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Client Talking Points

EUROPE

Leaders lead on the equity front this morning with Denmark up +2.2% (+15.2% year-to-date) and Ireland up +0.9% (+9.9% YTD). Both are crushing the Dow as the European Currency continues to strengthen versus the US Dollar.

VOLUME

If you look at the complexion of the selloffs and bounces for the last month, US Equity Volume on DOWN DAYS is up +8% versus the one month average, whereas volume on UP DAYS is down -5% versus the average – for the last five days volume has been down -14% versus the average. Sorry, lower-highs on lower-volume don’t confirm a renewed bull.

USD

It’s just sad to watch the poor thing meander in no-man’s land. The Yellen Fed restated its view last week that it has 0% intention to fight inflation – so rock on commodities, as oil and Energy (XLE) join what’s becoming a broad based breakout. Monetary policy has consequences.

Asset Allocation

CASH 36% US EQUITIES 0%
INTL EQUITIES 10% COMMODITIES 14%
FIXED INCOME 21% INTL CURRENCIES 19%

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

Gold-Corn +0.14-0.66%; both are yellow and beating the Dow, handily, YTD #BuyInflation @KeithMcCullough

QUOTE OF THE DAY

"If I look at the masses, I will never act. If I look at the one, I will." - Mother Theresa

STAT OF THE DAY

Netflix announced plans to raise prices by $1-2 per month, initially for new customers but eventually for everyone, “to acquire more content and deliver an even better streaming experience.” With the company set to surpass 50 million streaming subscribers by the second half of 2014, the price increase could add between $600 million and $1.2 billion to the company’s revenues within the next two years. (Forbes)