Report
Dave Nicoski ...
  • Ross LaDuke
EUR 240.43 For Business Accounts Only

Vermilion Int'l Compass: Global Equity Strategy

Add exposure to cyclicals

Our positive outlook on global equities (both the MSCI ACWI and ACWI ex-US) remains intact and we believe a “buy the dip” strategy is warranted. We recommend taking advantage of recent weakness -- where applicable -- by adding exposure to cyclical Sectors.

• Actionable Sectors: Consumer Discretionary and Manufacturing. Today's recommendations focus on autos, auto parts, and machinery which span the Discretionary and Manufacturing Sectors. We initially recommended adding exposure to autos and auto parts in our 3/14/19 Int'l Compass, and we view the recent mild pullback as an opportunity to add exposure. Continued RS improvements within these cyclicals Sectors and deterioration of defensive Sectors -- characteristics consistent with bull markets -- gives us confidence in our positive outlook... see chart below, pages 2-3, and pages 5-14 for actionable stocks.

• Opportunities in Japan. Japan has not been a focus of ours for some time due to continued underperformance of the TOPIX First Section index. Overall this still rings true, however the small-cap (TOPIX Small) vs. large-cap (TOPIX First Section) ratio is bullishly inflecting. This gives us hope that Japan may be turning the corner. In today's report we highlight opportunities within Group MF-26 Tooling, Supplies & Products, Japan and MF-29 Machinery/Power/Instru/Controls, Japan... see pages 2-3.

• STOXX Europe 600 on its way to new highs? The way the UK's FTSE 100, France's CAC 40, and Germany's DAX are trading, we believe the STOXX Europe 600 index can hit new highs in the coming weeks/months. Europe remains resilient in the face of Europe being a “favored short,” Brexit uncertainty, the threat of tariffs from the U.S., and GDP downgrades. Believe in this rally... see page 4.
Underlyings
Aida Engineering Ltd.

Aida Engineering is mainly engaged in the manufacture and sale of automated press machines, industrial robots and dies. Co. offers multipurpose servo presses, precision forming presses, mid and large-size presses, high-speed automatic press machines and cold forging presses. Co. also offers conveyor equipment including transfer units, material-handling robots and servo transfer units, as well as coil feeders and tooling dies. In addition, Co. is engaged in the provision of spare parts, maintenance, equipment upgrading and overhaul services. Co. operates its operations in Japan, Asia, the U.S., Canada, Mexico, Brazil and Europe.

BAIC Motor Corporation Limited Class H

Brembo S.p.A.

Brembo operates in the field of components for the motor vehicle industry, designing, manufacturing and marketing disc braking systems. The product ranges includes performance brake calipers, brake discs, wheel side assemblies, complete braking systems and integrated engineering services that accompany the development of new vehicle models marketed by car and motorbike manufacturers. Co.'s products and services are employed on cars, commercial vehicles, and motorbikes, as well as in racing. Co. is divided into several manufacturing and marketing units which Co. coordinates.

CKD Corporation

CKD is mainly engaged in the manufacture and sale of automatic machinery products and other component products. Co.'s principal business segments are automatic machinery and components. Co.'s principal products are lamp and bulb making machines, automatic packaging machines, secondary battery making machines, capacitor making machines, labor-saving components, pneumatic control components, pneumatic actuators, pneumatic auxiliary components, fine system components and fluid control components. In addition, Co., through its subsidiaries, is engaged in the provision of insurance agency services and factoring services.

Compagnie de Saint-Gobain SA

Compagnie de Saint-Gobain manufactures, produces, and distributes industrial materials. Co.'s activities are divided into four sectors: Innovative Materials (Co. makes, processes and sells glass and glazing products for the building, the automotive and solar energy industries; Co. also manufactures Ceramics and Plastics, Abrasives, and Textiles), Construction Products (Co. offers products for the Insulation, Gypsum, Exterior Products, Pipe and Industrial Mortars), Building Distribution (Co. distributes building materials (plumbing, heating and sanitaryware products) and ceramic tiles), and Packaging - Verallia (Co. manufactures glass containers and jars for foodstuffs and beverages).

