Report
Dave Nicoski ...
  • Ross LaDuke

Vermilion Int'l Compass: Global Equity Strategy

Not much has changed over the past week when looking at the MSCI ACWI and S&P 500, with prices generally trending sideways and no material changes in our primary breadth indicators. Therefore, our outlook remains positive given breadth and price action improvements on both the ACWI and S&P 500 relative to mid-April (both developments that we highlighted in the 5/17/18 International Compass).

• Major themes: Opportunities within Health Care and Materials. Price and relative strength trends continue to improve for our international equal-weight Health Care Sector. We recommend adding exposure... see pages 2 and 7-9 for actionable stocks. Within Materials, it's not just metals & mining and steel stocks that are outperforming. We explore other attractive Groups within the Sector... see pages 3 and 10-17 for actionable stocks.

• Developed international. Price and relative strength trends remain favorable for Japan's TOPIX - maintain overweight. Relative strength has continued its bottoming process within Canada and much of Europe - be selective. Speaking of Europe, the UK's FTSE 100 and France's CAC 40 are breaking out to decade-plus highs... see below and pages 4-6.

• Emerging markets. Despite recent deterioration, price and relative strength support levels continue to hold and uptrends remain intact for the MSCI EM index. Until this changes, we continue to view recent weakness as a buying opportunity... see page 6.
Underlyings
ABCAM PLC

Abcam produces and distributes research-grade antibodies and associated protein research tools. Co.'s main product types consist of: antibodies, which is generated to target antigens on molecules it is interested in studying to understand where they are located within a cell or tissue sample; research-grade antibodies, which is used in academic pharma and biotech laboratories to investigate fundamental scientific questions; in vitro diagnostic antibodies, which is used in a clinical setting, such as a hospital or medical institute lab, to help diagnose a particular disease or condition; and kits, which contains everything a researcher needs to run an experiment.

Air Liquide SA

L'Air Liquide is engaged in the market of gases for industry, health and the environment. Oxygen, nitrogen, hydrogen, and rare gases make up Co.'s core activities. Co. structures its activities in three segments: Gas and Services, Engineering and Technology, and Other activities. The Gas and Services segment comprises four business lines: Industrial Merchant, Large Industries, Healthcare and Electronics; Engineering and Technology designs, develops and builds industrial gas production plants for Co. and third parties; and the Other Activities segment develops welding and cutting edge technologies, and markets deep-sea diving and swimming equipment to professionals and privates individuals.

Amplifon S.p.A.

Amplifon is multinational company engaged in the ddistribution, fitting, adaptation and personalization of hearing systems (hearing aids) designed to meet the needs of those suffering from hearing disabilities. Co. is also engaged in the sale of accessories such as batteries, consumables and spare parts, as well as in the distribution of biomedical devices. Co. is active in 20 different countries: Italy, France, Germany, Switzerland, The Netherlands, Belgium, Luxembourg, the U.K., Ireland, Spain, Portugal, Hungary, Turkey, the U.S., Canada, Australia, New Zealand, India, Egypt, and in Poland.

Astellas Pharma Inc.

Astellas Pharma is engaged in the development, research, manufacture, and sale of pharmaceuticals. Co. operates its operation in Japan, Americas, Europe, and Asia/Oceania. Co.'s principal product for the global market include "Xtandi" a therapeutic agent for prostatic cancer, "Eligard" a luteinizing hormone-releasing hormone (LHRH) agonist for the treatment of prostate cancer,"Prograf" an immunosuppressant used to prevent rejection in organ transplants, "Vesicare" a treatment for overactive bladder, "Harnal ( "Omnic" in the U.S. and Europe)" an 1 blocking agent for prostatic and urethral smooth muscle, and "Fungurad ("Mycamine" in the U.S. and Europe)" a candin-type antifungal agent.

