Client Talking Points
The VIX closed < 14.72 Hedgeye TREND yesterday. Looking at front month Volatility on the equity side, we’re going to get an oversold signal here. On our immediate term TRADE duration the VIX will be oversold around 13.01. That means that the equity market is immediate term TRADE overbought. Consider that immediate term signal within the inverse relationship that is Volatility versus Price in the S&P 500. The immediate term TRADE overbought line for the S&P 500 is 1888.
One of our favorite Emerging Markets right now, the BSE Sensex continues to shine +0.5% to +6.8% year-to-date. This continues to work in the face of not only some political reform, but the currency not going down in a blazing ball of fire anymore. What you get here in India this morning is another positive divergence versus the region. You’d rather be long India on the equity side. Dr. Raj continues to deliver. Hedgeye macro analyst Darius Dale has been all over this one.
Oil remains bearish TREND Hedgeye with Brent down hard at $104.65 this morning, which for the consumer, who’s getting plugged by inflation, is a very good thing.
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Top Long Ideas
Hologic is emerging from an extremely tough period which has left investors wary of further missteps. In out 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.
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.
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.
Three for the Road
TWEET OF THE DAY
Norway, another country that doesn't do 0% rates of return for Savers, sees unemployment drop to 3.5% @KeithMcCullough
QUOTE OF THE DAY
"Do what you feel in your heart to be right for you’ll be criticized anyway." - Eleanor Roosevelt
STAT OF THE DAY
Sporting a "Luck of the Jedi I Have" T-shirt, a California retiree stepped forward to claim a $425 million Powerball jackpot a month and a half after he bought the winning ticket. B. Raymond Buxton was grabbing lunch at a Subway inside a convenience store when he decided to buy a second ticket on Feb. 19. It was that second ticket — a $2 impulse purchase — that hit it big. (CNBC)