Fight Night

FIGHT NIGHT

 

 

CLIENT TALKING POINTS

 

FIGHT NIGHT

The latest data according to our proprietary Hedgeye Election Indicator shows President Obama’s odds of being reelected at 62.4%. Most polls you’ll hear about also put Obama several points ahead of Romney both nationally and on a state-by-state basis. Clearly, Romney needs to execute a major comeback in order to win this election and tonight’s his first chance to do so. The upcoming debates are Mitt’s chance to show he’s got what it takes to turn America around and can visibly improve the economy. Jobs will likely be discussed, but it’ll be interesting to see if they touch on the US dollar and the role of the Federal Reserve at all.

 

 

RISK AND RANGE

The US stock market continues to amaze and wonder heading into November as the S&P 500 holds above our 1430 TRADE level of support with resistance at 1448. Trading the risk and the range is what we do here at Hedgeye. With the CBOE Volatility Index (VIX) above 15, things could heat up soon without anyone taking immediate notice of the situation. Obama needs to keep the market propped up for about one more month and after that, who knows what’ll happen, especially with Europe acting as the wildcard in all this.

 

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ASSET ALLOCATION

 

Cash:                DOWN

 

U.S. Equities:   Flat

 

Int'l Equities:   Flat   

 

Commodities: Flat

 

Fixed Income:  UP

 

Int'l Currencies: Flat  

 

 

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TOP LONG IDEAS

 

BRINKER INTL (EAT)

Remains our top long in casual dining as new sales layers (pizza) and strong-performing remodels (~5% comps) should maintain sales momentum. The company is continuing to enhance returns for shareholders through share buybacks . The stock trades at a discount to DIN (7.7x vs 9.3x EV/EBITDA) and in line with the group at 7.3x.

  • TRADE:  LONG
  • TREND:  LONG
  • TAIL:      LONG            

 

PACCAR (PCAR)

Emissions regulations in the US focusing on greenhouse gases should end the disruptive pre-buy cycle and allow PCAR to improve margins. Improved capacity utilization, truck fleet aging, and less volatile used truck prices all should support higher long-run profitability. In the near-term, Paccar may benefit from engine certification issues at Navistar, allowing it to gain market share. Longer-term, Paccar enjos a strong position in a structurally advantaged industry and an attractive valuation.

  • TRADE:  LONG
  • TREND:  LONG
  • TAIL:      LONG

 

UNDER ARMOUR (UA)

This company’s on track to post $3Bn in revenues by ’14 – impressive given a $1.5Bn print in 2011. Perhaps more impressive is the breadth of growth drivers that will get it there – women’s, accessories, new underwear platform etc. in addition to footwear. UA is gaining share in both apparel and footwear quarter-to-date. While some may be concerned over the loss of UA’s SVP/Sourcing we’re 8% ahead of the Street in the upcoming quarter and buyers on weakness.

  • TRADE:  LONG
  • TREND:  LONG
  • TAIL:      LONG

  

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THREE FOR THE ROAD

 

TWEET OF THE DAY

“Do you ever get tired of carrying so many evil secrets around or is it just me?” -@Dasan

 

 

QUOTE OF THE DAY

“Human Dignity has gleamed only now and then and here and there, in lonely splendor, throughout the ages, a hope of the better men, never an achievement of the majority.” -James Thurber

                       

 

STAT OF THE DAY

ADP private sector labor report shows U.S. private sector created 162,000 jobs in September, besting forecasts from economists for 143,000.


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