Client Talking Points
Good for the Dollar, Bad for Commodities
The US Dollar Index is now up for six of the last seven weeks, and , in turn, the CRB Commodities Index is down for six of the last seven weeks. The dollar and commodities, then are inversely correlated. Oil, copper and rice have have very high inverse correlations, for example.
Emerging Markets Impact
Watch the emerging markets, too, to gauge the strengthening US dollar’s impact. In those emerging markets that do not have a peg to the dollar, we are seeing localized inflation. In those countries whose equity markets are commodity-linked, like Brazil for example, we are seeing declines. Brazil is down 9.4% for the year.
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Top Long Ideas
Darden stands to be a beneficiary from a housing recovery and an improved employment picture, which boosts casual dining trends. Darden reported earnings today that beat Wall Street expectations, though net income declined 18%.
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.
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.
Three for the Road
TWEET OF THE DAY
“Love that #OldWall mentality – everyone else had it wrong. So it’s ok (pay us).” – @KeithMcCullough
QUOTE OF THE DAY
“Be yourself; everyone else is already taken.” – Oscar Wilde
STAT OF THE DAY
15, the seed of Florida Gulf Coast, which became the first 15th seed in NCAA men’s basketball tournament history to make the round of 16.