CLIENT TALKING POINTS
Shifting Expectations
By now it’s pretty obvious that one of our big Q4 Macro themes, #EarningsSlowing, has taken effect and is widespread throughout the market. What’s interesting is that while we’ve been shouting about this since late February, the Old Wall is finally changing their stance on earnings. Consensus numbers and price targets are shifting at the banks and brokers; only took them nearly a year to get it right.
The Bernanke Top
Some people will tell you that stocks are “cheap” here. We say “they can get cheaper” because they can. Take technology for instance. Since the Bernanke Top (September 2012), the XLK ETF is down -10%, AAPL is down -14% and AMZN is down -15%. And on top of it, they’re missing on earnings. So while you might want to rush in and be a buyer, we warn that technology can get a lot cheaper.
TOP LONG IDEAS
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.
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.
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.
Asset Allocation
| CASH | 64% | US EQUITIES | 3% | |
| INTL EQUITIES | 0% | COMMODITIES | 0% | |
| FIXED INCOME | 18% | INTL CURRENCIES | 15% |
THREE FOR THE ROAD
TWEET OF THE DAY
“The problem with political jokes is they get elected.” -@Giggles270346
QUOTE OF THE DAY
“History is the version of past events that people have decided to agree upon.” -Napoleon Bonaparte
STAT OF THE DAY
Apple profit rises 24% on iPhone sales.