The Call @ Hedgeye [FREE EDITION] | November 18, 2025

Key Concepts

• Quad 4 Risk: A period of economic uncertainty and potential downturn.
• Conditional Factoring: A probabilistic approach to forecasting, acknowledging uncertainty.
• Monthly Quads Beam: A framework for analyzing market conditions across different quadrants.
• Hedgei Nation: A community or group associated with the speaker's investment philosophy.
• YOLO Crowd/Hoodies: Terms for speculative retail investors.
• RevPAR (Revenue Per Available Room): A key metric for the hotel industry.
• Comps (Comparables): Year-over-year revenue growth comparisons.
• Rate of Change Delta: The difference in growth rates between periods.
• Quad Factor Score: A metric used to rank investment opportunities.
• Signal Strength: The reliability and conviction of an investment signal.
• Fractals: Patterns that repeat at different scales, applied to market analysis.
• Risk Management: Strategies to mitigate potential losses.
• Fourth Turning: A concept suggesting a cyclical societal reset.

Market Analysis and Investment Strategies

Quad 4 and Market Conditions

The discussion begins by acknowledging the uncertainty surrounding "Quad 4 risk," emphasizing that while the timing is unknown, the mathematical certainty of its eventual occurrence is understood. The speaker uses the analogy of predicting rain: one may not know the exact time, but when it's raining, it's evident.

• Bitcoin Crash: Bitcoin has experienced a 27% crash.
• Nvidia Performance: Nvidia is down 10% from its cycle high.
• Historical Trends: Looking back, October was identified as a Quad 1 period. The "high retail sentiment basket," including widely owned stocks by speculative investors (YOLO crowd, hoodies), has broken trend. Robinhood, for example, is down 18% since October 6th, peaking around the same time as Bitcoin.

Exiting Quad 4 and Nvidia's Role

The abatement of Quad 4 is linked to Nvidia's performance. While the speaker appreciates CEO Jensen Huang's narrative (e.g., his favorite restaurant being Denny's), the focus is on the "risk range, trade, and trend" rather than personal stories.

Sector-Specific Analysis and Investment Ideas

Restaurants (Brinker International - EAT)

Brinker International (EAT) is highlighted as a stock that climbed on the back of "old wall reports" attempting to gain market share. The speaker criticizes a report title suggesting "near-term difficult comparisons provide an entry point," arguing it doesn't fully account for issues like the "queso flop" and a questionable slate for the latter half of the fiscal year.

• Comps Challenges: Brinker faces significant comparable sales challenges, going from a 3.5% comp two quarters ago to a projected 31% comp in the current and next quarters.
• Valuation and Domestic Sourcing: The discussion touches on valuation calls and positive undertones on beef, noting that 80% of their basket is domestically sourced, questioning the impact of this on current market conditions.
• Chili's Performance: Chili's comps are a key driver, with a 19% comp in the last quarter. However, the speaker questions the need to "comp the comps" when product performance is faltering, citing the queso flop and the upcoming chicken sandwich.
• Negative Comps Potential: While acknowledging the possibility of negative year-over-year comps given a 43% two-year stacked comp against the June quarter, the speaker believes full-year comps will remain positive for Chili's.
• Actionability: EAT is placed in the top five most actionable ideas.

Hotels (Marriott, Hilton, LVS, Wynn)

The hotel sector is discussed, with Marriott and Hilton identified as strong long-term prospects into 2026, and potentially solid longs for the remainder of 2025.

• RevPAR Data: US RevPAR data is expected to remain "pretty crappy" in the near term, with Wednesday's data anticipated to be weak. Last week's data was against an easy election-related comp.
• Q4 and Q1 Outlook: Q4 and Q1 are likely to underwhelm and decelerate due to tough comps in November and December.
• C-Corps Resilience: Marriott and Hilton (C-corps) are seen as resilient due to their operating models and EPS algorithms, which are less affected by softer US RevPAR trends.
• Global Exposure and Net Unit Growth: Their global ties and net unit growth are positive factors.
• Underallocation: The speaker believes investors are generally underallocated to these names.
• Opportunity in Weak Data: Upcoming weaker data in the hotel space is viewed as an opportunity to increase positions in Marriott or Hilton.
• Preference: Marriott is preferred over Hilton due to a lower earnings bar, greater resilience, a slightly higher-end product, and more international exposure. Marriott is placed in the top five most actionable ideas.
• Other Longs: LVS and Wynn are also on the buy list and will be added opportunistically.

