• It's Coming...

    MARKET EDGES

    Identify global risks and opportunities with essential macro intel using Hedgeye’s Market Edges.

LOWERING EXPECTATIONS

CLIENT TALKING POINTS

LOWERING EXPECTATIONS

Big companies like FedEx (FDX) and Caterpillar (CAT) have already provided caution to the earnings slowdown that is occurring and it’s spreading throughout the market quickly as third-quarter earnings reports come in day after day. Just look at Zynga (ZNGA) which was down -19% pre-market. Looks like people are starting to realize that people would rather put gas in their car then buy virtual goods in Farmville. Wait and see. As we head into next week, you’re going to see weak guidance across the board, regardless of what Romney and Obama have up their sleeves.

STRONG AIN’T WRONG

There’s nothing wrong with a strong currency and the United States should focus on restoring confidence in the greenback. Strengthening the dollar helps strengthen America; your neighbor isn’t going to complain about commodity prices going lower, that’s for sure. The dollar and cereal boxes have a lot in common these days - they’re shrinking. Let’s see where next week takes us and remember: get the dollar right, you get a lot of other things right. 

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ASSET ALLOCATION

Cash:                UP

U.S. Equities:   Flat

Int'l Equities:   DOWN   

Commodities: Flat

Fixed Income:  Flat

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

“If #obama can't stand up to #Romney and challenge him on facts. How do we expect him to stand up to Iran and other world leaders ? #debate” -@greenbergcap

QUOTE OF THE DAY

“I don't mind what Congress does, as long as they don't do it in the streets and frighten the horses.” -Victor Hugo

STAT OF THE DAY

US September Non-Farm Payrolls rise slightly less than expected, up by 114,000 in September; Jobless Rate falls to 7.8%