RIA DAILY PLAYBOOK
FOR RELEASE ON TUESDAY, JULY 10, 2012
CLIENT TALKING POINTS
READING THE STORY
You get fed news flow and you have to digest it in a rapid manner that gets to the point right away. This morning, before 4AM, the futures were down due to a bad start to the US earnings season. Then, after 5AM, we were up on news of Spain getting a re-do on the timing of its bank bailout. It’s all part of the game.
Basically, keep this in mind: The Barclays debacle is far from over. Bob Diamond will be paid handsomely on his way out, Barclays will separate its retail and investment banking operations and the world will continue on despite the massive manipulation going on in the market. Life is grand.
EARNINGS WATCH
As we move into the earnings season, every week is going to have a slew of new numbers to watch. Right now, the real question is whether or not the slowing growth (and we know slowing growth), is priced into corporate earnings. If this continues, the longest of long-term corporate profit margin cycle peak is probably in. “Cheap stocks” will become a lot cheaper.
BRITISH INCOMPETENCE
Barclays has a serious problem on its hands on with this LIBOR scandal. People are realizing that they screwed up big time. An interesting note is that Barclays current has a market capitalization of around $20 billion. Were Barclays Capital to separate from the parent division, it would need an additional $20 billion in recapitalization post-split. Diamond and Aegis aren’t going to take their bonuses – that’s given. The question is can this legendary institution survive, given all that’s happened and the worst is yet to come? We shall see.
ASSET ALLOCATION
Cash: Down U.S. Equities: Flat
Int'l Equities: Down Commodities: Down
Fixed Income: Down Int'l Currencies: Down
TOP LONG IDEAS
PSS WORLD MEDICAL (PSSI)
The bulk of the bad news is on the table following disappointing F2012. Rebased F2013 estimates far more reasonable, and revenues should be supported by our expectations for rising physician utilization, and in the near-term, a flu season that is shaping up as a considerable tailwind.
TRADE: LONG
TREND: LONG
TAIL: NEUTRAL
HCA (HCA)
SS volume accelerated in 1Q12 and employment remains a tailwind to both admissions & mix. We expect acuity to stabilize and births and outpatient utilization to accelerate out of 1Q12, while supply cost management continues as a margin driver and acquisition opportunities remain a source for upside.
TRADE: NEUTRAL
TREND: LONG
TAIL: NEUTRAL
UNDER ARMOUR (UA)
The company continues to control its own destiny through investments in all the right areas. We think 30%+ top line and EPS growth for 5+ years. One of its failures, however, has been in penetrating markets outside the US. That will happen. But for now, its failure is a competitive advantage in the face of a strengthening dollar. We like it in sympathy with a LULU sell-off.
TRADE: LONG
TREND: LONG
TAIL: LONG
THREE FOR THE ROAD
Tweet of the Day: “PFG=People’s Funds Gone #PFGBest” -@ilkandcookies
Quote of the Day: “That is the saving grace of humor, if you fail no one is laughing at you.” –A. Whitney Brown
Stat of the Day: $200 million in missing funds from Iowa-based futures brokerage PFGBest.
