Hedgeye CEO Keith McCullough is adding Pinterest (PINS) to the long side of Investing Ideas. Below is a brief note.
Why are we getting buying opportunities in some of my Independent Research team's GROWTH names right now? Two words: #Quad Four.
On the other side of his epically timed short call on Netflix (NFLX), Communications analyst Andrew "Freebird" Freedman has been bullish on Pinterest (PINS). That said, "don’t call me a rookie” Freebird didn't like PINS at every time (#Quad4) and price.
For those of you who want to learn how to use The Quads to augment your "stock picking" #process, here's a Jedi of The Quads note that was well timed by the Freebird pre-this pancaking of Tech/Comms momentum:
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NAVIGATING THE FOUR QUADS We incorporate the Hedgeye Macro four-quadrant, growth and inflation (GIP) model into our research process as a risk management overlay to our fundamental positioning. Each quadrant has a combination of style factors that outperform or underperform based on whether growth and inflation are accelerating or decelerating. For example...
When the quads and our fundamental positioning are in alignment, our conviction often increases significantly and vice-versa. The Hedgeye Macro team held a call recently detailing their expectation for the U.S. to enter Quad 4 territory in 3Q19 followed by a move back into Quad 3 in 4Q19. Quad 4 is the same environment we experienced in 4Q18, which was characterized by sharp equity drawdowns and an increase in market volatility. From a fundamental perspective, the timing of Quad 4 lines up well with our Netflix (NFLX) short. NFLX is a high-beta, high-multiple, leveraged growth stock that we expect will report disappointing Q2 results and Q3 guidance in July 2019. Meanwhile, one of our favorite long ideas, Pinterest (PINS), is also likely to perform poorly in Quad 4 due to its high-beta, high-multiple and growth style factors (recent IPOs also don't backtest well in Quad 4). However, because we see upside to consensus estimates in 2019 and have confidence in the long-term growth narrative, we are okay with staying long through Quad 4 and look to get more aggressive on weakness. We also plan to take advantage of Quad 4 weakness by adding to our list of long ideas in anticipation of what the Hedgeye Macro team believes will be a buy-the-dip moment... |
KM
