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A Letter to Newborn "Inflation Hawks"

Editor's Note: The insight below accompanied a new Real-Time Alert signal sent to subscribers yesterday.

 

To the newborn "inflation hawks" (the old ones from 2012 died),

 

So... you want to go Ex-GDP and go for another hike because “inflation is reaching the target” do you? Cool. In addition to commodity-linked inflation proxies getting deflated last week, the 5yr US Treasury Break-Even rate dropped 2 basis points on the week to 1.34%.

 

In other words, with:

 

A)     GDP tracking towards 1.1% in Q3 (we’ll get that print right before the election)

B)     Housing and Consumer Confidence rolling off their #LateCycle peaks

C)     Inflation pressures deflating from their Down Dollar YTD highs

D)     Yield Spread (UST 10yr minus 2yr) at its YTD low (down 5bps last week)

E)      SP500 dead flat now vs. 1 month ago today

 

The Fed has “clearly seen improvements for the last 2 months?” Or were those the politically prepared remarks pre the SP500 (you-ge indicator!) going down for 5 of the last 6 trading days and US Equity Volatility (VIX) ramping +20.4% in a week?

 

The only thing that’s crystal clear to me at this point is that

 

A) the US GDP growth cycle peaked in mid-2015

B) inflation has had what the Fed should call “transitory” reflation

C) the labor cycle continues to slow from its 2015 rate of change cycle peak.

 

A Letter to Newborn "Inflation Hawks" - late cycle cartoon 10.08.2015

 

Short the Financials vs. your Long-term Bond core longs.

KM


EVENT | BlackStone Group (BX) BlackBook

Wednesday, September 7th at 11:00AM ET

 

Watch a replay below.

CLICK HERE to access the associated slides.

CLICK HERE to access an audio-only replay.

 


Stock Report: AMN Healthcare Services (AHS)

Takeaway: We added AHS to Investing Ideas on the short side on 8/23.

Stock Report: AMN Healthcare Services (AHS) - HE AHS table 8 30 16 

THE HEDGEYE EDGE

AMN Healthcare Services (AHS) was a great stock pick from 2013 until its 2016 peak. During that period, the company's fundamental performance accelerated and the stock price doubled.

 

AHS is a leader in the Nurse Staffing industry and has secured contracts with some of the largest Hospital Systems in the country. However, we believe the tailwinds are fleeting, and that the Affordable Care Act (ACA) has been responsible for much of the good news for AHS. For the US Medical Economy broadly, millions of newly insured have gained access to healthcare services and entered the delivery system with pent-up demand. The ACA-driven incremental demand occurred over a compressed period of time, exacerbating short-term staffing deficits. This created what we believe was a temporary increase in volume and pricing at AHS.

 

We expect shares to trade back to the low-$20s as organic growth slows and then declines over the next 6-9 months.

 

Stock Report: AMN Healthcare Services (AHS) - 20160829 Employment Gains

 

INTERMEDIATE TERM (TREND)

The time is now, as we expect a material deceleration in healthcare consumption to drive lower demand for temporary staffing services over the next 6-9 months. This will pressure organic growth at AHS, which we believe could be negative as soon as 4Q16 and continue into 2017. Consensus appears to be modelling high single-digit organic growth for 2017.

 

We are tracking several data points with Healthcare Job Openings (JOLTS) providing the best indicator of demand and is widely followed as an indicator for AHS. Preceding the trend in JOLTS, however, is growth in the insured population across all payor types, which after the huge ACA boost, is now reverting back to pre-ACA growth rates in-line with broader demographic trends.  

 

Stock Report: AMN Healthcare Services (AHS) - 20160829 Insured Pop Growth Jobs

 

This unprecedented boom and bust environment for the US Medical economy is reflected in both the absolute level in Healthcare JOLTS and Healthcare JOLTS as a percentage of Healthcare Employment, both of which remain elevated at multi-standard deviation highs. Anecdotally, hospital admissions are trending into negative territory in 3Q16 for the first time since 2013. This confirms our #ACATaper thesis and will cause Hospitals to pull back on hiring. We believe this will begin with the temporary staffing AHS provides.

 

Our catalysts on the short side will be monthly updates on Employment and JOLTS, along with earnings guidance.

 

Stock Report: AMN Healthcare Services (AHS) - 20160829 JOLTS Extended

 

Stock Report: AMN Healthcare Services (AHS) - 20160829 JOLTS Slowing

 

LONG TERM (TAIL)

AHS is one of our shorter duration ideas. AHS is a well-run business, fundamentally strong and a leader in its space. However, we don’t believe the current valuation accurately reflects slowing and potentially negative organic growth. At some point in the next 12-18 months, it is quite possible we end up being long the name depending on the valuation and how our data is trending. Until then, we will remain short.

ONE-YEAR TRAILING CHART

Stock Report: AMN Healthcare Services (AHS) - HE AHS chart 8 30 16


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The Essential Election 2016 Health Policy Guide

The Essential Election 2016 Health Policy Guide - healthcare1

This is an institutional research note written by Hedgeye Healthcare Policy analyst Emily Evans. For additional information about our institutional research email to sales@hedgeye.com.


Las Vegas Sands (LVS): Best Idea Long Call Today

Takeaway: Our Gaming, Lodging, and Leisure analysts are hosting a Best Idea call (long) call on Las Vegas Sands today.

Las Vegas Sands (LVS): Best Idea Long Call Today - LVS

 

LVS: BEST IDEA LONG

Conference Call

11:00AM ET

KEY TOPICS OF DISCUSSION

Mass Outlook - Inflecting Positive 

  • Hedgeye Mass Tracker results
  • Impact of new rooms on GGR
  • Visitation (overnight vs. same-day), hotel guests stays, average length of stay, and RevPAR

2Q 2016 Market Analysis 

  • Mass table efficiency
  • Minimum bet limit / observed average bets 
  • Promotional spending
  • Market share analysis

LVS - Best Idea Long

  • Mass centric business model
  • Estimates look acheivable and potentially beatable
  • Strong balance sheet - low leverage and high free cash flow generation
  • Sustainable and growing dividend now funded by free cash flow - 6% dividend yield

Q&A

 

CALL DETAILS

Attendance on this call is limited.

Please note if you are not a current subscriber to our Gaming, Lodging, and Leisure research there will be a fee associated with this call. Ping sales@hedgeye.com for more information.

 

ABOUT HEDGEYE

Hedgeye Risk Management is a leading independent provider of real-time investment research. Focused exclusively on generating and delivering investment ideas, the firm combines quantitative, bottom-up and macro analysis with an emphasis on timing. 

 

The Hedgeye team features some of the world's most regarded research analysts - united around a vision of independent, uncompromised real-time investment research as a service.


Poll of the Day: Which "Simpsons" Character BEST Represents Centrally Planned Markets

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