Equity Flows? Not Looking Good

Client Talking Points

USD

There was a big overbought signal yesterday, so we signal buy EUR/USD again here. In the absence of a jobs print somewhere north of 230,000, I say you short USD and buy the long bond again today as US growth slows. Incidentally, we’re keeping a close eye on US domestic equity fund flows. They’ve seen outflows for two straight weeks with inflows into taxable bond funds for more than seven weeks.

10YR

The UST 10-year yield’s TREND resistance is now 2.82%. So the setup is simple. On a jobs whiff, I’d look for the US Dollar down, bond yields down – no support for the 10-year yield to 2.66%. Consensus expectations on these jobs numbers are high.

GOLD

Gold is up +0.4% early this morning, making a series of higher-lows after holding Hedgeye TREND support of $1,270. Being long Gold (+7.4% year-to-date) or the Commodities (CRB Index up another +0.6% yesterday to +8.2% YTD) beats a flat Dow. #InflationAccelerating.

Asset Allocation

CASH 26% US EQUITIES 4%
INTL EQUITIES 10% COMMODITIES 20%
FIXED INCOME 20% INTL CURRENCIES 20%

Top Long Ideas

Company Ticker Sector Duration
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.

Three for the Road

TWEET OF THE DAY

CANADA: rockstar yr for the Canadians (Olympic Hockey) vs Americans (Dow) w/ the TSE +6.7% YTD @KeithMcCullough

QUOTE OF THE DAY

"Happiness is not something readymade. It comes from your own actions." - Dalai Lama XIV

STAT OF THE DAY

UK sales of new cars in March rose at their fastest pace for a decade, according to the Society of Motor Manufacturers and Traders. There were 464,824 new car registrations, a rise of 17.7% on a year earlier. The month also saw the biggest-ever rise in sales of alternatively-fueled vehicles, with sales soaring 63.8% compared to last year. (BBC)


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