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Client Talking Points

Bullish Formation

There's a lot to get bullish on these days. The US dollar is certainly worth getting behind as commodities get destroyed across the board. You've saw what can happen to gold and copper is getting a beatdown that's even more severe. US equities are another market in bullish formation, and we like the S&P 500, Consumer Discretionary (XLY), US Consumer Staples (XLP), US Healthcare (XLV) and individual stocks by the way of Nike (NKE) and Starbucks (SBUX).

Bearish Formation

Now, it may seem obvious at this point but commodities are in bearish formation. We've been bearish on commodities for some time now as one of our big global macro themes. Particularly, we like shorting gold (GLD) and gold miners (GDX). We're also bearish on individual names like Freeport (FCX). And then we have Japan, where the Yen (FXY) has been in bearish formation for sometime thanks to the Bank of Japan's planning. Russia and Brazil are also in bearish formation due to their correlation with the commodity markets.

Asset Allocation

CASH 31% US EQUITIES 20%
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

"We do not want you to buy $CAT" -@KeithMcCullough

QUOTE OF THE DAY

"Defining and analyzing humor is a pastime of humorless people." -Robert Benchly

STAT OF THE DAY

Netflix shares rally 25% after earnings beat expectations.