CONTINENTAL AKTIENGESELLSCHAFT

Continental is an automotive industry supplier. Co.'s automotive divisions comprised of: Chassis & Safety, which develops and produces systems that provide safety and enhanced vehicle dynamics; Powertrain, which develops solutions for gasoline and diesel engines, as well as hybrid and electrical drive systems; and Interior, which provides solutions for information management within vehicles and networking between vehicles. Co.'s rubber divisions comprised of: Tires, which provides tires for passenger cars through trucks, buses and construction site vehicles to special vehicles, motorcycles and bicycles; and ContiTech, which develops products made from rubber and plastic.

Daifuku Co. Ltd.

DAIFUKU is engaged in the consulting, planning and engineering, designing, manufacturing, installation and after-sales service of logistic systems, material handling equipment and others. Co.'s major products include storage, transport, sorting and picking systems, clean room transport and storage systems, automobile production line systems, distributed monitoring, control systems, industrial computer, interface boards, LAN-related equipment, logistics system controllers, car-wash machines, transport and storage systems for medical equipment, machines for bowling alleys and automatic scoring systems, multilevel bicycle parking systems, and wheelchair lifts for care-provider vehicles.

Daimler AG

Daimler provides a range of transportation products, including passenger cars and commercial vehicles, and also financial services. Co. operates in five segments. Mercedes-Benz Cars sells passenger cars and off-road vehicles under the Mercedes-Benz brand and small cars under the smart brand. The Daimler Trucks distributes its trucks (Mercedes-Benz, Freightliner, FUSO, Western Star, Thomas Built Buses and BharatBenz). The vans of the Mercedes-Benz Vans segment are sold under the brand name Mercedes-Benz and Freightliner. Daimler Buses sells completely built-up buses (Mercedes-Benz and Setra). The Daimler Financial Services division supports sales of Co.'s automotive brands.

DMG MORI CO. LTD.

DMG MORI and its affiliates are mainly engaged in the manufacture and sale of machine tools and the provision of technical assistance. Co.'s primary products include CNC lathes, vertical-type and horizontal-type machining centers, multi-axis machines and grinding machines. In addition, Co., through its subsidiaries, is involved in the development of software for machine tools; the overhaul of used machine tools; the design, manufacture and sale of machine tools related equipment; and the manufacture and sale of grinding machine, automotive parts, mold parts and machine tools parts.

Fanuc Corporation

Fanuc is engaged in the development, manufacture and sale of CNC systems as well as application products based on its engineering. Co.'s principal products include Factory Automation (FA) products such as computer numeric control (CNC) systems and laser products; The Robot including collaborative robot, arc welding robot, palletizing robot, mini/small/medium/large size robot and paint robot; and the he Robo-machine such as robodrill(compact machining center), roboshot (electric injection molding machine), robocut (wire-cut electric discharge machine) and robonano (ultra precision machine).

Faurecia SA

Faurecia is an automobile equipment supplier based in France. Co.'s activities can be divided into four business units: Automotive Seating (design of vehicle seats, manufacture of seating frames and adjustment mechanisms, and assembly of complete seating units); Emissions Control Technologies (design and manufacture of exhaust systems); Interior Systems (design and manufacture of instrument panels, door panels and modules, and acoustic components); and Automotive Exteriors (design and manufacture of front ends and safety modules). Some of Co.'s customers are PSA Peugeot Citroen, VW Group, Renault-Nissan, Ford Group, BMW and GM Group.

Fuyao Glass Industry Group Co. Ltd. Class H

Geely Automobile Holdings Limited

Geely Automobile Holdings is an investment holding company. Through its subsidiaries, Co. is engaged in the investment holding and export of sedans outside the People's Republic of China (PRC); research, production, marketing and sales of automobile parts and related components and the research and development of electric hybrid engines in the PRC; procurement of automobile parts and components in the PRC; and marketing and sales of sedans in Russia and South America. In addition, through its associated companies, Co. is also engaged in the manufacturing of traffic facilities; provision of webpage design and related technology support services; manufacturing of emission control systems.