Berger Paints India Limited

Berger Paints India Limited is engaged in the manufacture of paints and varnishes, enamels or lacquers. The Company offers products in categories, including interior wall coatings, exterior wall coatings, Berger metal and wood paints, protective coating, undercoats and construction chemicals. Its designer finishes include Silk Illusions Design Metallica, Silk Illusions Non Metallic, Silk Illusions Metallica and Silk Illusions Marble Finish. Its interior emulsions include Silk Luxury Emulsion, Easy Clean, Rangoli Total Care and Bison Acrylic Emulsion. Its interior wall distempers include Bison Distemper. The Company's exterior emulsions include WeatherCoat All Guard, WeatherCoat Longlife, WeatherCoat Smooth, Walmasta, WeatherCoat Tile Protektor and WeatherCoat Kool & Seal. It also offers WeatherCoat Texture, Tartaruga Hi-Build and Tartaruga. It offers enamels, such as Breathe Easy Enamel, Luxol Lustre, Luxol Satin Enamel, Luxol High Gloss Enamel and Berger Butterfly GP Enamel.

Biotage AB

Biotage AB is a Sweden-based company that develops and sells systems, consumables and services in the field of life sciences. Its customers include pharmaceutical and biotechnology companies, companies within the food industry and academic institutions. The Company offers systems and services within three areas: analytical chemistry, organic chemistry and industrial resins. Biotage's offering within analytical chemistry consists of consumables with related applications to extract selected substances from various types of samples. The Company's offering within organic chemistry includes products for pharmaceutical development based on both small molecules and peptides and its offering within industrial resins is composed of polymer-based resins and research services that lead to the development and manufacture of polymer-based materials. As of December 31, 2013, the Company operated 12 wholly owned subsidiaries worldwide.

Canfor Corporation

Canfor is an integrated forest products company with facilities in Canada and the U.S. Co. has two reportable segments: Lumber and Pulp and Paper. The Lumber segment includes logging operations, and manufacturing and sale of various grades, widths and lengths of lumber, engineered wood products, wood chips and wood pellets. The Pulp and Paper segment includes purchase of residual fibre, and production and sale of pulp and paper products, including Northern Bleached Softwood Kraft and Bleached Chemi-Thermo Mechanical Pulp as well as energy revenues.

Chugoku Marine Paints Ltd.

Chugoku Marine Paints is mainly engaged in the manufacture and sale of paints and adhesives for marine use and industrial use as well as the provision of painting works in Japan, China, South Korea, Southeast Asia, Europe and the U.S. Co.'s principal products include paints for vessels, fishing boats, fishnet, pleasure boats, yachts, marine containers, buildings materials and woodworking. Co. also manufactures and sells high performance paints for plastics, heavy duty paints, and caulking material for railways. In addition, Co. is involved in the property management business, software development and operation of gold driving range.

Cochlear Limited

Cochlear is a for-profit entity and operates in the implantable hearing device industry. Co.'s implant systems comprise an implant which is inserted during surgery and an external sound processor. As of June 30 2016, Co. sold in over 100 countries and had a direct presence in approximately 20 countries and used distributors and agents in other areas. Manufacturing for the cochlear implant product range is based in Australia. The bone conduction implant product range is manufactured in Sweden. Co.'s supply chain operates with product being distributed from its manufacturing sites in Australia and Sweden to its regional distribution centres in the U.S., the U.K. and Panama.

Croda International Plc

Croda International creates, makes, and sells specialty chemicals. Co.'s sales, marketing and research activities are organized into four global market sectors: Personal Care, which focuses on ingredients for skin, hair, sun protection and color cosmetic products; Life Sciences, which comprises of three complementary businesses: Health Care, Crop Protection, and Seed Enhancement; Performance Technologies, which targets technologies in Smart Materials and Energy Technologies and continues to develop its presence in Home Care and Water Treatment; and Industrial Chemicals, which is a sector based on selling co-streams, developing niche industrial applications and undertaking toll processing.

Engro Fertilizers

Engro Fertilizers Limited is a Pakistan-based company, which is engaged in manufacturing, purchasing and marketing of fertilizers. The Company's brands include Engro Urea, Engro NP, Engro DAP, Zingro, Engro MOP, Engro SSP and Engro Zarkhez. Engro NP is the Company's fertilizer brand with Nitrogen and Phosphorous content in equal quantity. Engro DAP primarily contains Di-Ammonium Phosphate, and is imported by Engro EXIMP and marketed by the Company. Engro DAP is marketed in approximately 50 kilogram bags. Zingro is a micronutrient fertilizer, and is imported by Engro EXIMP and marketed by the Company. Engro Zarkhez has Nitrogen, Phosphorous and Potassium, and is primarily offered for sugar cane, fruit orchards, vegetables, potato and tobacco farming. Engro Envy is primarily offered to urban market for gardens, lawns, flower beds, fruit plants and ornamental plants. The Company is a subsidiary of Engro Corporation.

