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CHART OF THE DAY: A Tough 2016 For Equity Investors

CHART OF THE DAY: A Tough 2016 For Equity Investors - 10.17.16 EL Chart

 

It's been a rough year and half for equity investors.

 

After selloffs in July and December of 2015, a lot of people are playing performance catchup and chasing the returns of indices like the S&P 500 and Russell 2000. That's been a losing bet for some time now.

 

As you can see in the Chart of the Day, from today's Early Look, high beta, stocks that are the most likely to move with swings in the stock market, got killed last week. High beta stocks were down -2.5% versus low beta stocks which were essentially flat (circled in red). Low beta has been winning the battle in the year-to-date as well, +7.9% versus +6.7% for high beta. (See below for more on how this table is constructed.*)

 

To be clear, we've been advising that investors buy low beta stocks that are in the top 25% of market cap for well over a year now. We've been right on high vs. low beta. Here's how that's worked for market cap year-to-date:

 

  • Bottom 25%: +3.2%; versus
  • Top 25%: +4.2%

 

Based on our contrarian outlook for the U.S. economy and earnings season (here and here), we're sticking with our call to buy low beta, big market cap stocks.

That's been a winning mix all year. 

 

 

*  *  *  *

 

(*The chart above shows equity market "style factors" for companies in the S&P 500. Basically, we rank S&P 500 companies by their style factors comparing those in the top 25% versus the bottom 25% based on performance. For instance, we take the performance of S&P 500 stocks that have the "highest beta," the top 25% of the index, and compare that to the bottom 25% with the lowest beta.)


REPLAY! This Week On HedgeyeTV

Our deep bench of analysts take to HedgeyeTV every weekday to update subscribers on Hedgeye's high conviction stock ideas and evolving macro trends. Whether it's on The Macro ShowReal-Time Alerts Live or other exclusive live events, HedgeyeTV is always chock full of insight.

 

Below is a taste of the most recent week in HedgeyeTV. (Like what you see? Click here to subscribe for free to our YouTube channel.)

 

Enjoy!   

 

1. 5 Reasons To Sell Starbucks Now | $SBUX (10/16/2016)

 

 

During a recent HedgeyeTV presentation to institutional subscribers, Hedgeye Restaurants analyst Howard Penney laid out his sell call on Starbucks. In the excerpt above, Penney gives the five reasons the company isn’t, as one of his competitors recently claimed, “the greatest growth company in all of retail.”

 

2. ‘Macro Mentoring’ Session 6: How We Analyze Economic Cycles (10/15/2016)

 

  

In this week’s edition of ‘Macro Mentoring’, Hedgeye CEO Keith McCullough shows viewers how he uses the sine curve when analyzing the Non-Farm Payrolls and why he is predicting a slowdown in the broader economy. He also explains what’s driving global bond yields. 

 

3. Howe: Why U.S. Election ‘Venom’ = Indictments & Gridlock (10/14/2016)

 

 

In this excerpt from The Macro Show earlier today, Hedgeye Demography Sector Head Neil Howe discusses his post-election outlook. It’s pretty grim.

 

4. What The Media Missed: ‘It’s Literally A Lie’ To Say US Growth Isn’t Slowing (10/12/2016)

 

 

In this brief excerpt from The Macro Show, Hedgeye CEO Keith McCullough explains what mainstream media networks missed about U.S. economic growth and the broader implications for investors.

 

5. President Trump Catalyst? Bad Jobs Report (10/10/2016)

 

 

In this brief excerpt from The Macro Show, Hedgeye CEO Keith McCullough explains why the upcoming non-farm payroll reports could tip the presidential election in Donald Trump’s favor.


PREMIUM INSIGHT

5 Reasons To Sell Starbucks Now | $SBUX

5 Reasons To Sell Starbucks Now | $SBUX - Restaurants SBUX 10.14.2016

During a recent HedgeyeTV presentation to institutional subscribers, Hedgeye Restaurants analyst Howard Penney laid out his sell call on Starbucks. In the excerpt above, Penney gives the five reasons the company isn’t, as one of his competitors claimed recently, “the greatest growth company in all of retail.”


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This Week In Hedgeye Cartoons

Our cartoonist Bob Rich captures the tenor on Wall Street every weekday in Hedgeye's widely-acclaimed Cartoon of the Day. Below are his five latest cartoons. We hope you enjoy his humor and wit as filtered through Hedgeye's market insights. (Click here to receive our daily cartoon for free.)

 

Enjoy!

 

1. Turning A Blind Eye (10/14/2016)

This Week In Hedgeye Cartoons - White House economist cartoon 10.14.2016

 

Jason Furman, chair of the White House Council of Economic Advisers, actually said last week, "I don't think you're late cycle... I just don't believe in the concept of late cycle." We crowned that statement "the most glaringly irresponsible statement" of the day. 

 

2. Crude "Cuts" (10/13/2016)

This Week In Hedgeye Cartoons - Oil cartoon 10.13.2016

 

OPEC sits on ~80% of global crude reserves but has "virtually no control" over how much crude its members produce.

 

3. Economic "Growth" (10/12/2016)

This Week In Hedgeye Cartoons - sine curve cartoon 10.12.2016

 

U.S. economic growth continues down the slope, from 3% to 2% to 1% to...

 

4. Bailouts! (10/11/2016)

This Week In Hedgeye Cartoons - bankers bailing cartoon 10.11.2016

 

Central bankers are trying to bail out the sinking global economy. But the water keeps on coming in.

 

5. Economic Ills (10/10/2016)

This Week In Hedgeye Cartoons - cyclicals cartoon 10.11.2016

 

We are entering the slowest part of the U.S. economic cycle and there's no cure for these economic ills.

 

Click here to receive our daily cartoon for free.

 


‘Macro Mentoring’ Session 6: How We Analyze Economic Cycles

In this week’s edition of ‘Macro Mentoring’, Hedgeye CEO Keith McCullough shows viewers how he uses the sine curve when analyzing the Non-Farm Payrolls and why he is predicting a slowdown in the broader economy. He also explains what’s driving U.S. bond yields.


The Week Ahead

The Economic Data calendar for the week of the 17th of October through the 21st of October is full of critical releases and events. Here is a snapshot of some of the headline numbers that we will be focused on.

 

CLICK IMAGE TO ENLARGE.

The Week Ahead - 10.14.16 Week Ahead


Daily Trading Ranges

20 Proprietary Risk Ranges

Daily Trading Ranges is designed to help you understand where you’re buying and selling within the risk range and help you make better sales at the top end of the range and purchases at the low end.

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