Hold The Line

Client Talking Points

Slicing Through The VIX

The S&P 500 held its line of support for us at 1557 on an immediate-term TRADE basis. Guess what happened to volatility (especially after that fake AP tweet was taken care of)? The VIX fell back below TRADE support of 14.82. We can go much lower and the pain trade right now, as far as the VIX goes, is at 10.97. Remember: Nothing is impossible.

Euro Trip

We covered our short position in the Euro yesterday (via FXE) at the low end of our risk range: 1.29-1.31. There's plenty of long-term TAIL risk for the EU that should have those trading the currency on their toes watching every move the ECB makes. Will they cut rates to zero? Will they bail everyone and their mother's pension out? Wait and see. The next meeting is May 2nd and we'll know a lot more then and knowing is half the battle. 

Asset Allocation

CASH 24% US EQUITIES 24%
INTL EQUITIES 18% 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

"Kingsbridge Armory in The Bronx to be transformed Bronx into the world’s largest ice-skating mecca stks.co/iSgJ AWESOME" -@LDrogen

QUOTE OF THE DAY

"I may not have gone where I intended to go, but I think I have ended up where I needed to be." -Douglas Adams

STAT OF THE DAY

Over $20 billion has been redeemed from exchange-traded products that focus on gold.