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Client Talking Points

CHINA

The Shanghai Comp is down for the fourth consecutive day (-1.6% to -5.3% year-to-date) as mostly every Asian stock market closed down overnight. Indonesia led the losers down -1.4% and Japan was down another -1% to -11.7% Nikkei YTD.

OIL

WTI crude – starting the week off well – bid up +0.9% to $101.46 and has no immediate-term resistance in our risk range model to $105-106. I’m staying with the long inflation trade via commodities (Food, Oil, Gold, etc.) and TIPs.

US #ConsumerSlowing

We’ll get US GDP slowing (Q1 to be reported with a 1% handle on Wednesday), but no worries, that was just weather, right? Consensus certainly hopes so. This PIMCO call is the consensus call for high 2%, low 3% into the toughest GDP comps of the year (Q3) as inflation heads higher and classic slowing indicators like US Dollar and rates head lower.

Asset Allocation

CASH 32% US EQUITIES 0%
INTL EQUITIES 10% COMMODITIES 18%
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

CRB Food Index corrected a whopping -0.2% last wk (still inflated by +21.5% YTD) #InflationAccelerating @KeithMcCullough

QUOTE OF THE DAY

"The quality, not the longevity, of one's life is what is important." - Martin Luther King

STAT OF THE DAY

Several current and former cheerleaders are suing their NFL employers over pay. One former cheerleader for the Cincinnati Bengals said she was paid no more than $90 for each game and worked 10 games. Including $75 for a public appearance, she said she was paid $855 for the 2013 season and worked "well over 300 hours a year." Including the games, practices and other events, she calculated her hourly wage at $2.85. (CNN)