RIA DAILY PLAYBOOK
FOR RELEASE ON WEDNESDAY, JULY 25, 2012
CLIENT TALKING POINTS
ALL IN A TRADE
Keith McCullough was hard at work yesterday updating the Hedgeye Virtual Portfolio. We covered several shorts to book gains, including Novagold (NG) and Baker-Hughes (BHI). We also shorted two huge names that we’ve been increasingly bearish on over the past year: JP Morgan (JPM) and JCPenney (JCP). We recently did a full breakdown of JCP and our bearish case for the stock on our website. Please use the URL below if you’d like to read it:
JCP: Right On The Money: http://app.hedgeye.com/unlocked_content/22086-jcp-right-on-the-money
SHOW ME THE MONEY
While the 10-year US Treasury yield continues to make new lows on a weekly basis, Europe is headed in the opposite direction. Yields continue to climb and set new highs all over the place, including some of the headliner countries like Spain and Italy. Spanish 10-year yields, even if marginally off their highs of the morning, are north of the 7.5% line. If you’re craving returns and don’t mind the heightened risk environment, you can find it in the Eurozone.
RIGHT AWAY, MR. PRESIDENT
It appears that President Obama still has an edge in the upcoming November election. On Tuesday, we released the latest results of our Hedgeye Election Indicator (HEI – link below), showing that the President’s chances of being reelected declined by 70bp, reversing a multi-week upward trend.
A NBC News / Wall Street Journal poll out this morning shows that President Obama holds a 10-point lead on the question: who would make a better Commander in Chief? At the same point four years ago, a Pew poll showed that McCain led Obama on the same question by 15 points. Still, the race between Mitt Romney and Barack Obama remains close and spirited as the countdown until November ticks away.
Hedgeye Election Indicator Results: http://app.hedgeye.com/unlocked_content/22070-president-obama-s-reelection-chances
Cash: Up U.S. Equities: Down
Int'l Equities: Flat Commodities: Flat
Fixed Income: Flat Int'l Currencies: Flat
TOP LONG IDEAS
JACK IN THE BOX (JACK)
This company is transitioning from cash burn to $75mm annual free cash flow generation thanks to completion of a reimaging program and refranchising of JIB units. Qdoba is the leverage; a maturing and growing store base will bring higher margins. We see 8.5% upside over the next 6-9 months.
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.
LIFEPOINT HOSPITALS (LPNT)
We continue to expect outpatient utilization to pick up in 2H12 alongside stabilization in acuity with ortho and cardiac/ICD volumes supporting both pricing and inpatient admissions growth. Births should serve as a tailwind into year-end, recent and prospective acquisitions offer some upside to 2012/13 numbers and the in place repo offers some earnings flexibility. With European and Asian growth slowing, we like targeted domestic revenue exposure as well.
THREE FOR THE ROAD
Tweet of the Day: “226 AAPL-loaded hedge funds desperate for Bernanke put to avoid margin call bonanza” -@zerohedge
Quote of the Day: “Few people can see genius in someone who has offended them.” –Robertson Davies
Stat of the Day: Caterpillar Inc (CAT) reported. The company reported a second-quarter profit of $1.67 billion, or $2.54 per share, compared with $1.02 billion, or $1.52 per share, a year earlier. Revenue rose 21 percent to $17.37 billion. Street consensus was $17.11 billion. The company also confirmed that China sales are slowing year-over-year, essentially confirming the growth slowing story in Asia.