Georg Fischer AG

Georg Fischer is an industrial group that focuses on its three core businesses GF Piping Systems, GF Automotive and GF AgieCharmilles. GF Piping Systems piping systems made of plastics and metal and has a global market presence. GF Automotive is a development partner and manufacturer of stressable cast components and systems made of light metal and iron for the global automotive industry as well as for the machine tool and plant engineering sectors. GF AgieCharmilles provides machines, system solutions, and customer services for the manufacture of molds, tools, and components.

Harbin VITI Electronic (A)

Harbin VITI Electronics Co., Ltd. is a China-based company principally engaged in research, development, design, manufacture and sales of electronic automotive products. The Company's products include controller area network (CAN) bus products, electronic control unit (ECU), combination instrument series, sensors series and other products.

HIWIN Technologies Corp.

Hiwin Technologies and its subsidiaries are engaged in the research and development, design, manufacture, sale and repair of ballscrew, linear guideway, bearings, robot, linear motor system, linear actuator, and positioning measurement system.

Hosokawa Micron Corp.

Hosokawa Micron is a provider of powder and particle processing machinery and devices, as well as related system engineering for various industries. The Powder Processing Equipment segment is engaged in the manufacture and sale of grinding and classification devices, mixing and drying devices, agglomeration and compaction devices, other handling equipment, functional composite materials, dust collection devices and precision air-conditioning devices, as well as the provision of contracted processing services. The Plastic Processing Equipment segment offers manufacturing devices for plastic films.

Hyundai Mobis Co. Ltd

Hyundai Mobis is engaged in the auto parts business, mainly on manufacturing parts and modules, for car production, and for after-sales services, overseas business, environmental services, and others. Co. maintains 5 business facilities including steel making facilities; press; crane; plant and airport equipment.

Konecranes Oyj

Konecranes reports two business areas, Service and Equipment, as its primary business segments. Co.'s Service business area provides maintenance and modernization services for all types and brands of industrial cranes, lifting equipment, and machine tools. Co.'s service offering covers inspections, preventive maintenance programs, repairs and improvements, on-call service, spare parts, modernizations, and a range of consultation services. Co.'s Equipment business area provides components, cranes, and material handling solutions for a range of customers. As its secondary segments, Co. reports three geographical areas: Europe, Middle East and Africa; Americas; and Asia-Pacific.

Lu Hai Holding Corp

LU HAI HOLDING CORP. is a Taiwan-based company principally engaged in manufacture and sales of various types of valves. The Company's main products include bicycle valves, motorcycle and electric motorcycle valves, automotive, truck and off-road vehicle valves and related accessories. The Company distributes its products in domestic market and to overseas markets, such as mainland China and Indonesia.

Mazda Motor Corp.

Mazda Motor and its affiliates are mainly engaged in the manufacture and sale of passenger and commercial vehicles. Co. provides compact vehicles, sports cars, sedans, mini vans, light cars, commercial vehicles, welfare vehicles and customized vehicles, as well as car accessories. Co.'s principal products are four-wheeled vehicles, gasoline reciprocating engines, diesel engines, and automatic and manual transmissions for vehicles. Co.'s principal brand automobiles include Demio, Axela, Atenza, CX-3, CX-5, CX-8, Roadster, Carol, Flair, Flair Wagon, Scrum Wagon, Bongo, Titan, Familia Van, and Scrum Van/Truck.

Metso Outotec Oyj

Outotec is a global provider of process solutions, technologies and services for the mining and metallurgical industries organized in four divisions. The Minerals Processing division provides concentrator plants, process solutions and services for ore concentration, the minerals and fertilizer industry, energy sector and water treatment. The Base Metals division provides metallurgical processing technology for copper, nickel, zinc, precious metals and ferroalloys. The Metals Processing division develops and supplies technologies and services for the production of iron, alumina, aluminum and synthetic rutile. Larox develops and delivers industrial filters for separating solids from liquids.

MinebeaMitsumi Inc.

Minebea is mainly engaged in the manufacture and sale of ball bearings and high-precision components. Along with its subsidiaries and associated companies, Co. operates in three business segments: machined components, electronic devices and components and MITSUIMI. Co.'s core products include mechanical parts, such as ball bearings, rod-end bearings, pivot assemblies of HDDs; fasteners for automobile and aircraft; LCD backlights; measuring instruments; motors, such as spindle motors for HDDs, information motors (stepping motors, DC brushless motors, DC brush motors and fan motors), and precision motors; special components; mold; and internal parts.

