Client Talking Points
Vladimir Putin trying to steal Mario Draghi’s thunder this morning by banning U.S. and EU (even Canadian!) food imports. The Russian stock market doesn’t like it, down another -1% to -17.3% year-to-date #TrainWreck.
Either European stocks know Mario Draghi isn’t going to deliver more cowbell, or everyone will be surprised when he does. The EUR/USD hasn’t budged and Portugal is down another -1%. The DAX has no bid (yet) either.
Oil continues to break down (both Brent and WTIC) as the #InflationAccelerating consumption tax of 1H 2014 loses some of its momentum – doesn’t mean U.S. CPI is going to collapse; just goes up at a slower rate as U.S. GDP #Q3Slowing continues.
|FIXED INCOME||28%||INTL CURRENCIES||10%|
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.
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
While Mass deceleration has been our theme for the Macau stocks since 6/13/14 we were definitely surprised it happened so drastically
QUOTE OF THE DAY
I am not a product of my circumstances. I am a product of my decisions.
STAT OF THE DAY
The secular decline in Casual Dining continues July same-store sales -1.1% (2YR down 90 bps to -2.5%) July Traffic -3.2% (2YR dwn 110 bps to -4.2%).