What's Next?

Client Talking Points

Wait And Watch

It's tempting to want to buy US equities after a massive pullback like yesterday's, but no one ever lost money waiting on the sidelines and to watch what the market's going to do. Volatility spiked hard along with volume yesterday and the S&P 500 broke our TRADE line of support at 1557. This comes after the index hit a new all-time high of 1593 last week and was severely overbought. A lot of things can happen today so we'll feel this one out and either buy or sell when the risk management signals line up.

Go For The Gold?

Some people might be tempted to buy gold after it took nearly a 10% hit to the face yesterday. We're not one of those people. The fact of the matter is we have been discussing the bubble in gold since late last year and know that when you have a strong US dollar appreciating in value like we have the last few months, that its game over for commodities. People who want to short gold should pay close attention to the market and short on a bounce. You don't short anything at the bottom of a massive sell off. - even Bernanke can tell you that.

Asset Allocation

CASH 36% US EQUITIES 15%
INTL EQUITIES 15% COMMODITIES 0%
FIXED INCOME 6% INTL CURRENCIES 28%

Top Long Ideas

Company Ticker Sector Duration
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.

Three for the Road

TWEET OF THE DAY

"Gold $GLD $GDX, etc is a certified gong show - we dont buy things that are crashing" -@KeithMcCullough

QUOTE OF THE DAY

"It is impossible to defeat an ignorant man in argument." -William G. McAdoo

STAT OF THE DAY

Housing Starts rose 7% in March to a seasonally adjusted annual rate of 1.04 million -- the highest level since June 2008.


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