Mitsui High-Tec Inc.

Mitsui High-Tec is engaged in the production and sales of lead frame, motor core, precision tooling and machine tools. Co.'s principal business segments are tooling, electronic parts, electrical parts, and machinery. Co., along with its subsidiaries, is mainly engaged in the manufacture and sale of mold dies for press, which include cutting dies for motor core products and other precision mold for various components; the integrated circuit (IC) lead frames; the IC assembly parts; the industrial machinery which include flat-surface grinding machine; the motor core products, as well as other press cutting and processing products.

Nidec Corporation

NIDEC and its subsidiaries are primarily engaged in the design, development, manufacture and marketing of small precision motors, mid-size motors, machinery, electronic and optical components, and other products. Co.'s principal products are spindle motors for hard disk drives, motors for optical disk drives, small precision fans and other small motors; mid-size motors; test systems, measuring equipment, power transmission equipment, factory automation systems, card readers and industrial robots; camera shutters, camera lens units, switches, trimmer potentiometers, motor driven actuator units, processing and precision plastic mold products; and auto parts and pivot assemblies.

Nissan Shatai Co. Ltd.

Nissan Shatai is mainly engaged in the development and manufacture of automobiles and parts for Co.'s parent company, Nissan Motor Co., Ltd. Co. is engaged in the contract manufacturing of passenger vehicles, SUVs, pickup trucks, commercial vans, light commercial vehicles, small buses and light trucks. Co.'s vehicle models include "NV200," "NV350," "NV150," "ARMADA," "ATLAS," "PATROL," "CIVILIAN," "Infiniti QX80," "QUEST," "WINGROAD" and "Elgrand." Co. also manufactures automotive parts and specially-equipped vehicles. Co. is also engaged in the provision of information processing, staff dispatching service and facility maintenance.

Okuma Corp.

Okuma is mainly engaged in the manufacture and sale of machine tools and industrial machinery. Co.'s principal products include numerical control lathes (CNC Lathes, Vertical CNC Lathes, and aluminum wheel applications), machining centers (vertical, horizontal, and 5-axis machining centers), multitasking machines, turning centers, numerically controlled grinding machines (NC cylindrical grinders and NC internal grinders), numerical control systems and servo motors. Co. also provides after-sales services. Co. operates its operations in Japan, the U.S., Europe and Asia.

Piaggio & C. S.p.a.

Piaggio is a manufacturer of two-wheeler motor vehicles and commercial vehicles. Co.'s product range includes scooters, mopeds and motorcycles from 50cc to 1,400cc marketed under the Piaggio, Vespa, Gilera, Aprilia, Moto Guzzi, Derbi and Scarabeo brands. Co. also operates in the three- and four-wheeler light transport sector with its Ape, Porter and Quargo ranges of commercial vehicles.

Punch Industry

PUNCH INDUSTRY CO., LTD. is principally engaged in the manufacture and distribution of molds. The Company's main products are comprised of plastic molds, which are used for the manufacture of plastic products, such as the outer frame of digital cameras and mobile phones, as well as pressed molds, which are manufactured by pressing machinery. The main products manufactured by the Company include sprue bushings, gate bushings, ejector pins and other plastic molds, as well as guide bushes for die sets, punches, stripper guides and other pressed molds.

Renault SA

Renault is an automobile manufacturer. Co.'s activities have been organized into two main business sectors, in more than 120 countries: Automotive and Sales Financing. Co. designs, develops and sells passenger cars and light commercial vehicles. Following the acquisition of Romanian carmaker Dacia and Samsung Motors' operating assets in South Korea, Co. has three automotive brands: Renault, Dacia and Samsung. RCI Banque, Co.'s captive financing arm, finances sales of the Renault, Renault Samsung Motors (RSM) and Dacia brands, and, in Europe, the Nissan and Infiniti brands. In addition to these two activities, Co. has equity investments in the following two companies: Nissan and AVTOVAZ.