Fibria Celulose S.A.

Fibria Celulose is a pulp and paper products company and a producer of wood-free printing and writing papers and specialty papers. Co. produces bleached eucalyptus kraft pulp (BEKP), which is a variety of hardwood pulp. Co. sells BEKP to both the Brazilian domestic and export markets. In addition to selling its pulp production to third parties, Co. uses its pulp production internally to manufacture a range of printing and writing paper products, including coated and uncoated printing and writing papers, thermal papers, carbonless papers and other specialty papers.

Formosa Chemicals & Fibre Corporation

Formosa Chemicals & Fibre is engaged in the manufacture and sales of petrochemical products including purified terephthalic acid, polystyrene, butadiene, stryene monomer ("SM"), SM polymer, benzene, toulene, p-xylene, o-xylene, nylon fiber and rayon staple fiber. Through its subsidiaries, Co. is also engaged in the manufacture and sales of rayon-grade wood pulp, machinery for chemical fibers, other industrial-grade chemical products and processed goods; spinning, weaving, dyeing and finishing of chemical fibers; water treatment; cable and machine installation; and import and export of aforementioned products and materials.

Grand Pacific Petrochemical Corp.

Grand Pacific Petrochemical is principally engaged in the manufacture of petrochemical raw materials, synthetic resins and plastics. Co. provides styrene monomer (SM) and related derivatives and byproducts, such as toluene, aluminum chloride solution and hydrogen, as well as acrylonitrile butadiene styrene (ABS) resins. Co. is also involved in the international trade.

Huchems Fine Chemical Corp.

Huchems Fine Chemical Corporation is a Korea-based company principally engaged in the manufacture and distribution of chemical products. The Company mainly manufactures fine chemical products, including dinitrotoluene (DNT) used to produce polyurethane and toluenediisocyanate (TDI); mononitrobenzene (MNB) for polyurethane and methylene diphenyl diisocyanate (MDI); nitric acid for metallurgical usage, pigment and gunpowder, and ammonium nitrate for explosive and anesthetic. It also sells certificated emissions reduction and ammonia, among others.

Indorama Ventures Public Co. Ltd.

Indorama Ventures Public Company and its subsidiaries are engaged in the manufacturing and distribution of polyethylene terephthalate (PET), purified terephthalic acid (PTA) and related products, polyester fibres and yarns, and wool products. Co. conducts its businesses through three segments: PET, which manufactures and distributes solid state polymerised chips, PET performs, closures and blown bottles; PTA, which manufactures and distributes purified terephthalic acid; and Fibers and yams, which manufactures and distributes fibers and yarns. Co. operates in the following main geographical areas: Thailand, North America, Europe and rest of the world.

International Forest Products Ltd. Cl A

Interfor Corporation is a Canada-based lumber provider. The Company and its subsidiaries produce wood products in British Columbia, the United States Northwest and the United States South for sale to markets around the world. The Company operates through solid wood segment. The Company offers a range of products, including Clear Cedar Finger Joint Bevel Siding, Clear Cedar Solid Bevel Siding, Clear Cedar V-Joint Paneling, Dimension Lumber, Elite Cedar 5/4 Radius Edge Decking, Elite Cedar V-Joint Paneling, Elite Knotty Cedar Decking, Fineline Paneling, Japan Zairai-Beams, Japan Zairai-Ground Sill, Japan Zairai-Posts, Japan Zairai-Roof Structure, Japan Zairai-Small Structural, Reserve Boards, Reserve End-Matched Paneling, Reserve Lodgepole Pine Paneling, Reserve V-Joint Decking, Special Appearance Grade Cedar Timbers, Reserve Ponderosa Pine Paneling and Studs. The Company has approximately 20 mills across North America with annual capacity of over three billion board feet.

