Growth's Roadblock

Client Talking Points

Tread Lightly

Since 2013 started, stocks have ripped to the upside nearly every day and the S&P 500 is a few handles away from touching 1500, an impressive feat considering that the financial crisis was only five years ago. And while the move in stocks is actually justified this time, we begin to worry about inflation slowing global growth. If commodity prices (oil in particular) keep heading higher, that can stop growth right in its tracks. When consumption slows because of $8 a gallon gas and $5 boxes of Gushers at the supermarket, so does global growth. There is no way that $100/barrel WTI crude is going be OK with the American consumer; Jamie Dimon can kiss his 4% GDP growth rate goodbye if that happens. 

The Big Miss

Apple’s (AAPL) earnings release after the close is the big catalyst for the market. If they miss, people are likely to freak out. People freak out when bad things happen to Apple because it makes up 17% of the tech sector ETF (XLK) and is king of the NASDAQ. “In the meantime, the SP500 is immediate-term TRADE overbought at 1496 inasmuch as the VIX is oversold at 12.19,” says Keith this morning. And if we want to enjoy a market above 1500, we’re probably going to need to see a beat from Apple after the close.

Asset Allocation

CASH 52% US EQUITIES 12%
INTL EQUITIES 18% COMMODITIES 0%
FIXED INCOME 0% INTL CURRENCIES 18%

Top Long Ideas

Company Ticker Sector Duration
ASCA

We believe ASCA will receive a higher bid from another gaming competitor. Our valuation puts ASCA’s worth closer to $40.

ADM

ADM has significantly lagged the overall market in 2012 over concerns that weakness in the company’s bioproducts (ethanol) and merchandise and handling segment will persist. Ethanol margins suffered from higher corn costs, as well as weak domestic demand and low capacity utilization across the industry. Merchandising and handling results were at the mercy of a smaller U.S. corn harvest. Both segments could be in a position to rebound as we move into 2013 and a new crop goes into the ground. With corn prices remaining at elevated levels, the incentive to plant corn certainly exists, and we expect that we will see corn planted fencepost to fencepost.

HOLX

HOLX remains one of our favorite longer-term fundamental growth companies given growing penetration of its 3D Tomo platform and high leverage to the 2014 Insurance Expansion from the Affordable Care Act.

Three for the Road

TWEET OF THE DAY

“Economists lowered 2013 economic growth expectations for Asia for the fourth time in a row. However expectations are 2013 will beat 2012.” -@Bain_Energy

QUOTE OF THE DAY

“Philosophy is a battle against the bewitchment of our intelligence by means of language.” -Ludwig Wittgenstein

 

STAT OF THE DAY

U.S. chains store sales were up 3.2% in January over where they were a year ago.