“Better to remain silent and be thought a fool than to speak and remove all doubt.”
-Abraham Lincoln
For those that have been following Hedgeye over the years, you know that one of our favorite holidays is April Fool’s Day. Sadly, this year’s April Fool’s Day, or le poisson d’avril as it is known in France, falls on the weekend, so you will be spared our attempt at humor.
The most successful joke we played was six years ago when we wrote in the Early Look that Keith was leaving Hedgeye and then announced at Noon that “The Most Interesting Investor in the World” was becoming CEO. Now, to be fair, his experience was quite impressive so you couldn’t really blame us for this change in management.
As we wrote:
“The Most Interesting Investor in The World has over 50-years of experience trading global markets. His vast business experience includes: passing his entire CFA in six months; discovering the Tupi Oil Field in Brazil; teaching Henry Kravis about leverage; advising the Federal Reserve on the creation of Maiden Lane I and II; and managing Warren Buffett's personal account.”
That’s a resume that even President Trump would drool over!
Back to the Global Macro Grind…
While it is no joke to us and may be unbelievable to certain politicized stock market operators, the economy continues to improve based on many metrics we follow. In the last couple of days, we’ve highlighted consumer confidence hitting a 196 month high, durable goods up 2.7% y-o-y, and U.S. home prices increasing to a 3-year high of up 5.7% y-o-y.
The last point on housing may be one of the most bullish and misunderstood. Despite interest rates increasing recently and likely moving higher, the domestic housing market is strong and getting stronger. In the Hedgeye Housing compendium (a fancy word for a collection of data points), we track 23 different housing data points and, as of last count, 15 of the 23 are improving sequentially.
Lately, we’ve been building out our machine learning big data group at Hedgeye and they’ve incorporated almost a million daily economic data points into a new real time gauge of economic conditions called the Jolts Oligopoly Kinetic Equilibrium Index ®. This new index measures the daily rate of economic change in the U.S. and you can see here, too, we are looking at almost 20-year highs.
Certainly many investors are still reluctant to embrace the bull market and still consider the Trump economy a bit of a JOKE. Despite what you think of the macro, our research team is producing stock and industry investment ideas at a feverish pace. In no particular order, these are the key calls we’ve made this week alone:
- The Future of Retail – Our ever mercurial retail guru Brian McGough produced one of our top pieces of research so far this year, with 70+ slides highlighting his view of the future of retail. In his opinion, we are at one of the most pivotal times in the history of retail and he expects “20% of today’s companies to account for 90% of tomorrow’s market cap.” His top long ideas include Nike, Dick’s Sporting Goods, and Kate Spade. On the short side his top ideas include Hanes Brands, Carters Inc, and Target.
- Long Praxair: Take the Blue Pill, Wake Up in Danbury – Jay Van Sciver our Industrials Sector head and student of cycles published his 50 page take on Praxair yesterday. His view is basically threefold: 1) merger concerns are overblown and the deal with Linde should get approved, 2) fundamentals for PX should improve into 2017 with easy economic comparisons, and 3) PX is undervalued on a standalone basis and even more so in a merger scenario with Linde to the tune of more than 30% upside.
- Short Microsemi: Best Idea Short – Our newly minted Technology analyst Ami Joseph launched a broadside on Microsemi yesterday. The crux of his short case revolves around organic growth, or lack thereof, for the company. In his view, MSCC has been obfuscating true growth by being a serial acquirer and then adopting a narrative that makes the “street” believe that there is an underlying growth driver, like a new product cycle or favorable end markets. The reality, though, is that the music always stops with a serial acquirer at which point expectations and stock prices re-align.
As always, email us at to receive the above reports or other in-depth pieces from our 40+ person research team.
Our immediate-term Global Macro Risk Ranges are now:
UST 10yr Yield 2.35-2.55%
SPX 2
VIX 10.53-13.19
EUR/USD 1.06-1.08
Oil (WTI) 47.12-50.00
Gold 1
Copper 2.59-2.69
Keep your head up and stick on the ice,
Daryl G. Jones
Director of Research