Medipal Holdings Corporation

Medipal Holdings is a holding company controls, administers and supports the operating activities of subsidiaries and affiliates in which it holds shares in the prescription pharmaceutical wholesale business, cosmetics, daily necessities and OTC pharmaceutical wholesale business, Animal health products and food processing raw materials wholesale business, and related business. Co. is involved in the wholesale of pharmaceutical products, medical equipment and test reagents; cosmetics, daily necessities, soap, detergents, over-the-counter pharmaceuticals; and veterinary products, food additives and food processing raw materials.

Methanex Corporation

Methanex is a producer and supplier of methanol to the international markets of Asia Pacific, North America, Europe and South America. Co.'s operations consist of the production and sale of methanol, a commodity chemical.

Metsa Board Oyj Class B

Metsa Board is a European producer of folding boxboard and white fresh forest fibre linerboard and a market pulp supplier. Co. and its subsidiaries comprise a forest industry group, which operations are organized into two business segments: Cartonboard and Lineboard and Paper. The Cartonboard business area is a manufacturer of folding boxboards. The business area also provides packaging services in Asia. The Linerboard and Paper business area is a manufacturer of coated white fresh forest fibre linerboards and producer of uncoated fresh forest fibre linerboards. The Linerboard and Paper business area also manufactures uncoated fine papers mainly for office end-use as well as coated papers.

Morphosys AG

NIPPON PAINT HOLDINGS CO.LTD.

Nippon Paint Holdings is a holding company mainly engaged in the manufacture and sale of coating materials and fine chemical products. Along with its subsidiaries and associated companies, Co. is involved in the manufacture and sale of paint for automobile-, general- and industrial-uses, automobile refinish paint, anti-corrosion paint, concrete anti-corrosion paint, pre-coat paint for metal, and paint for vessel- and family-uses. Co. is also engaged in the manufacture and sale of surface treatment agent, display related materials, electronic materials and particulate materials. Co. has operations in Japan, Asia, Americas and Europe.

Nippon Sanso Holdings Corporation

Taiyo Nippon Sanso and its affiliates are mainly engaged in the manufacture and sale of industrial gases. Co. provides industrial gases including oxygen, nitrogen, argon, hydrogen, carbon dioxide, helium and acetylene, as well as gas supply equipment and gas-related equipment for cutting, welding, combustion and freezing and exhaust gas abatement systems. Co. also provides liquid petroleum gas (LPG), medical gases, and medical devices. In addition, Co. is engaged in the provision of construction and engineering services of gas-related facilities and related equipment. Co., through its affiliates, is also engaged in the manufacture and sale of housewares as well as the real estate business.

NMC Health PLC

NOF Corporation

NOF and its affiliates are mainly engaged in the manufacture and sale of oil and chemical-related products. Co. operates in three business segments: functional chemicals, life science, and explosive & propulsion. Co.'s principal products include fatty acids, fatty acid derivatives, surfactants, ethylene oxide and propylene oxide derivatives, organic peroxides, functional polymers, functional films, materials for anti-corrosion, biocompatible materials, raw materials for delivery system ("DDS") drug formulation, edible oils, functional foods, industrial explosives, defense-related explosives, rocket propellant, automotive safety devices and metal manufactured products.

OCI NV

OCI produces and sells nitrogen based fertilizers and industrial chemicals. Co. offers a portfolio of nitrogen fertilizers and industrial chemicals, including anhydrous ammonia, granular urea, urea ammonium nitrate, calcium ammonium nitrate, methanol, and melamine for agricultural and industrial customers. Co. also provides engineering and construction services primarily with a focus on infrastructure, industrial, and highend commercial projects, such as conventional power and renewable energy, petrochemicals, oil and gas, water and wastewater, and transportation infrastructure in the United States, Europe, the Middle East, Africa, and Central Asia for public and private clients.

Oji Holdings Corp.

Oji Holdings and its subsidiaries are engaged in the manufacturing, processing, and sale of paper products with packaging function and wiping function. Co.'s principal products and services include duplex board, packaging materials, containerboard, folding carton, paper bag, corrugated container, and household products; newsprint, printing and writing paper, and communication paper; imaging media, specialty paper, adhesive products, and functional film; and lumber, tree planting, pulp, renewable energy, and raw material and fuel. Co., through its subsidiaries, also provides real estate, logistic and warehousing services, as well as civil construction and engineering services.

