Big Trouble In Little China

RIA DAILY PLAYBOOK  

FOR RELEASE ON TUESDAY, JULY 31, 2012

CLIENT TALKING POINTS

RUMOR DU JOUR

Tuesday’s Rumor of the Day is brought to you in part by China. We have said again and again that China cannot afford another round of rate cuts right now. Food and fuel prices are already too high and the country just can’t send ‘em any higher. Well despite common sense, word on the Street is that President Hu will increase fiscal and monetary support to the economy in the second half of 2012.

This comes from Xinhua, the official press agency of the People’s Republic of China. We’d still take it with a grain of cautionary salt.

ALL THE GLITTERS IS GOLD

The Bailout Bulls are back in action begging for more QE. We remain on the sidelines to see what Fed Chairman Ben Bernanke will do exactly, but should the bulls get their wish, gold will rip to the upside. Currently, we have $1606 as our TRADE line of support, which was formerly our line of resistance. This thing could run all the way up to $1679, so keep an eye out and be careful out there. People have a tendency to gravitate toward bright and shiny objects.

WE AREN’T THE CHAMPIONS

As the Olympics continue to sneer in the face of viewers, retailers aren’t faring much better. Sales and growth that were expected from London hosting the games this year are tepid and just aren’t meeting retailers’ expectations. Throw in the time delays associated with the various networks showing the Olympics and you’ve got a mess on your hands of epic proportions. It’ll take a hell of a climax and break through from an underdog athlete or something of the like to revitalize both sales and viewership.

ASSET ALLOCATION

Cash:  Down              U.S. Equities: Flat

Int'l Equities: Flat     Commodities: Flat

Fixed Income: Up         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.

TRADE: LONG

TREND: LONG

TAIL: LONG            

FIFTH & PACIFIC COMPANIES (FNP)

The former Liz Claiborne (LIZ) is on the path to prosperity. There’s a fantastic growth story with FNP. The Kate Spade brand is growing at an almost unprecedented clip. Save for Juicy Couture, the company has brands performing strongly throughout its entire portfolio. We’re bullish on FNP for all three durations: TRADE, TREND and TAIL.

TRADE: LONG

TREND: LONG

TAIL: LONG

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.

TRADE: NEUTRAL

TREND: LONG

TAIL: LONG

THREE FOR THE ROAD

Tweet of the Day: "Bernstein u/g $FB to hold, lowers TP to $23. "Display advertising worth $19/share, $4/share to upside from social advertising & new biz"” -@BergenCapital

Quote of the Day: “The end of the human race will be that it will eventually die of civilization.” –Ralph Waldo Emerson

Stat of the Day: The EFSF sold 1.48 billion euros of three-year bonds at an average yield of 0.54%. The cover ratio--a gauge of demand--was 3.7.