Ammer Sports

Ammer Sports was a "best idea long" before its earnings print, with a perceived disconnect between street estimates and underlying data.

• Topline Growth: The company delivered 30% year-over-year topline growth, exceeding estimates of 27%.
• Accelerating Trends: Growth was driven by accelerating trends across all regions and brands.
• China Performance: Despite a negative reaction to a marketing event in China, China actually accelerated year-over-year on a tougher compare.
• Margin Expansion: Margins also expanded.
• Pre-Market Performance: Shares were up 9% in pre-market trading.
• Small Cap in Quad 4: This is cited as an example of a small-cap stock that can perform well in Quad 4, contrasting with the broken trend of the Russell 2000 index.

Healthcare Sector

The healthcare sector is analyzed, with a focus on potential shorts and longs.

• US Physical Therapy (USPH): Ranked 46 out of 58 on the quad factor score, it's identified as a top priority short due to fundamentals, volume, and wage inflation issues.
• AMN Healthcare (AMN): Data continues to look bad regarding new postings.
• Cross Country Healthcare (CCRN): Merging with a private company (Healthcare) that is a disruptor with low or negative margins in exchange for platform revenue, which is expected to be incrementally negative for AMN.
• Long Side: WGS, Align, Acadia, and Aluminina are in the workflow.
• UHS (Universal Health Services): Considered a "stick of dynamite" with a lower priority due to past performance, but will be refreshed. Data analysis will focus on volume, pricing, and margins once government data becomes available.

Industrials and Transports

Industrials are generally seen as performing poorly in Quad 4.

• XLI Sell Signal: A sell signal on XLI (Industrial Select Sector SPDR Fund) was executed, reducing exposure to minimums.
• Early Cyclicals: Some early cyclicals may start to bottom out first.
• JB Hunt (JBHT): Identified as a strong signal, potentially a "faster horse" in the transport sector. Its recent quarter strength and lower input costs (oil equivalents) are positive.
• Transport Stack: A transport stack analysis is underway, focusing on UPS and express carriers, potentially LTL, and intermodal (like JB Hunt).
• UPS: Considered a unionized competitor that steadily loses share and has executed poorly in the express air business. Generally not favored on the long side.
• FedEx: The go-to for large-cap transport, historically a good trading vehicle for alpha generation. It's believed to have put in a bottom and is rallying.
• Actionability: FedEx is placed in the top five most actionable ideas, alongside UPS and JB Hunt, with a preference for FedEx for swing moves.

HVAC Industry

The HVAC industry is in a "reset stock mode."

• Negative Factors:
  • Refrigerant Change: Transitioning from R410A to other refrigerants will be expensive and difficult to train, potentially reducing installations.
  • Subsidy Removal: Removal of IRA subsidies.
• Timeline: The industry is likely months, possibly quarters, away from being a long opportunity.
• Carrier: Added back to the bench for closer monitoring.

Oil and Energy

The oil signal remains weak, particularly for small-cap names.

• Small Cap Oil Names: Cord (CHRD), Perian Resources (PR), and Matador (MTER) are mentioned.
• Pension Fund Stakes: Two of these three have seen pension funds acquire significant stakes, attempting to time the bottom ahead of Quad 4, which is not recommended.
• Weak Signal: Oil lacks signal strength.
• Leverage: Matador and Perian Resources have some leverage.
• December Tax Loss Selling: These stocks may be sold to realize tax losses in December.
• Demand Concerns: A lack of signal strength in oil and these stocks, coupled with ample inventory on the mid-cap and natural gas side, suggests caution.
• Value Players: While some "value players" are making moves, picking up pennies in front of a train is discouraged.
• Energy's Importance: Energy drives economic activity. GDP per capita versus energy consumption per capita are strongly correlated. Subsidies are decreasing, and the ability of governments to subsidize uneconomic energy forms is questioned.

China Tech (Tencent, Xiaomi, PDD)

China's tech sector is facing headwinds.

