Client Talking Points
The old adage of “buy on the low, sell on the high” still rings true these days. At Hedgeye, we’re buyers when the market is tanking and people are forced to sell. Basically, you’re in one of two camps: you’re either holding a lot of cash or you’ve got a buy list with names you’re ready to pick up on market weakness. We’re in the latter camp and today, we’ll be looking to pick up a few new names. We have a process and we stick to it. Right now, our signals are suggesting we buy stocks and sell bonds, so we’re going to go forward and do just that.
Think back to the 2000 bubble when it popped and everything went from triple digits to single digits in a matter of weeks (or delisted entirely). Those who took out their proverbial wallet and started buying on the low did what was right and generated a profit more than likely. It’s the same thing here, courtesy of post-election cynicism that has investors all riled up.
The Name's Bonds
Skyfall and 007 aside, the recent bullish bias in bonds has been quite obvious over the last several weeks with our Growth Slowing theme building day by day. With the 10-year Treasury only offering a yield of 1.61%, we think bonds are overbought here and the time is nearing to sell ‘em like you mean it.
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Top Long Ideas
After a long downward slide, TCB has finally turned the corner. The margin has stabilized after the balance sheet restructuring. Loans are growing thanks to the equipment finance business. Non-interest income is more likely to go up than down going forward, a reversal from the past 18 months. Credit quality has a tailwind from a distressed housing recovery in TCB’s core markets: Minneapolis, Detroit and Chicago. On top of this, the CEO, Bill Cooper, is one of the oldest regional bank CEOs, which raises the probability that the bank will be sold. Expectations are bombed out at this point, so we think it’s time to move from bearish to bullish on TCB.
There is improving visibility on 20%+ EPS growth with P/E of only 11x with better content leading to market share gains. New orders from Canada and IL should be a catalyst. Additionally, many people in the investment community are out in Las Vegas at the annual slot show (G2E) and should hear upbeat presentations by management.
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.
Three for the Road
TWEET OF THE DAY
“Becky is grilling a $JCP analyst right now on Sqwawk. Sad to see people defend a name like this.#Sinking_ship.” -@HedgeyeRetail
QUOTE OF THE DAY
“Ambition is a poor excuse for not having sense enough to be lazy.” -Edgar Bergen
STAT OF THE DAY
JC Penney Q3 Same Store Sales fall 26.1%