Client Talking Points
Russia is getting wrecked (again) on both the stock and bond market front. The Russian 10-year Bond auction effectively failed this morning as the Russian Trading System Index continues to crash. It’s down -0.6% this morning to -18.7% year-to-date – Putin needs oil higher.
Don’t tell anyone but the 10s/2s Spread has compressed another 6 basis points this week to +227 bps wide. The Financials (XLF) don’t like this and the market needs the Financials to power new all-time bubble highs. Classic #GrowthSlowing signal.
Total US stock market volume is down -18% and -23% respectively yesterday versus the one month and three month volume averages. #Nice – not. With the Nasdaq still below my 4203 TREND line, FB, AAPL, and QCOM have some heavy lifting to do tonight. Meanwhile, from a US Dollar perspective, I feel like I am watching a slow motion train wreck every morning.
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Top Long Ideas
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.
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.
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 held $1271 support; Corn, Nat Gas, Wheat all want to make higher highs #InflationAccelerating @KeithMcCullough
QUOTE OF THE DAY
"To live is the rarest thing in the world. Most people exist, that is all." - Oscar Wilde
STAT OF THE DAY
An audit revealed that the IRS paid bonuses to employees in trouble over tax issues themselves. More than $2.8 million, plus thousands of hours of paid time-off, were doled out over two years to employees who had recently been disciplined for various types of misconduct, according to an audit report. About $1 million of that money was given as bonuses to 1,100 employees who were in trouble over tax related issues. (CNN)