“What is your investment edge?”
– Asked in every interview I have been on
Although I am one of the newer analysts here at Hedgeye, I have a long history that goes all the way back to the beginning. I started my Wall Street career on the sell-side, but it was during a CNBC interview that I realized I enjoyed the thrill of putting real money to work, rather than being in front of the camera. I switched sides and went on to spend 14 years on the buy-side. It was during that time when I heard about Keith’s Investment Ideas. When he started Hedgeye, I was one of the inaugural clients for the Retail sector.
I ended up reading so many musings on ice hockey from Keith’s Early Looks, that I took my son to 6 AM practices to see if it instilled the hard work ethos and discipline he insisted it did. I even picked up the game myself several years ago! Being the worst hockey player at our firm, I get much-unsolicited advice, like the often repeated, “you just have to get to know your edges.”
This isn’t advice; it’s more of a statement that I need to practice more. Starting to play ice hockey at 38 years old and using those edges to stop and turn was the most challenging thing I have done in years. Being out of my comfort zone was intimidating. My first investment lesson was to stay in my comfort zone. What felt like the worst in investing was to lose money when I did not understand what I owned. My first painful hockey lesson was not to turn away from a slapshot because all your pads are in the front. Being in front of the camera is also not my comfort zone.
So why would I join Hedgeye, where all our sector presentations are on camera? Keith told me keep the mindset of the buy-side in my interview, and I’ll get used to the camera. I joined because of the culture, the investment process, and the teammates. Hockey is a game; Hedgeye does not approach investing as a game. We don’t have investment banking or trading. We don’t have buy ratings to take management teams on the road to visit clients. We don’t have our EPS estimate for the quarter a penny below so that management can report a beat. Management teams don’t keep us close because they can’t get comfortable that we issue so many short ratings. It is straight forward how we earn our living.
We need to provide our clients with insights to make their investment decision.
Hedgeye offers me the freedom to dig into an idea.
Back to the Consumables Macro Grind…
Everyone in research has a large universe to hunt for compelling investments. This way, we are focusing on our best investment ideas. That’s why we do not have hold ratings, instead we have our best long ideas and best short ideas.
One of our investment themes in consumer staples is the easy or difficult year over year comparisons of the pandemic – separating the one-time winners, secular winners, structural losers, and losers that will see a reversal with a vaccine.
Constellation Brands (STZ) is a best idea long, because it is a structural share gainer in beer. It owns the Corona and Modelo beer brands in the U.S. as well as a wine and spirits portfolio. Sales accelerated at the outset of the pandemic despite one of its main brands sharing the name Corona with the virus. If I can share just one chart it would be the Chart of The Day, that shows the demographics underpinning its growth.
When the Mexican government shut beer production for nearly three months, Constellation Brands went from being nearly unaffected during the pandemic to becoming a temporary loser. Now the company’s sales growth is accelerating with improving inventory levels. Our conversations with the distributors confirm the supply improvement. We can see the month over month improvement in the point of sales data as well. As people return to restaurants, bars, and events in 2021 we’ll see recovery there as well.
We have a great team at Hedgeye. We are thankful that you value independent research that you may not agree with all the time but still want us as part of your investment process. Being a keen student of the market’s lessons, keeping an open mind, and repeating our investment process gives us our edge. We are honored to be part of your edge.
For more on Constellation Brands or Consumer Staples info (but not hockey tips) follow me on Twitter @Hedgeye_Staples.
Immediate-term @Hedgeye Risk Range with TREND signal in brackets:
UST 10yr Yield 0.88-0.98% (bullish)
UST 2yr Yield 0.11-0.18% (neutral)
SPX 3 (bullish)
RUT 1 (bullish)
NASDAQ 12,280-12,661 (bullish)
Tech (XLK) 123.40-127.75 (bullish)
Energy (XLE) 38.51-42.22 (bullish)
Financials (XLF) 28.09-29.30 (bullish)
Utilities (XLU) 61.56-63.43 (bearish)
Gold Miners (GDX) 33.18-36.75 (bearish)
Shanghai Comp 3 (bullish)
Nikkei 264 (bullish)
DAX 13145-13607 (bullish)
VIX 19.55-24.71 (bearish)
USD 90.04-91.16 (bearish)
Oil (WTI) 44.95-47.98 (bullish)
Nat Gas 2.31-2.77 (neutral)
Gold 1 (bearish)
Copper 3.48-3.59 (bullish)
Have a great day today,
Daniel Biolsi
Consumables Analyst