Osaka Soda

Osaka Soda is engaged in the manufacture and sale of basic chemicals and functional chemicals, as well as the manufacture, purchase and sale of housing equipment. Co.'s principal products include caustic soda, chlorine gas/liquid, hydrogen gas, caustic potash, alkali agents, hydrochloric acid, sodium chlorite, sodium hypochlorite, low salt sodium hypochlorite, ferric chloride, dially phthalates, polysulfide system silane coupling agent, lens materials, photosensitive resin, and high luster DAP decorative laminate. Co. is also engaged in the construction and maintenance of chemical plants and environment preservation facilities, and the provision of recycle and logistics businesses.

Oxford BioMedica PLC

Oxford BioMedica is a producer of gene and cell therapy in lentiviral vector and cell therapy research, development and production. Gene and cell therapy is the treatment of disease by the delivery of therapeutic deoxyribonucleic acid into a patient's cells. This can be achieved either in vivo (referred to as gene therapy) or ex vivo (referred to as cell therapy), the latter being where patients' cells are genetically modified cells outside the body before being re-infused. Co.'s products include: OXB-102, which targets Parkinson's disease; OXB-202, which targets corneal graft rejection; and OXB-302 (CAR-T 5T4), which targets targets a range of cancers.

Pidilite Industries Limited

Pidilite Industries is engaged in the manufacturing and selling of consumer and bazaar products and speciality industrial chemical. Co.'s business is divided into three major segments: consumer & bazaar products, industrial products and other segments. Consumer & bazaar products consist of mainly adhesives, sealants, art materials and construction chemicals. Industrial products consists of organic pigments, industrial resins and industrial adhesives. Other segments consist of VAM manufacturing unit of Vinyl Chemicals (India) Ltd.

Recticel SA

Recticel is engaged in the production of a variety of polyurethane foams that are used in the furniture, technical, automotive, bedding and insulation industries. The Flexible Foam Business Line covers the manufacture, conversion and marketing of flexible polyurethane foam. The types of flexible foams are classified as Comfort, Technical Foams and Composite Foams. Co. is also engaged in the manufacture of foams used in mattresses and slat bases. In addition, Co. manufactures rigid polyurethane and phenolic foams for thermal insulation. Co.'s automotive activities include: manufacturing moulded seat cushions, window encapsulation and manufacturing interior trim components.

Sakai Chemical Industry Co. Ltd.

Sakai Chemical Industry is mainly engaged in the manufacture and sale of chemical products. Co. has three business segments: chemical, medical and others. The Chemical segment provides titanium oxide, resin additives, barium products, catalyser products, as well as electronic materials and zinc products. It also offers ingredients for cosmetics, other organic and non-organic chemicals. The Medical segment offers ethical drugs, general use drugs, functional foods and medical devices. The Others segment is engaged in the construction related business.

Sartorius Stedim Biotech SA

Sartorius Stedim Biotech is a provider of equipment and services for the development, quality assurance and production processes of the biopharmaceutical industry. Co.'s solutions cover fermentation, filtration, purification, fluid management and lab technologies and membrane chromatography, including various conventional lab products to biopharmaceutical laboratories. Co.'s technologies, products and services are used to develop and manufacture medications and vaccines using biological methods. Co.'s products covers all upstream and downstream steps in the production of active pharmaceutical ingredients. It specializes in single-use products and offers technical consulting and services.

Sumitomo Bakelite Co. Ltd.

Sumitomo Bakelite is mainly engaged in the manufacture and sale of semiconductor and display materials, high-performance plastics and quality of life products. Co.'s principal products include epoxy molding compound for encapsulating semiconductor devices "SUMIKON®ENE" and liquid epoxy resin for encapsulating semiconductor devices "SUMIRESIN EXCEL®CRP"; safety helmets for industrial use "SUMIHAT®" and plastic cutting boards "My Kitchen®"; and medical therapeutic devices and laboratory wares. In addition, Co. is involved in the provision of test and research services and property leasing services.

Suzuken Co. Ltd.

Suzuken is mainly engaged in the manufacture and sale of pharmaceutical products. Co. is engaged in the sale of pharmaceuticals and medical equipment; the manufacture of pharmaceutical products and diagnostic medicines; the operation of dispensing pharmacies; the provision of medical-related services, such as the sale of healthcare-related literature and the provision of clinical research coordinators; the provision of home nursing care and facility nursing care services; the manufacture of biological and physiological measuring equipment, such as electrocardiographic equipment and blood pressure gauges; as well as the transportation of pharmaceutical products.

