Freshly Squeezed

Client Talking Points

US DOLLAR

The US Dollar got hammered yesterday as consensus comes around to A) #InflationAccelerating and B) the Fed cheering it on (which will slow growth, and get Janet Yellen to get more dovish from here). The USD Index at $79.78 remains well below our long-term TAIL risk line of $81.17—yes taxing US Consumption.

JAPAN

The other side of the Down Dollar trade? Up Yen! #Nice, though not really for the Nikkei which is down -5.3% in 3 days to -11.6% year-to-date as the currency war rocks on. The Nikkei is signaling immediate-term TRADE oversold. Cover some of those shorts here.

COMMODITIES

Freshly squeezed year-to-date highs for the CRB Index (19 commodities): up +1.2% yesterday to +10% year-to-date (it sure beats being long $YELP, which we’ll host “The Bear” call on today @1PM). Since this Fed has 0% credibility fighting inflation, the long-bond goes up on inflation slowing real growth.

Asset Allocation

CASH 34% US EQUITIES 4%
INTL EQUITIES 8% COMMODITIES 16%
FIXED INCOME 18% 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

New Zealand, who has been focused on a #StrongCurrency policy, continued higher overnight +7% YTD @KeithMcCullough

QUOTE OF THE DAY

"Respond intelligently even to unintelligent treatment." - Lao Tsu

STAT OF THE DAY

Toyota has announced five recalls, affecting a total of 6.39 million vehicles globally. The recalls cover 27 Toyota models, some made as early as 2004. The announcement affects around 2 million vehicles in North America, which may be experiencing problems with an air bag cable and seat rails. (CNN)

 

 


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