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PREMIUM INSIGHT

Fed Rate Hike? Does This Look Like A "Rates Rising" Chart To You?

Fed Rate Hike? Does This Look Like A "Rates Rising" Chart To You? - us treasury 2 9 22

I’ve spent a lot of time in the last 16 months trying to think for myself on why slower and lower for longer was the better option than living in perpetual fear of a redo of the “rates rising” call we made (short the Long Bond and Gold) in 2013.


Stock Report: Whole Foods Market (WFM)

Takeaway: We added WFM to Investing Ideas on the long side on 9/7.

Stock Report: Whole Foods Market (WFM) - HE WFM table 9 21 16 

THE HEDGEYE EDGE

For the last four quarters Whole Foods Market (WFM) has been plagued by negative same-store sales, driven by three reasons:

 

  1. A weighing scandal that gained national attention which they lapped in week 11 of Q3;
  2. Increase in competition in the space; and
  3. The negativity around their high prices.

 

But Whole Foods still stands for something, and as they work to shed their “Whole Paycheck” reputation by investing in price and providing more items on promotion they are turning around their concept. Whole Foods is still one of the most trusted grocery stores in the country, and the original national Natural & Organic Market.

 

We believe their time to thrive again is coming sooner rather than later. 

 

Click images to enlarge

Stock Report: Whole Foods Market (WFM) - wfm 1

 

Stock Report: Whole Foods Market (WFM) - wfm 2

 

Whole Foods has grown rapidly since being founded in 1980, and really has not caught up with the efficiencies of the larger conventional markets.

 

WFM has been implementing their 9-point recovery plan to better their business and provide a better product to their customers. The plan started with a $300mm cost savings initiative to streamline the business and remove redundancies.

 

WFM has also begun to implement inventory and labor management systems. WFM is investing in price that is backed by national advertising to drive traffic to the stores. In addition, they are investing in the simplification of the store, which primarily consists of building a centralized kitchen to streamline processes and technological advances.

 

Stock Report: Whole Foods Market (WFM) - wfm 3

 

A lot of this story is about playing the deflation cycle. We have a tendency to be early with some of our calls as we like to think of stocks over a longer duration. WFM will likely be one of those calls.

 

Currently, the Street hates WFM and the sector in general. Depending on your investment style, that is usually the best time to build a long position. Over the past 50 years, looking at food at home inflation there have been 6 periods of deflation (excluding the current) lasting approximately 7.2 months. The current deflationary cycle has lasted 8 months so we are past an average downturn.

 

As we approach calendar 4Q16, it looks like early 2017 could be the inflection point in the turn from deflation to inflation and also the sentiment on WFM.

 

Stock Report: Whole Foods Market (WFM) - wfm 4

ONE-YEAR TRAILING CHART

Stock Report: Whole Foods Market (WFM) - HE WFM chart 9 21 16


BX: Adding Blackstone to Investing Ideas (SHORT SIDE)

Takeaway: We are adding BX to the short side today.

Editor's Note: Our Financials analyst Jonathan Casteleyn will send subscribers a full report outlining our high-conviction thesis. In the meantime, below is a brief summary written by Hedgeye CEO Keith McCullough earlier this morning.

 

BX: Adding Blackstone to Investing Ideas (SHORT SIDE) - z bx

 

One of our freshest (newest) Institutional Best Ideas (on the short side) is Blackstone (BX). Jonathan Casteleyn is our senior Financials analyst on the name. Here's an excerpt from his recent "Black Book" on BX:

 

"The most causal factor for shares has started dropping...and quickly...with net accrued performance fees having moved from $4.11 per share in 1Q15 to $2.78 per share currently. We think that leading carry funds in private equity and real estate won't be able to offset these distributed gains fast enough with new realizations and thus this performance balance will continuing dropping along with the stock. For 2017, we forecast that BX will have to distribute up to 66% of its accrued performance balance, 20 points higher than the distribution supporting its dividend in 2016 and about 200 basis points higher than the all-time high in 2015."

 

Sell Green,

KM 


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20 Proprietary Risk Ranges

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PREMIUM INSIGHT

About Everything: Replay with Neil Howe & Ben Ryan

About Everything: Replay with Neil Howe & Ben Ryan - AE thumbnail

Join Hedgeye Demography Sector Head Neil Howe for a live Q&A at 2pm ET. In this complimentary edition of About Everything, Howe discusses what he calls the Homeland Generation, America's youngest generation of kids coming after Millennials, and explains the investing implications of this new generation. 


EVENT | Credit Cards Black Book Presentation

Wednesday, September 28th at 1:00PM ET

Watch a replay below. 

CLICK HERE to access the associated slides.

CLICK HERE to access the audio-only replay. 

 


PREMIUM INSIGHT

About Everything | Kids These Days: Homelanders

About Everything | Kids These Days: Homelanders - slide

In this complimentary edition of About Everything, Hedgeye Demography Sector Head Neil Howe discusses what he calls the Homeland Generation, America's youngest generation of kids coming after Millennials. Howe explains the investing implications of this new generation.


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This indispensable trading tool is based on a risk management signaling process Hedgeye CEO Keith McCullough developed during his years as a hedge fund manager and continues to refine. Nearly every trading day, you’ll receive Keith’s latest signals - buy, sell, short or cover.

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