Emotional Trading

Client Talking Points

Bad Brent

Brent crude oil is now in bearish formation and has been down for the last few days consecutively as global supply increases and commodity prices feel the wrath of a stronger dollar. Driving season is kicking into gear and consumption is due for a boost as prices come down at the pump. That'll have Americans using both cars in their household instead of carpooling it and getting out the convertible.it. Expect Brent to go lower on an up day for the dollar.

Bernanke Blues

People got really emotional over yesterday's FOMC meeting. Whether they wound up expecting change or not doesn't matter - we knew this was coming. More of the same. Low rates, asset purchases, keeping the markets happy - that's what Bernanke does. As for as America goes, we'll enjoy this tomfoolery for at least another year before anything material changes. But tomorrow, all eyes are on Europe and a possible rate cut from the ECB via Draghi. That'll get people really worked up - just wait and see. 

Asset Allocation

CASH 15% US EQUITIES 26%
INTL EQUITIES 20% COMMODITIES 0%
FIXED INCOME 6% INTL CURRENCIES 33%

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. 

WWW

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. 

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.

Three for the Road

TWEET OF THE DAY

"When all is said and done, $FNP printed what it needed to make the stock not go down." -@HedgeyeRetail

QUOTE OF THE DAY

"Only the shallow know themselves." -Oscar Wilde 

STAT OF THE DAY

Initial jobless claims fall 18,000 to a seasonally-adjusted 324,000 last week, the lowest level since January 2008.