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MGM Mirage (NYSE:MGM) led "low-quality" stocks down yesterday, with a 5.45% decline following a preliminary financial report for the quarter. A Stern Agee analyst, as reported by The Street.com, said that the nine wholly owned Las Vegas strip properties generated 1Q10 EBITDA of $205 million versus $283 million last year and their estimate of $251 million and that, "every property was down year-over-year and missed our forecasts."

Investors pointing to forecasts that implied incrementally improving ROIC were probably a bit disappointed today. A back-of-the-envelope analysis shows that taking $50 million off of each quarter for the next several quarters would project a flat ROIC trend before turning up a bit by December 2010. Those more optimistic will note this still breaks a previously negative ROIC trend seen for most of 2009, and arbitrarily lopping $50 million off the next several quarterly EBITDA forecasts relative to current consensus may be a bit onerous.

Below are two ROIC forecasts for MGM that we developed, using consensus estimates and our own. Using McKinsey & Company's framework, NOPLAT refers to trailing 12-month net operating profit less adjusted taxes, and Operating Capital refers to the net fixed assets, adjusted working capital and the discounted present value of any operating leases required to run the business.

ROIC Consensus-Driven Forecast April 14, 2010MGM-consensus-estimates-2010-04-14

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ROIC Forecast After Negatively Adjusting NOPLAT by $50 MIlion Per QuarterMGM-adjsuted-consensus-estimates-2010-04-14

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Long/Short Strategy Daily Update
'High-quality' stocks in the unlevered long portfolio rose 0.12% and 'low-quality' stocks in the unlevered short portfolio declined -0.57% for Thursday, April 15, 2010.

For the MTD, 'high-quality' stocks in the unlevered long portfolio are up 5.20%, ahead of the S&P 500 (ex dividends) at 3.61%. 'Low-quality' stocks in the unlevered short portfolio are up less for the MTD, at 5.14%.

Market Neutral Portfolio
As a result, the Market Neutral Model Portfolio increased 0.69% today and is now up 0.02% MTD.

Moderate Long/Short Portfolio
Given the 120/80 long/short weighting in the Moderate Long/Short Model Portfolio, it appreciated 0.60% overall for the day. The Moderate portfolio performance is now up 2.07% MTD versus 3.61% for the S&P 500, excluding dividends.

The Moderate Long portfolio is up 6.26% for the month and the Moderate Short portfolio is down -3.99%.

Aggressive Long/Short Portfolio
Given the 200/0 long/short weighting in the Aggressive Long/Short Model Portfolio, it appreciated 0.24% overall for the day. The Aggressive portfolio performance is now up 10.61% MTD versus 3.61% for the S&P 500, excluding dividends.

'High-Quality' Long Stocks Performance
The best daily performers in the long portfolio included SanDisk Corp. (NASDAQ:SNDK) up 2.52%, Warner Chilcott Limited (NASDAQ:WCRX) up 2.35%, and Seagate Technology (NASDAQ:STX) up 2.19%.

The worst daily performers in the long portfolio included Kinross Gold Corporation (NYSE:KGC) down -1.73%, Lubrizol Corp. (LZ) down -1.61%, and Gilead Sciences Inc. (NASDAQ:GILD) down -1.61%.

'Low-Quality' Short Stocks Performance
The best daily performers in the short portfolio included MGM Mirage down -5.45%, NII Holdings Inc. (NASDAQ:NIHD)) down -4.00%, and China Unicom Hong Kong Limited. (NYSE:CHU) down -2.88%.

The worst daily performers in the short portfolio included Plains Exploration & Production Company (NYSE:PXP) up 1.94%, Martin Marietta Materials Inc. (NYSE:MLM) up 1.84%, and Arch Coal Inc. (NYSE:ACI) up 1.76%.

Our Long/Short Indicator Remains Strongly Net Long

The Ascendere Long/Short Model Portfolios are "tactical tilt" portfolios that buy the highest quality stocks and sell the lowest quality stocks while maintaining a net long or net short position at all times. They are composed about 80-100 stocks and rebalanced monthly.

Investors focusing on daily performance could find monitoring our model portfolio useful as a proxy for what is working in the market in general as viewed through the lens of "high-quality" versus "low-quality" stocks.

Daily-Ascendere-Associates-2010-04-15

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Disclosure: No positions

Source: MGM Mirage Leads 'Low-Quality' Stocks Down