Toho Holdings Co. Ltd.

Toho Holdings is a holding company mainly engaged in the wholesale distribution of pharmaceuticals. Co. operates in four major business segments: pharmaceutical wholesale, dispensing pharmacies, site management organization ("SMO") and information equipment sales. Co. is engaged in the sale of prescription pharmaceuticals, reagents and medical devices to hospitals, clinics and dispensing pharmacies; the management and operation of health insurance dispensing pharmacies; the SMO business firmly assists a variety of medical establishments and provides pharmaceutical development services commissioned by pharmaceutical manufactures; and the planning and sale of information processing equipment.

Tokuyama Corporation

Tokuyama is engaged in the manufacture and sale of chemicals, specialty products, cement and functional materials. Co.'s principal products include soda ash, calcium chloride, sodium silicate, caustic soda, vinyl chloride monomer, propylene oxide, methylene chloride, polyvinyl chloride, polycrystalline silicon, fumed silica, aluminum nitride, high-purity chemicals, methylene chloride, polycrystalline silicon, fumed silica, aluminum nitride substrate, portland cement, cement-type soil solidifier, ready-mixed concrete, active pharmaceutical ingredients and intermediates, plastic lens-related materials, microporous film, polyolefin film, ion exchange membranes, and plastic window sashes.

UPC Technology Corp.

UPC TECHNOLOGY CORPORATION is a Taiwan-based company principally engaged in the manufacture and distribution of chemical products. The Company's main products include phthalic anhydride (PA), maleic anhydride (MA), diisononyl phthalate (DINP), fumaric acid (FA), unsaturated polyester resins (UPR), poly ethylene (PE), polyester polyol, polyvinyl chloride (PVC) and epoxy resins, among others. The Company operates its businesses through six geographical segments, including Eastern China, Southern China, Northern China, Central China, Taiwan and Other Regions.

UPM-Kymmene Oyj

UPM-Kymmene is a global paper and forest products group, mainly engaged in the production of paper, with an emphasis on the manufacture and sale of printing and writing papers. Co.'s operations comprise of these segments: UPM Biorefining, UPM Energy, UPM Raflatac, UPM Paper Asia, UPM Paper ENA, UPM Plywood and Other. UPM Biocomposites, UPM Biochemicals business units and Group services are reported in Other operations. Co.'s activities are centred in European Union countries, North and South America and Asia with production plants in 13 countries.

Victrex plc

Victrex is a non-trading investment holding company. Through its subsidiaries, Co. is engaged in polymer solutions, focused on the strategic markets of Automotive, Aerospace, Energy (including Manufacturing & Engineering), Electronics and Medical. Co. develops solutions in Polyether ether ketone (PEEK) and Polyaryletherketones (PAEK) based polymer, selected semi-finished and finished parts. Co.'s operating segments are: Industrial (Victrex Polymer Solutions), which focuses on its Automotive, Aerospace, Electronics and Energy markets; and Medical (Invibio Biomaterial Solutions), which focuses on providing solutions for medical device manufacturers.

West Fraser Timber Co. Ltd.

West Fraser Timber is an integrated wood products company producing lumber, newprint, wood chips, plywood, panels and pulp and paper products.

Provider
Vermilion Research
Vermilion Research

Vermilion Research delivers timely, actionable, and unique research inputs to professional investors. Our research strategists highlight securities which we believe are at major inflection points, based on our various proprietary technical indicators, and offer asymmetric risk/return profiles. We believe our research methodology, which is not limited by industry sector or market capitalization, enables us to deliver superior investment recommendations.

Our process begins by organizing all actively traded stocks into coherent sectors, then into logical industry groups. We then apply our proprietary relative strength tools to identify developing price trends. Once attractive trends are identified within a selected sectors or groups, we screen for individual stocks which we believe offer the best risk/reward profile. Vermilion offers U.S. and global equity market research products. Vermilion’s research team, which has received numerous awards and accolades, has a combined 70 year of experience in the analysis of investment securities.

Analysts
Dave Nicoski

Ross LaDuke

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