• It's Coming...

    MARKET EDGES

    Identify global risks and opportunities with essential macro intel using Hedgeye’s Market Edges.

Client Talking Points

Higher and Higher

The market is quite keen on going up these days. While some would argue a bullish case based on specific factors, we argue and make our bull case from a growth and consumption standpoint. US economic growth and consumption continue to gain and surprise on the upside via employment numbers and the like.

Squeezing Commodtities

Commodities continue to get squeezed, going the opposite way of the stock market. The CRB Commodities Index was down -0.4% yesterday and continues to look awful right now. Gold is the big one that everyone is focused on and continues to fail at our 1492 line of resistance. Oil is up next and lower prices at the pump help boost consumption.

Asset Allocation

CASH 31% US EQUITIES 18%
INTL EQUITIES 18% COMMODITIES 0%
FIXED INCOME 6% INTL CURRENCIES 27%

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

"Always fun to break news faster than those paid to break it #OldMedia" -@KeithMcCullough

QUOTE OF THE DAY

"The optimist proclaims that we live in the best of all possible worlds; and the pessimist fears this is true." -James Branch Cabell

STAT OF THE DAY

China April Exports Rise 14.7% As Imports Gain 16.8%.