Cheat 'Em

Client Talking Points

Three-Card Monte

The market can sometimes feel like  a guy with a cardboard table, hidden in an alleyway with some playing cards and the odds stacked against you. Yesterday, the US equity market rallied on “Greek” news and then promptly did an about-face and proceeded to sink lower along with European and Chinese equity markets. A lot of investors probably feel cheated, especially those who though that China had “totally bottomed.” Remember: cheap can always get cheaper. Stocks can always go lower. #GrowthSlowing continues in full force.

Asset Allocation

CASH 58% US EQUITIES 0%
INTL EQUITIES 0% COMMODITIES 0%
FIXED INCOME 24% INTL CURRENCIES 18%

Top Long Ideas

Company Ticker Sector Duration
TCB

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.

IGT

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.

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.

Three for the Road

TWEET OF THE DAY

“‘China has bottomed’ bulls, very quiet” -@KeithMcCullough

QUOTE OF THE DAY

“Bore, n.: A person who talks when you wish him to listen.” -Ambrose Bierce

STAT OF THE DAY

ConAgra to Buy Ralcorp Holdings for $5 billion.


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