Client Talking Points
One-day down versus the US Dollar does not a Hedgeye TREND make. If the EUR/USD were to snap $1.37 I’d take ECB President Mario Draghi’s comments more seriously. I think he’s just jawboning for the French and Italian bureaucrats, for now.
There was a big standout to the bullish side overnight with the BSE Sensex closing up another +2.5% to +8.4% year-to-date. Under a Down Dollar macro scenario, you want to be buying our favorite Emerging Markets.
I guess consensus bond bears tried to rally the 10-year yield every day this week, and failed. We’re in no man’s land (for US growth equities) if this thing closes and remains under our TAIL risk line of 2.60%. Watch that closely.
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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
RUSSIA: now that its not -20% YTD, great spot to re-short $RSX @KeithMcCullough
QUOTE OF THE DAY
“It’s easier to go down a hill than up, but the view is from the top.” – Arnold Bennett
STAT OF THE DAY
The class of 2014 expects to make bigger bucks than those who graduated the year before, but they're already behind in the first step: getting a job. Only 11% secured a job two months before graduation. Nearly 80% of those surveyed are facing at least $10,000 in loans. (CNN)