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Client Talking Points

NASDAQ

The Nasdaq is down -5.3% from its year-to-date high and, more importantly, it sliced through my intermediate-term TREND line of 4,203 support on real volume Friday. Take a look at our bearish note on YELP from late last week. Some of the expectations embedded in these social media stocks are scary.

COMMODITIES

The CRB Commodities Index is up +0.57% versus Nasdaq down -2.6% on Friday. It’s alpha for the long #InflationAccelerating macro position versus US #GrowthSlowing (and big multiple stock compression). Meanwhile, the CRB Food Index was up another +0.6% last week to +19.8% year-to-date. Food #InflationAccelerating continues to be the contrarian macro call of the year.

UST 10YR

The 10-year yield backed off my intermediate-term TREND resistance line of 2.81% last week like a champ. It makes sense as the rate of change in US employment continues to deteriorate. The 2-year average in Non-Farm Payrolls and private payrolls posted their lowest rates since November 2012 and August 2011, respectively.

Asset Allocation

CASH 32% US EQUITIES 4%
INTL EQUITIES 8% COMMODITIES 16%
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

Social Media Bubbles are unique to the US stock market - watch their momentum factors closely @KeithMcCullough

QUOTE OF THE DAY

"When all is said and done, success without happiness is the worst kind of failure." - Louis Binstock

STAT OF THE DAY

More Americans felt rich enough to invest in vacation homes last year. Annual sales jumped nearly 30% to 717,000 homes, according to the National Association of Realtors. Vacation home sales represented 13% of the total market, their highest share since 2006. The median price rose to $168,700, up 12.5% from a year earlier. (CNN)