CLIENT TALKING POINTS
Saving Europe
Europe is back in the spotlight, just in time to distract us from the mess in the United States known as the fiscal cliff. While the 10-year yields on various Eurozone countries are relatively low compared to levels we saw during the summer of this year, global growth continues to slow. France’s Industrial Production growth is down 1.1% for October after a -2.5% drop in September, Italy’s GDP growth is down -2.4% year-over-year for Q3 of 2012 and Japan’s GDP growth is down -3.5% quarter-over-quarter SAAR for Q3 of 2012. For anyone who thought things were peachy keen, think again. Factor in the fact that we’re two weeks away from hitting the debt ceiling and there’s plenty of cause for concern.
TOP LONG IDEAS
YUM
New unit openings in China and strength in YRI and US should offset China weakness in 1H13. China SRS growth is sensitive to the economy but new unit growth and ROIIC are likely to be supported by continuing growth of the consuming class in China. Looking at operating income by geography for YUM/MCD/SBUX, we can see that YUM is the most geographically diverse. This is manifest in YUM’s more stable EPS growth and price performance over the last 10 years.
SBUX
Uncertainty in US from a macro perspective (jobless claims uptick) gives us pause from TRADE perspective although coffee prices will serve as a tailwind going forward. Company is becoming more complex, taking on risk as it acquires new brands. Longer-term, we view Starbucks, along with YUM, as one of the most attractive global growth stories in our space.
FDX
Margins are in a cycle trough as the USPS is on the brink. FDX is taking more share in the U.S. and following the recent $TNT news flow we think $UPS is in a tough spot.
Asset Allocation
| CASH | 52% | US EQUITIES | 12% | |
| INTL EQUITIES | 6% | COMMODITIES | 0% | |
| FIXED INCOME | 18% | INTL CURRENCIES | 12% |
THREE FOR THE ROAD
TWEET OF THE DAY
“Your dad's "distribution model" is crumbling.” -@ReformedBroker
QUOTE OF THE DAY
“None but a coward dares to boast that he has never known fear.” -Ferdinand Foch
STAT OF THE DAY
McDonald’s saw a stronger-than-expected 2.4% rise in sales in November. Same restaurant sales rose 1.4% in Europe, US sales at established restaurants rose 2.5%.
