CLIENT TALKING POINTS
Emerging Markets
The great bull market in Emerging Markets just so happened to coincide with the US Dollar Index hitting her all-time lows (2011). Janet “Mother of All Doves” Yellen is committed to bringing that puppy back online. After a big up week last week, EM Asia rocking right now with the Philippines and Indonesia up +1.3%-1.9% overnight bringing it to +12% and +14%, respectively, year-to-date. Meanwhile, Yellen’s Fed is “extraordinarily committed” to devaluing the Dollar and keeping the 10-year below 2.81%. Believe her.
EUROPE
Euros. They like Burning Bucks. So do European consumers. The EUR/USD is holding all lines of Hedgeye support and equity markets like Italy and Portugal continue to candy crush the Dow at +15%-16% year-to-date.
GOLD
Gold is holding Hedgeye TREND signal line of $1,276 support and is up small this morning. The biggest headwind for Gold is that the crowd bought the living daylights out of futures/options contracts at the mid-March top (the net long position peaked at over +125,000 contracts and is finally burning off some as the price reaction does). On a related note, the SPX risk range is 1 – bubbling back up to the all-time highs (on no volume).
TOP LONG IDEAS
HOLX
Hologic is emerging from an extremely tough period which has left investors wary of further missteps. In our view, Hologic and its new management are set to show solid growth over the next several years. We have built two survey tools to track and forecast the two critical elements that will drive this acceleration. The first survey tool measures 3-D Mammography placements every month. Recently we have detected acceleration in month over month placements. When Hologic finally receives a reimbursement code from Medicare, placements will accelerate further, perhaps even sooner. With our survey, we'll see it real time. In addition to our mammography survey. We've been running a monthly survey of OB/GYNs asking them questions to help us forecast the rest of Hologic's businesses, some of which have been faced with significant headwinds. Based on our survey, we think those headwinds are fading. If the Affordable Care Act actually manages to reduce the number of uninsured, Hologic is one of the best positioned companies.
OC
Construction activity remains cyclically depressed, but has likely begun the long process of recovery. A large multi-year rebound in construction should provide a tailwind to OC shares that the market appears to be underestimating. Both residential and nonresidential construction in the U.S. would need to roughly double to reach post-war demographic norms. As credit returns to the market and government funded construction begins to rebound, construction markets should make steady gains in coming years, quarterly weather aside, supporting OC’s revenue and capacity utilization.
DRI
Darden is the world’s largest full service restaurant company. The company operates +2000 restaurants in the U.S. and Canada, including Olive Garden, Red Lobster, LongHorn and Capital Grille. Management has been under a firestorm of criticism for poor performance. Hedgeye's Howard Penney has been at the forefront of this activist movement since early 2013, when he first identified the potential for unleashing significant value creation for Darden shareholders. Less than a year later, it looks like Penney’s plan is coming to fruition. Penney (who thinks DRI is grossly mismanaged and in need of a major overhaul) believes activists will drive material change at Darden. This would obviously be extremely bullish for shareholders and could happen fairly soon driving shares materially higher.
Asset Allocation
| CASH | 25% | US EQUITIES | 6% | |
| INTL EQUITIES | 12% | COMMODITIES | 20% | |
| FIXED INCOME | 15% | INTL CURRENCIES | 22% |
THREE FOR THE ROAD
TWEET OF THE DAY
TREASURIES: 2.75% 10yr yield doing a whole heck of a lot of nothing this morning #GrowthSlowing @KeithMcCullough
QUOTE OF THE DAY
"One can choose to go back toward safety or forward toward growth." - Abraham Maslow
STAT OF THE DAY
On this day ten years ago… April 1, 2004, Google launched Gmail and almost immediately changed the way people use email. Gmail accomplished the tricky feat of staying ahead of the competition technologically while growing to become the world's largest email service, boasting more than 500 million users. (CNN)
