CLIENT TALKING POINTS
Strong Dollar
The US dollar remains in bullish formation and had a big move to the upside yesterday to the tune of +0.7%. The Yen is coming down further while the dollar is appreciating and taking down commodities with it. This continues to be a bullish catalyst for US consumption stocks which is part of our growth thesis.
Tech Mate
Tech has lagged the broader market and select sectors considerably and is only up +7.2% year-to-date via XLK. Meanwhile, the S&P 500 is up +12% pre-NFP report. The sector has been lagging in large part due to Apple (AAPL) but that's starting to change and the sector is turning bullish. Keep an eye on it over the next week.
TOP LONG IDEAS
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.
Asset Allocation
| CASH | 21% | US EQUITIES | 25% | |
| INTL EQUITIES | 18% | COMMODITIES | 0% | |
| FIXED INCOME | 6% | INTL CURRENCIES | 30% |
THREE FOR THE ROAD
TWEET OF THE DAY
"Big upside revision for US nonfarm payrolls. Last month was an anomaly" -@NicTrades
QUOTE OF THE DAY
"Talk sense to a fool and he calls you foolish." -Euripides
STAT OF THE DAY
U.S. adds 165,000 jobs; unemployment 7.5% in latest NFP report.
