 GDP report, discuss the "Top-3" things in his macro notebook, and update his current signals in Real-Time Alerts.


As always, he will answer your questions live.


CLICK HERE to access the associated slides.



An audio-only replay of today's show is available here.

REMINDER | A Special Super Show Live Today at 9:00AM ET

CLICK HERE to watch.

REMINDER | A Special Super Show Live Today at 9:00AM ET - HETV supershow title


In light of big economic news and recent market developments, Hedgeye CEO Keith McCullough is hosting a special Super Show Friday morning exclusively for subscribers. Keith will review the investing implications of the Q2 GDP report, discuss the "Top-3" things in his macro notebook, and update his current signals in Real-Time Alerts.


As always, he will answer your questions live.

EXPE | 2Q16 Earnings Call Notes

Takeaway: Room nights certainly disappointing for a stock that’s up 15% in the last month but AWAY and OWW integration thesis very much intact

INTRO: We're taking a page out of our GLL team's book and posting our earnings call notes.  The below bullets are a summary of what was said/reported, not our updated thoughts.  We'll have a more detailed note out tomorrow updating our thesis.  



  • Gross bookings ex. eLong +25% YoY
  • Lodging portfolio added 25K properties, +20% YoY
  • HomeAway revenue +36% YoY - 1 million listings are now online bookable
  • Trended Metrics
    • Room nights: +20% YoY
      • 8% inorganic impact
      • Normalized for the Easter shift 3% to 1Q room nights, which could have been added back to 2Q
      • Domestic: +22%
      • Intl: +18%
    • ADR’s: -1% YoY
    • Revenue per night: -5% YoY
    • Hotel Revenue growth: 14% YoY
    • Airline tickets sold: +45% YoY
    • Air Revenue Growth: 50% YoY
  • Home Away
    • Revenue +36% YoY
    • Expecting current trends should accelerate in 2H16
    • Looking to offer more and more inventory through core OTA channels
    • Executing ahead of plan - Service fee roll out has been successful thus far  
  • Orbitz
    • Integration of OWW largely complete
    • All Business clients migrated to Egencia platform
    • Heavy lifting largely behind them
    • Incrementally optimistic for bulk of synergies in the back half of the year
    • Room nights decelerating due to the integration, conversion rates were lower, meta search platform slowing, but now the teams are back to focusing on core business
    • Continue to expect to deliver a strong year for the company
    • Overall profits from Orbitz are better than expected
  • Trivago
    • Neither EXPE or founders of Trivago opened their put call window for Trivago this year
    • Therefore IPO to potentially be completed by year end
    • This is an IPO not a spin off
    • Put/Call window will re-open in March 2017. For now they cannot comment further on the IPO  
  • Terrorist attacks and the frequency of the events are troubling, but they usually see demand quickly snap back
    • Hopeful that cancellations can bounce back
  • EBITDA growth guidance of 35-45% intact.
    • Forecasting greater contribution from AWAY and OWW than they originally guided too
    • But legacy EXPE is expected to contributed
  • Forecasting mild reacceleration in room nights for 2H,
  • Capital outlays for their new HQ now at half the original forecasted est.  


  • Room night slow down due to more than just integration issues?
    • Mgmt stated they were originally expecting 500-700bps deceleration from 1Q16, largely based on calendar issues
    • Largely self-inflected – took them a bit to get OWW stabilized and integrated to their platform.
    • Half of the incremental 500-700bps room night slow down largely due to integration focus
  • More of a slowdown in the international segment is due to slow down in Meta search, Air Asia comp effect, and potentially a slower macro environment
  • Timing of integration of AWAY into core EXPE 
    • Listings growing at 20% YoY, is an acceleration and they are very happy with the AWAY integration thus far
    • Foresee a much deeper integration of AWAY inventory into the core OTA platform – but this will take time
    • Over a million bookable listings
  • Facebook dynamic ads / messenger bot
    • Currently experimenting and starting to scale up and spend more on it. EXPE engineers have been working with FB engineers.
    • Messenger Bot is very new but they see the future in it, at this point so far so good but it isn’t something they have scaled yet
  • AWAY Booking growth rates and conversion rates after implementation of service fee
    • Saw a conversion rate decrease at first, but due to optimization it is now up on a YoY basis
    • AWAY conversion rates are still far from where they see them going, lots of upside and optimism around getting those conversion rates up 
    • Online Bookings growth well north of 200% YoY, an acceleration from 1Q 2016
  • AWAY results have been great, had expected a lot and results have exceeded their expectations.  Alternative accommodation is a big space and they look forward to benefiting from the growth
  • Hotel ad campaign and rewards push hurting demand for OTA product?
    • Have not seen any correlation between hotel chain heavy markets or independent hotel markets i.e. there hasn’t been more pronounced softness where chains have greater presence vs. where chains don’t have a presence
    • So far there is nothing for them to suggest the fundamentals of their business are changing
  • Less than 0.5% of searches on end up searching directly for a particular brand
    • Most of their customers simply want the best hotel for the best price, regardless of brand  
  • Terrorist attacks certainly have an impact: (used France as an example)
    • Pre the Paris attacks: Room nights to France were +20%, after the attacks bookings dipped to low single digits YoY, then after the Brussels attacks bookings went into negative single digits, but then since the Nice bookings went even more negative YoY
  • Upside of negative demand shock in France = Demand for destinations like Spain and Ireland seeing more increases in bookings so customers could be shifting their destination, either way they are cautious
  • Bookings into London have increased pretty significantly from the US since BREXIT, but other than that not much is noticeable
  • Professional managed homes on AWAY seem to be most willing to jump into the online bookable segment. But, Individually managed homes also adopting the new product and continue to be an important part of growth
  • Revenue growth largely driven by AWAY and Trivago this quarter. They report into revenue not into bookings, therefore it’s a tailwind.   
  • There is always a knee jerk reaction in the local market where a terror attack happens
  • Overall effect from terror on travel market is tough to quantify, but their growth trajectory remains stronger than the industry
  • Instead of going on a long trip, sometimes customers will stay closer to home but
  • Would like to keep as many transactions online as possible, but this transition won’t happen overnight  
  • OWW integration different than Travelocity and prior integrations, but glad it is over so they can get back to core execution – major difference was predominately due to the sheer size of OWW
  • AWAY will continue to add listings in their core regions (vacation areas), but urban markets will slowly become a focus
  • As room nights reaccelerate, sales and marketing likely to move higher as well
  • Stricter enforcement on home sharing laws impacting AWAY?
    • They are vacation focused and whole home focused, therefore they feel less
    • Monitoring it, and would like to work with local municipalities
    • Effecting them less than other home sharing companies
  • Egencia results aided a little bit by OWW, but there was definitely a continuation of clients trading down, particularly in Europe, but they were able to drive strong volumes
  • They are not on instant book yet, but they will be in dialogue with TRIP eventually, but likely not for a while
  • New hotel additions largely a function of their sales team doing really well
    • Try to bring on most of their hotels in 1Q and 2Q, summer time is more focused on managing rates, promotions
  • Overall, the company continues to gain share and traction around the world, they expect execution to continue and growth to remain elevated for the foreseeable future            

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