Putting On Risk

PUTTING ON RISK

 

 

CLIENT TALKING POINTS

 

PUTTING ON RISK

There’s always risk somewhere. Be it in the stock market or voting in an election. Risk is a part of our daily lives. So the IMF coming out this morning and stating that it sees an “alarmingly high risk of a deeper global slump,” is a realization of the risk that has been inherent in global markets for some time now. What does that mean for you? To us, it means more of the same that hasn’t worked. We’re still in a recession and multiple rounds of QE haven’t worked. What’s left to try out at this point? When you run out of bullets, you're at risk of being taken down, just like the market.

 

 

EUROPE’S BAILOUT

Europe continues to watch itself turn into an absolute mess. Italian stocks and Spanish stocks continue to fall lower and people still think that these countries aren’t all that bad. What will it take for them to realize the mess they’ve gotten themselves into? The ECB can buy bonds until it’s blue in the face, but is that going to fix the underlying problem? The U.S. and Greece enjoyed kicking the can down the road; does that mean it’s OK to kick the can to others? These are questions that will soon be answered. And in the mean time, we'll watch stocks fall and bond yields climb.

 

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ASSET ALLOCATION

 

Cash:                Flat

 

U.S. Equities:   Flat

 

Int'l Equities:   Flat   

 

Commodities: Flat

 

Fixed Income:  UP

 

Int'l Currencies: Down  

 

 

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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

“#Iran Live: Gold prices soar 25% in a week as officials try to "black out" the figures bit.ly/UOLcim | #p2 #tcot#IranElection” -@EANewsFeed

 

 

QUOTE OF THE DAY

“Forgive your enemies, but never forget their names.” -John F. Kennedy

                       

 

STAT OF THE DAY

Iron ore, Shanghai steel near 2-month peak as demand revives

 

 

 


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