Client Talking Points
For a while now, China has been one of Hedgeye’s top long ideas, but some of the recent data has sent some mixed signals. Specifically, industrial production, fixed asset investment and aggregate financing (a driver of money supply) were marginally below expectations and saw sequential declines. Now to be fair, many of these economic metrics are showing year-over-year growth rates, that relative to the rest of the world, are outstanding. We’ll continue to keep a close eye on China, particularly on new policy initiatives that come from the government there.
While China is belittling us a bit, our call on gold is playing out as we expected. The breakdown of gold has been a key asset call on the back of our view that global growth is stabilizing. This hasn’t been a popular call as many institutional investors have been over allocated to gold based on the idea that as growth decelerates, expectations for future QE rise, the dollar depreciates and investors flock to gold as protection against further dollar debauchery.
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Top Long Ideas
We believe ASCA will receive a higher bid from another gaming competitor. Our valuation puts ASCA’s worth closer to $40.
With FedEx Express margins at a 30+ year low and 4-7 percentage points behind competitors, the opportunity for effective cost reductions appears significant. FedEx Ground is using its structural advantages to take market share from UPS. FDX competes in a highly consolidated industry with rational pricing. Both the Ground and Express divisions could be separately worth more than FDX’s current market value, in our view.
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
“That smoke out of the Vatican chimney, that mean a Darrelle Revis trade is near?” -- @Adam Schefter, ESPN NFL Insider.
QUOTE OF THE DAY
“There’s a great consumer fan base that hasn’t declined.” – Metropoulos & Company on Twinkies. Metropoulos is one of the two investment firms that has agreed to buy Hostess Brands.
STAT OF THE DAY
1.1%, the amount US retail sales rose last month, the biggest jump in five months