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IT DOESN'T ADD UP

 

CLIENT TALKING POINTS

IT DOESN’T ADD UP

After the first presidential debate, the government released three economic data reports that suggested growth was returning to the US. Advanced monthly retail sales, Jobless Claims and the Jobs Report that Jack Welch got in a stir on Twitter about all seem suspect. The Jobless Claims report was missing one “large state’s” data and the Jobs Report suggested unemployment was at 7.8%? Get real. These kind of numbers don’t just magically appear overnight unless someone is tooling with them in order to achieve specific results. 

ROUND TWO

Now, if the above shenanigans occurred over the first presidential debate, we can’t wait to see what happens after tonight’s second debate between Obama and Romney. Economic growth is likely to be the key topic between both parties. Considering how close Romney and Obama are in the polls, this is going to be another round that Romney needs to win. If he can repeat the performance of his first debate, Obama will likely go back to spinning the data any which way he can to save face.

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ASSET ALLOCATION

Cash:                DOWN

U.S. Equities:   Flat

Int'l Equities:   Flat   

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

HCA HOLDINGS (HCA)

While political and reimbursement risk will remain near-term concerns, on the fundamental side we continue to expect accelerating outpatient growth alongside further strength in pricing as acuity improves thru 1Q13. Flu trends may provide an incremental benefit on the quarter and our expectation for a birth recovery should support patient surgery growth over the intermediate term. Supply costs should remain a source of topline & earnings upside going forward.

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

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THREE FOR THE ROAD

TWEET OF THE DAY

“‘We need a lasting solution’ -- Germ fin min Schaeuble, calling for creation of an EU ‘currency commissioner’ $$” -@carlquintanilla

QUOTE OF THE DAY

“Cynicism is an unpleasant way of saying the truth.” -Lillian Hellman

STAT OF THE DAY

Coca-Cola’s (KO) China business slows in quarter. Volume growth slows to 2% in China for Q3, vs. 6% year to date.