Client Talking Points
Talk About It
Everyone is talking about Europe, the ECB and Mario Draghi. Will he institute a rate cute this week? If not, will investors be sorely disappointed or can they swallow the reality that rates could stay the same? Regardless of the actual outcome, the Euro is taking a hit this morning against the US Dollar and has dropped below out TAIL risk line of $1.316
Step By Step
The Asian markets are following the lead of the US and are rallying hard with Korea's KOSPI index putting up +1.2% to the upside overnight. That puts the index back above our TREND line of resistance of 1943. It has the ability to continue to rally if US tech doesn't get clobbered and if the Yen can stop its bleeding. That remains to be seen for now.
|FIXED INCOME||6%||INTL CURRENCIES||30%|
Top Long Ideas
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.
WWW is one of the best managed and most consistent companies in retail. We’re rarely fans of acquisitions, but the recent addition of Sperry, Saucony, Keds and Stride Rite (known as PLG) gives WWW a multi-year platform from which to grow
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.
Three for the Road
TWEET OF THE DAY
"Last day of the month...always interesting ~ #BuckleUp" -@TheKillir
QUOTE OF THE DAY
"When a thing ceases to be a subject of controversy, it ceases to be a subject of interest." -William Hazlitt
STAT OF THE DAY
Employment cost index rises 0.3% in first quarter of 2013.