Client Talking Points
Domestic stock funds put up their 16 consecutive week of outflow and are now entering the seasonally weakest period of the year so avoid those equity managers JNS and TROW. The net of total equity mutual fund and ETF trends against total bond mutual fund and ETF flows totaled a negative $1.0 billion spread for the week ($3.0 billion of total equity inflow versus the $4.1 billion inflow within fixed income; positive numbers imply greater money flow to stocks; negative numbers imply greater money flow to bonds).
Indices are broadly lower in-line with recent economic data out of the region. Eurozone CPI is running at 0.4% year-over-year in July, which is the lowest since October 2009. Our quantitative lines of support have been broken across European equities for 1.5 months (the DAX, CAC, and MIB index all remain bearish TREND signals).
The U.S. dollar is up here week-over-week. If it holds above the tail line of 81.44 and continues to make a series of higher highs we may have to back away from our negative view. We will have to see what Yellen’s next move is, she speaks at Jackson Hole today at 10:00am (Mario Draghi speaks at 2:30pm).
|FIXED INCOME||24%||INTL CURRENCIES||4%|
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.
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.
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
$GPS makes it clear that market share for Athleta will come from $NKE. No mention of $LULU. (not that we won't see share shift there too)
QUOTE OF THE DAY
Great moments are born from great opportunities.
STAT OF THE DAY
The A.L.S. Association has received $41.8 million in donations from July 29 until Aug. 21. More than 739,000 new donors have given money to the association. That’smore than double the $19.4 million in total contributions the association received during the year that ended Jan. 31, 2013, according to a filing with the Internal Revenue Service.