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Client Talking Points

INDIA

BSE Sensex +1.4% to +20.9% year-to-date led gainers in Asia overnight; India is doing all the right things (on the margin) from a Hedgeye Macro Playbook perspective – we continue to like it on the long side.

DUBAI

#Crashed, in June. Dubai stock market down another -7-8% this morning puts it -22% for June and while there is no subtle news flow on the why, we think what’s happening there is pretty obvious. Putin’s petrodollars (and his stock market +2.3% this morning) are strengthening as U.S. weakens geopolitically.

GOLD

There was barely a correction after last week’s breakout above @Hedgeye immediate-term TRADE line of $1285/oz and this morning we are seeing what we like to see: follow through. Closing > $1336, Gold can easily re-test its year-to-date highs of $1381ish. The Macro setup is almost perfect for that.

Asset Allocation

CASH 10% US EQUITIES 6%
INTL EQUITIES 15% COMMODITIES 24%
FIXED INCOME 30% INTL CURRENCIES 15%

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.

LM

Legg Mason reported its month ending asset-under-management for April at the beginning of the week with a very positive result in its fixed income segment. The firm cited “significant” bond inflows for the month which we calculated to be over $2.3 billion. To contextualize this inflow amount we note that the entire U.S. mutual fund industry had total bond fund inflows of just $8.4 billion in April according to the Investment Company Institute, which provides an indication of the strong win rate for Legg alone last month. We also point out on a forward looking basis that the emerging trends in the mutual fund marketplace are starting to favor fixed income which should translate into accelerating positive trends at leading bond fund managers. Fixed income inflow is outpacing equities thus far in the second quarter of 2014 for the first time in 9 months which reflects the emerging defensive nature of global markets which is a good environment for leading fixed income houses including Legg Mason.

Three for the Road

TWEET OF THE DAY

RUSSIA: Putin powers a +2.3% move in the Russian stock market today

@KeithMcCullough 

QUOTE OF THE DAY

“The real test is how you behave when the crowd is roaring the other way.”

-George Goodman

STAT OF THE DAY

Energy (XLE) is up +14.4% year-to-date vs Consumer Discretionary (XLY) down -1% year-to-date, inflation slowing consumption growth.