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Client Talking Points

EUROPE

Year-to-date leaders are lagging this morning – Cyprus -2.6%, Denmark -2.2%, Austria -1.8% – as the DAX dips back below my intermediate-term TREND line of 9381. We currently have no European Equity exposure – Pain Trade is probably lower, for now #Waiting.

OIL

WTI broke out back above our TREND line last week (up again this morning to +6% year-to-date). I get a lot of questions about Oil – because it was one of the few commodities not going up – so this move plus Natural Gas up +13% YTD = #ConsumerSlowing. It isn’t good.

10YR

Treasury yield of 2.63% remains decisively broken (bullish for our slow-growth Gold Bond call) as the Street continues to expect #RatesRising in 2014 (that was the 2013 call). That’s not happening if we’re right on inflation slowing growth (Fed has 0% credibility fighting inflation).

Asset Allocation

CASH 40% US EQUITIES 0%
INTL EQUITIES 6% COMMODITIES 18%
FIXED INCOME 18% INTL CURRENCIES 18%

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

We remain bullish of Gold, in $GLD terms @KeithMcCullough

QUOTE OF THE DAY

"Hard work without talent is a shame, but talent without hard work is a tragedy." - Robert Half

STAT OF THE DAY

Twitter is having no trouble signing up users. But some new research provides an update on the size of an ongoing problem: getting people to tweet. A report from Twopcharts, a website that monitors Twitter account activity, states that about 44% of the 974 million existing Twitter accounts have never sent a tweet. To be sure, people don’t have to actively tweet to find the service useful, but the report highlights Twitter’s user retention issue. (WSJ)