Client Talking Points
European stocks nailed this move on the upside inasmuch as Gold did on the downside. Take a look at Germany and Italy. Both the DAX and Italy’s MIB index are hitting new highs this morning. We are long Germany via the EWG with our Q413 #EuroBulls Theme. See our Macro deck from this past Friday for details. Ping firstname.lastname@example.org if you need assistance.
Both the U.S. Dollar holding its long-term TAIL risk line of $79.21 support and the 10-year U.S. Treasury TREND line of 2.58% holding are critical in terms of the quant signals in my model that matter. Don’t forget. The sovereign debt bubble is as glaring as Gold’s was.
We have had $1271 as our mean reversion downside target since December 2012. It's good to be lucky, but we didn’t lick the finger on that – it was all math. Gold and Silver? Yup, they're down again this morning. Fear fades @ VIX TREND line of 18.98. Thankfully.
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Top Long Ideas
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.
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.
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.
Three for the Road
QUOTE OF THE DAY
There is a strong tendency to get used to and accept very bad things that would be shocking if seen with fresh eyes. -Ray Dalio
STAT OF THE DAY
U.S. national debt is now more than 23 times larger than it was when Jimmy Carter became president.