CLIENT TALKING POINTS
China Calling
China’s economy finally flexes some muscle, with exports up 7.2% and inflation benign at 2.6% year-on-year. That was good enough to drive the Shanghai Composite 3.4% higher, crossing our TREND line of resistance of 2123.
Japan’s Economy Grows. Really.
Japan reports that GDP rose 3.8% in the most recent quarter, and the market loves chasing sequential growth. The Nikkei rose 2.5% for the sessions, and is already up 6% in September. This must be a bear market.
Gold Bulls Are Still Out There
Gold prices are down this morning, following a 0.5% down week where the net long position in futures/options contracts hit its highest level since January. That’s a great contra-indicator, and we still don’t like Gold though lots of others do.
TOP LONG IDEAS
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. We think that the prevailing bearish view is very backward looking and leaves out a big piece of the WWW story, which is that integration of these brands into the WWW portfolio will allow the former PLG group to achieve what it could not under its former owner (most notably – international growth, and leverage a more diverse selling infrastructure in the US). Furthermore it will grow without needing to add the capital we’d otherwise expect as a stand-alone company – especially given WWW’s consolidation from four divisions into three -- which improves asset turns and financial returns.
HCA
Health Care sector head Tom Tobin has identified a number of tailwinds in the near and longer term that act as tailwinds to the hospital industry, and HCA in particular. This includes: Utilization, Maternity Trends as well as Pent-Up Demand and Acuity. The demographic shift towards more health care – driven by a gradually improving economy, improving employment trends, and accelerating new household formation and births – is a meaningful Macro factor and likely to lead to improving revenue and volume trends moving forward. Near-term market mayhem should not hamper this trend, even if it means slightly higher borrowing costs for hospitals down the road.
TROW
Financials sector senior analyst Jonathan Casteleyn continues to carry T. Rowe Price as his highest-conviction long call, based on the long-range reallocation out of bonds with investors continuing to move into stocks. T Rowe is one of the fastest growing equity asset managers and has consistently had the best performing stock funds over the past ten years.
Asset Allocation
| CASH | 26% | US EQUITIES | 26% | |
| INTL EQUITIES | 23% | COMMODITIES | 0% | |
| FIXED INCOME | 0% | INTL CURRENCIES | 25% |
THREE FOR THE ROAD
TWEET OF THE DAY
“I have never witnessed more whining about markets in my life”
--@KeithMcCullough
QUOTE OF THE DAY
“The secret of life is honesty and fair dealing. If you can fake that, you’ve got it made.” – Groucho Marx
STAT OF THE DAY
3, The number of NFL games Sunday where the first score in the game was a safety.