Consuming Europe

Client Talking Points

Focus On Europe

Keeping a close eye on non-US markets is key to being a global macro player. And right now, we're focused on the DAX and FTSE 100 indices in Germany and the UK, respectively. Both were able to hold above our TRADE lines of support again this morning, which is quite meaningful as commodity-focused markets like Brazil and Russia continue to break down.

The Consumption Game

It's important to pay attention to commodities even if you don't trade them. Coal, corn and copper in particular are all very important to watch right now as consumption increases. An increase in consumption makes for an increase in global growth which helps boost consumption-oriented stocks. We remain bullish on consumption names as a massive divergence continues to widen between consumption assets and commodity assets. The catalyst behind all this is the strong US dollar, which continues, week-after-week, to post gains. Get the dollar right and you get a lot of other things right.

Asset Allocation

CASH 18% US EQUITIES 30%
INTL EQUITIES 25% COMMODITIES 0%
FIXED INCOME 3% 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

"The more crisis-mongering and concern, the better for US stocks #study" -@KeithMcCullough

QUOTE OF THE DAY

“I never did give them hell. I just told the truth, and they thought it was hell.” –Harry S. Truman

STAT OF THE DAY

ADP report says economy added 158,000 private-sector jobs in March, coming in below expectations. Economists' consensus was at 215,000.


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