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    MARKET EDGES

    Identify global risks and opportunities with essential macro intel using Hedgeye’s Market Edges.

Client Talking Points

EUROPE

ECB President Mario Draghi’s impact on the FX market = lower-highs for the European Equity market? Nope, that wasn’t what he was looking for – so we’ll see if he backs off on getting easier, when it’s been getting tighter (on the margin) that’s worked for both GDP and Eurostoxx.

RUT

The Russell2000 smoked for another -1.6% down day yesterday as CNBC trumpets the “all-time-highs” in their style factor ignorance. RUT is now down -8.7% from its bubbled up March top and remains bearish TREND at Hedgeye. 

10YR

Big day for the inflation slows-growth, long bonds theme yesterday (PPI up +2.1% year-over-year for April). At 2.54% 10-year this morning, (fresh year-to-date lows) bonds are signaling overbought within a very bullish TREND. Consensus on #RatesRising in 2014 is way wrong.

Asset Allocation

CASH 20% US EQUITIES 6%
INTL EQUITIES 8% COMMODITIES 22%
FIXED INCOME 22% INTL CURRENCIES 22%

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

TREASURIES: big time payday for #ConsumerSlowing Bond Bulls yesterday @KeithMcCullough

QUOTE OF THE DAY

"If you want to live a happy life, tie it to a goal, not to people or things." - Albert Einstein

STAT OF THE DAY

29, the number of saves Montreal goalie Casey Price made in the Canadiens’ 3-1 victory over the Boston Bruins last night to advance to the Eastern Conference finals.