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Client Talking Points

Ease Into It

Keith mentioned that this was coming and it came like a bat out of hell: the Bank of Japan will inject $1.4 billion into the economy in less than two years. As a result, the Yen bit the dust, the Nikkei 225 continued its meteoric rise (+5.2% over the last two days) and US stocks applauded as the futures rose in anticipation of the announcement. This is what happens when you print more money and promise to throw a bunch of it at anything that moves; people get excited and it helps inflate stocks around the world.

Navigating Europe

Europe is looking quite bearish, but it's important to know which index to play if you're going to short it. Germany's DAX index and the UK's FTSE 100 have held above our TRADE and TREND lines of support since the beginning of April. We wouldn't short these indices but the EuroStoxx 50 is looking ripe for a short very soon, though. Since we stick to a process here at Hedgeye, we're going to wait for our signals to tell us when to short the index no matter how tempting it may be to hop right in. The economic data (particularly, some of the March PMI numbers) supports our bearish thesis and if we get another country like Cyprus that needs a bailout, the selling will come hard and fast.

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. The company's net income declined on its recent earnings report but beat the Street's expectations.

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

"Yen down 2.54% against USD as BoJ intends to double size of its balance sheet. ow.ly/i/1OTde #EcoBrief" -@JoeBrusuelas

QUOTE OF THE DAY

"History is indeed little more than the register of the crimes, follies and misfortunes of mankind." -Edward Gibbon

STAT OF THE DAY

Bank of Japan to pump $1.4 trillion into economy as part of an unprecedented stimulus package.