Client Talking Points
The total U.S. Equity Market Volume was -7% and -35% vs its 3 month and year-to-date averages yesterday, but the consensus short “hedge” (SPY, which we have not recommended) hit all-time highs on that as the Russell got back to breakeven for the year-to-date.
Now that we have the centrally planned bounce to lower-highs out of the way, the DAX is down -0.3% this morning after failing @Hedgeye TREND resistance of 9642 – we’re not buying that bounce; European economic data continues to slow.
Boring, yes – but staying long the Long Bond (TLT +16% year-to-date vs Russell 2000 flat) with #Q3Slowing in the U.S. remains our Best Macro Idea. Both the Markit PMI for AUG (58.5 vs 60.6 last) and JUL New Home Sales slowed yesterday.
|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. After almost a year of pushing for change at Bob Evans, activist investor Sandell Asset Management is claiming a big victory. Activist investor Sandell won at least five seats on the board of the restaurant operator and food processor, based on preliminary results from the company’s annual shareholder meeting last week. This is precisely the sort of bullish catalyst that was central to our high conviction on BOBE.
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
On May 13 we identified 300 stores that $JCP needs to close - backed by detailed analysis.
JPM this week says 'JCP should close 300 stores'.
QUOTE OF THE DAY
It’s better to look ahead and prepare than to look back and regret.
-Jackie Joyner Kersee
STAT OF THE DAY
Coffee prices up another +0.6% yesterday to +65.1% year-to-date.