India, Europe and Oil

Client Talking Points

India

Starting with the really bullish stuff this morn, India’s stock market is up another +0.9% to fresh YTD highs of +26.2% after showing waning inflation last week (Dr. Raj wants a stronger currency, higher rates, and stronger purchasing power for The People – love that)

Europe

“Weaken ze Euro to stim ze exports, eh?” Sorry guys, that isn’t going to work in these consumption economies; DAX leads the bounce +1.4% this morning, but it, CAC, MIB Index, Portugal, etc. all remain bearish TREND @Hedgeye.

Oil

One of the uglier big macro charts in my notebook right now as Brent is seeing another -1.3% down day on the heels of a -2% down week; finally a modest consumption tax cut for consumers who have been getting smoked from a real earnings perspective in 2014.

Asset Allocation

CASH 52% US EQUITIES 0%
INTL EQUITIES 12% COMMODITIES 6%
FIXED INCOME 24% INTL CURRENCIES 6%

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.

BOBE

The level of activism in the restaurant industry has never been more rampant.  In the past year alone, we’ve seen CBRL, DAVE, DRI, BJRI and BOBE attract largely uninvited attention from these investors. BOBE has a long history of mismanagement, evidenced by flawed strategic rationale, an excessively bloated cost structure and severe underperformance relative to peers.  Fortunately, its poor operating performance presents a tremendous opportunity. We believe activist investor Sandell has identified significant, largely feasible, opportunities to enhance shareholder value.  Particularly, we see tremendous upside value in selling the foods business, transitioning to an asset light model and refocusing capital allocation.

TLT

Fixed income continues to be our favorite asset class, so it should come as no surprise to see us rotate into the Shares 20+ Year Treasury Bond Fund (TLT) on the long side. In conjunction with our #Q3Slowing macro theme, we think the slope of domestic economic growth is poised to roll over here in the third quarter. In the context of what may be flat-to-decelerating reported inflation, we think the performance divergence between Treasuries, stocks and commodities may actually be set to widen over the next two to three months. This view remains counter to consensus expectations, which is additive to our already-high conviction level in this position.  Fade consensus on bonds – especially as growth slows. As it’s done for multiple generations, the 10Y Treasury Yield continues to track the slope of domestic economic growth like a glove.

Three for the Road

TWEET OF THE DAY

“Carney saying he doesn’t have to wait for wage inflation to raise rates – I like it #StrongPound” -- @KeithMcCullough

QUOTE OF THE DAY

“It’s not the will to win that matters – everyone has that. It’s the will to prepare to win that matters.” – Paul “Bear” Bryant

STAT OF THE DAY

59, the score that Champions Tour golfer Kevin Sutherland shot in the third round of this weekend’s Dick’s Sporting Goods Open. It’s the first time a golfer shot 59 in a Champions Tour event. 


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