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Client Talking Points

US Dollar Action

As we say often at Hedgeye, if you get the US dollar right, you get a lot of other things right. However, you still have to understand how the dollar is correlated to different assets, and those correlations change over time. Right now, an up US dollar means US and Asian stocks are higher but Brazilian, Russian and Emerging Market stocks are down.  Also, right now, a lower US dollar means higher commodities and basic materials stocks.

Crisis in the Crisis?

Cyprus wasn’t really a crisis though many would want you to believe it was a major global contagion. There are, though, economies in Europe that are struggling, and fear is indeed alive and well across the continent there. The Euro is in a bearish formation, and Italy has been bearish on TRADE and TREND durations for a month now.

Asset Allocation

CASH 30% US EQUITIES 20%
INTL EQUITIES 20% COMMODITIES 0%
FIXED INCOME 6% INTL CURRENCIES 24%

Top Long Ideas

Company Ticker Sector Duration
DRI

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%.

FDX

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

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

“Our cross country tour of the most hated bull market move in modern history carries on.” --@KeithMcCullough

 

QUOTE OF THE DAY

“If you tell the truth, you don’t have to remember anything.” – Mark Twain

STAT OF THE DAY

357,000, the number of initial jobless claims reported this morning, which was higher than expectations of 340,000