Taking A Beating

Client Talking Points

Whipping The KOSPI

South Korea's KOSPI index is down another -1.2% overnight, which brings the index to another lower-low for the year and is -5% year-to-date. Ouch. The country has plenty of external factors going against it, ranging from Japan's debauching the Yen to Kim Jong Un crying war up north. Tech in the US is taking a beating - just look at AAPL yesterday. All this spells trouble for Korea.

Doctor Copper

The Great Commodity Bubble brought on by Federal Reserve Chairman Ben Bernanke has already taken out gold, so who's next? Doctor Copper, step right up. While gold struggles to recover this morning, copper is taking another beating, down -1.1% to $3.08/lb. This comes on the heels of a fresh six month low, so don't forget: bad can get worse.

Asset Allocation

CASH 34% US EQUITIES 20%
INTL EQUITIES 15% COMMODITIES 0%
FIXED INCOME 6% INTL CURRENCIES 25%

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.

IGT

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

"If VZ activated 4 million iPhones, that's 25% YoY growth." -@Commodity_Bull

QUOTE OF THE DAY

"It is dangerous to be sincere unless you are also stupid." -George Bernard Shaw

STAT OF THE DAY

U.S. weekly jobless claims edge up by 4000 to 352,000.