Bearish Enough?

RIA DAILY PLAYBOOK     

FOR RELEASE ON WEDNESDAY, JULY 11, 2012

Bearish Enough? - client talking points

BRING ON THE BIG MAC

Our quarterly macro themes call takes place today at 11AM and will feature 49 slides in a 40 minute time span followed by anonymous Q&A. We are really fired up to talk about how growth is slowing and how commodity bubbles are bursting. Remember that our friend King Dollar is on a tear and is taking gold, copper and oil down with him.

If you’d like access to this morning’s Q3 Big Macro Themes call, please email sales@Hedgeye.com.

GETTING SMACKED AROUND

Everyone on the retail side and sellside will argue that if the Dow Jones Industrial Average is up year-to-date, then everything is groovy. Not the case. We are a mere 10 days into the third quarter of the year and check out how bad the three worst performing sectors of the S&P 500 have it:

1.    Industrials (XLI) = down -2.94%

2.    Basic Materials (XLB) = down -2.49%

3.    Energy (XLE) = down -2.12%

ARE WE BEARISH ENOUGH?

That’s a tough question to answer. People are still of the consensus that everything is going to work out in one way or another. The VIX is below 19, so how bad could it really be out there? We are at the start of a breakdown that is part of a bigger, macro-themed picture (see what we did there?) that must be understood. The consensus says the market is “bearish enough” -  we don’t buy that. We can always be more bearish.

Bearish Enough? - asset allocation

Bearish Enough? - assets July11

Bearish Enough? - 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

Bearish Enough? - three for the road

Tweet of the Day: “Microsoft store directly across from the Apple store. Guess which is full and which is empty?” -@Amaryllis         

Quote of the Day: “The most merciful thing in the world, I think, is the inability of the human mind to correlate all its contents.” –H.P. Lovecraft

Stat of the Day:  Hedge fund withdrawals jump to highest since 2009.