CLIENT TALKING POINTS
A Broken System
The Eurozone is a broken, interconnected system of countries with high unemployment, pension problems and structural banking issues. The European Central Bank, the International Monetary Fund, and Germany have all been working in tandem as Troika in an effort to slap band aids on to wounds whenever and wherever necessary. Slowly but surely, the Troika is learning from its past mistakes made in Greece and Cyprus and will be able to better assess issues in the future. Currently, things look "fine" for lack of a better term. Nothing is great, but bond auctions around various countries are going well despite high coupons and the liquidity is still there.
Go Bulldogs!
We posted a write up to a fantastic Bloomberg article (link) yesterday that featured CEO Keith McCullough discussing Yale Hockey tradition and history. Later that evening, Yale would go on to beat UMass Lowell in OT to advance to the championship round of the Frozen Four and will play Quinnipiac this weekend. This is a once in a lifetime event that we're extremely proud to be a part of. Both Yale and hockey run deep in the corporate culture at Hedgeye and we look forward to the Bulldogs securing victory this Saturday.
TOP LONG IDEAS
IGT
Decent earnings visibility, stabilized market share, and aggressive share repurchases should keep a floor on the stock. Near-term earnings, potentially big orders from Oregon and South Dakota, and news of proliferating gaming domestically could provide near term catalysts for a stock that trades at only 11x EPS. We believe that multiple is unsustainably low – and management likely agrees given the buyback – for a company with the balance sheet and strong cash flow as IGT. Given private equity’s interest in WMS (they lost out to SGMS) – a company similar to IGT that unlike IGT generates little free cash – we wouldn’t rule out a privatizing transaction to realize the inherent value in this company.
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.
Asset Allocation
| CASH | 30% | US EQUITIES | 18% | |
| INTL EQUITIES | 16% | COMMODITIES | 0% | |
| FIXED INCOME | 6% | INTL CURRENCIES | 30% |
THREE FOR THE ROAD
TWEET OF THE DAY
"@CBOE Apr #VIX up 0.30 to 13.45 on stock market weakness in the premarket. Financials under pressure - VIX closed @ 12.24 yesterday." -@RussellRhoads
QUOTE OF THE DAY
"What a blessing it would be if we could open and shut our ears as easily as we open and shut our eyes!" -Georg Christoph Lichtenberg
STAT OF THE DAY
Retail sales fell a seasonally adjusted 0.4% last month to mark the biggest decline since last June, the biggest drop in nine months.