• Xiaomi and PDD: Both have been exited and are not performing well on earnings.
• Tencent (TCEHY): A short pitch is made on Tencent, despite its historical outperformance.
  • AI Caution: Management is cautious about AI investment due to chip availability and a general shift towards protecting profits. This is seen as a dangerous strategy compared to peers like ByteDance and Baba accelerating AI investment.
  • VAS Segment Concerns: The Value-Added Services (VAS) segment, excluding video games, has been unimpressive for 2-3 years. Apple's new commission structure on mini-programs is also a negative.
  • Contrarian Short: This is considered a super contrarian short, as Tencent is seen as an AI beneficiary.
  • Potential for Estimate Cuts: If estimates are cut, the stock could unravel.
• Shanghai Composite Index: The first immediate-term trade break signal has been issued on the Shanghai Composite Index, indicating Quad 4 is coming to China in Q1.

Cloud Services (Amazon, Microsoft, Google)

The EU is investigating Amazon and Microsoft under the Digital Markets Act (DMA) for their cloud services, potentially as gatekeepers unfairly dominating the market.

• Focus on Amazon and Microsoft: The investigation primarily targets Amazon and Microsoft, not Google.
• Google as a Complainant: Google is reportedly one of the complainants, focusing on Microsoft's Azure integration with Windows.
• Interoperability Concerns: Outages on cloud platforms (e.g., AWS) highlight concerns about over-reliance on single providers and the need for diversification and redundancy.
• Timeline: The investigation is preliminary and will take months to determine potential fines or regulatory actions.

Risk Management and Process

• Patience and Process: The importance of patience and a rules-based decision-making process is stressed, especially in Quad 4.
• Selling on Green: The strategy of selling into market bounces (selling on green) over the last 3-6 days is highlighted as effective.
• Hope vs. Risk Management: Hope is explicitly stated as not being a risk management process.
• Quad 4 Preparation: Proactive preparation for Quad 4 involves making the right decisions, not doing nothing.
• Tickers as Factors: Investors should think of tickers as "tickers with factors" rather than just stocks.
• Consistency: The speaker emphasizes their own consistency in process and decision-making.
• Principles: Associating with people of principle is valued, with actions when nobody is looking being a key differentiator.

Notable Statements and Quotes

• "I mean, it's it's it's it's conditional factoring." (On understanding uncertainty)
• "I don't give a [ __ ] about his story this morning. I care about the wrist range. Where is the trade and where is the trend?" (On focusing on market fundamentals over narratives)
• "If any of our team makes a call to buy a stock 6 n 12 months ahead of a 43% comps, instead of giving you pink in your PA for your family, PK, which you know made a new high yesterday, you'll get a pink slip. And I mean immediately." (On accountability for investment calls)
• "You got to understand the flows you got to understand the behavior of the game if you don't we're going to beat you over time." (On market dynamics)
• "Hope is not a riskmanagement process." (On decision-making)
• "The ham is hedgei asset management. For those of you that aren't aware of it, we're not allowed to talk about the tickers, but we are allowed to talk to RPK." (Clarification on terminology)
• "Risk happens uh slowly, then uh transitions to all at once, uh pretty quickly, right?" (On market volatility)
• "The signal on industrials uh is as I said with Steiner on financials or on currencies for that matter um it's manifest right a fractal pattern has many many many components that the human eye can't see." (On complex market patterns)
• "I'd put JBHT in there. Not because I have a special relationship with the company or anything. It's just that I'm trying to think that through on why that signal looks different." (On identifying strong signals)
• "The importance of energy. Yeah. We call it the most important chart in energy is essentially GDP per capita versus energy consumption per capita and they are they go hand in hand." (On the fundamental role of energy)
• "I mean, you get um hedge funds, a lot of hedge funds have to run neutral. I run the opposite. I lean into factors, but if you want to be neutral on the China factor exposure, which a lot of hedge funds have to be, and you want to extract the AI winner versus loser, you'd be long baba against 10-centent, right?" (On market neutrality and factor exposure)

Conclusion

The discussion emphasizes a disciplined, data-driven approach to navigating market uncertainty, particularly in the context of Quad 4. Key takeaways include:

• Focus on Fundamentals and Signals: Prioritize risk ranges, trade, and trend over narratives.
• Sector Rotation and Opportunism: Identify sectors and individual stocks with strong signals, even amidst broader market weakness.
• Risk Management is Paramount: Implement rules-based decision-making, sell into strength when necessary, and avoid emotional trading.
• Patience is Key: Recognize that market shifts and opportunities unfold over time.
• Understanding Market Dynamics: Analyze flows, behavior, and underlying factors to gain an edge.
• Contrarian Thinking: Be willing to take positions against the prevailing sentiment when the data supports it.