Rheinmetall AG

Rheinmetall is a holding company. Through its subsidiaries, Co. operates in two sectors: defence and automotive. Co.'s defence sector is comprised of three divisions: combat systems, engaging in armored tracked vehicles and NBC protection systems; electronic solutions, engaging in air defence systems and soldier systems; and wheeled vehicles, engaging in wheeled logistics vehicles and wheeled tactical vehicles. Co.'s automotive sector is comprised of three division: mechatronics, engaging in cutting emissions and air management systems; hardparts, engaging in pistons and plain bearings and bushes; and motorservice, which includes aftermarket activities for replacement parts business.

Rotork plc

Rotork is a provider for the actuation, flow control and industrial markets. Co. has four product divisions: Controls, which includes products such as electric valve actuator ranges and network control systems for various applications; Fluid Systems, which manufactures and supplies a range of pneumatic, hydraulic and electro-hydraulic actuators and control systems; Gears, which is a manufacturer and supplier of gearboxes, adaptations and accessories to the international valve and actuator industry; and Instruments, which manufactures and supplies instrumentation and control products for flow, pressure, temperature and position measurement applications for a range of industries.

SMC Corporation

SMC and its subsidiaries are engaged in the manufacture and sale of pneumatic control equipment and other automatic control equipment. Co.'s principal products are directional control valves, such as air-operated valves, hand valves, power valves and solenoid valves; actuators, such as air cylinders, guided actuators and air grippers; air preparation equipment, such as air dryers, air mist separators, aftercoolers and air tanks; and air line equipment, such as air filters, air filter regulators, lubricators, modular filter regulator lubricator units, electro-pneumatic regulators, sensors and switches. In addition, Co., through its subsidiaries, is engaged in the warehousing business.

Tata Motors Limited

Tata Motors is an automobile company, engaged in the manufacture and sale of commercial and passenger vehicles primarily in India. Co. provides cars, utility vehicles, trucks, buses, and defense vehicles, as well as develops electric and hybrid vehicles for personal and public transportation. In addition, Co. is engaged in the provision of engineering and automotive applications, as well as machine tools and factory automation applications; construction equipment manufacturing; automotive vehicle components manufacturing, among others. Co. markets its vehicles in Europe, Africa, the Middle East, South East Asia, South Asia, and South America.

THK Co. Ltd.

THK is mainly engaged in the manufacture and sale of components for industrial equipment and transportation vehicles. Along with its subsidiaries and associated companies, Co. manufactures and sells machinery equipment components such as linear motion systems, actuators, and other industrial machinery and equipment. Co.'s principal products include linear motion guide, linear motion actuator, linear ball slide, flat roller, slide rail, ball spline, ball screw, screw nut, change nut, double-row angular contact ring, cross roller ring, lubricating accessories, among others.

Tong Yang Industry Co.

Tong Yang Industry is engaged in the manufacture and sale of parts, components and models for automobile and motorcycle. Through its subsidiaries, Co. is also engaged in the design, manufacture and sale of tooling mold; and the international trade of automobile parts and tooling molds. Co.'s products include bumper, grille, instrument panel, spoiler, fender, hood and others for automobiles; and fender, side cover, leg shield, light case and others for motorcycles.

Valeo SE

Valeo is an automotive supplier, partner to automakers worldwide. As an industrial and technology company, Co. focuses on designing, manufacturing and selling components, integrated systems and modules for automobiles and heavy goods vehicles, both on the original equipment and the aftermarket segments. In addition, Co. offers innovative products and systems that contribute to the reduction of CO2 emissions and to the development of intuitive driving to its customers. Co. operates through four business groups: Comfort and Driving Assistance Systems, Powertrain Systems, Thermal Systems, and Visibility Systems.

Weir Group PLC

The Weir Group is an engineering business. Co. is organized into three operating divisions: Minerals, which provides mill circuit technology and services as well as slurry handling equipment and associated aftermarket support for abrasive high wear applications; Oil & Gas, which provides pressure pumping and pressure control equipment and aftermarket spares and services, as well as equipment repairs, upgrades, certification and asset management, and field services; and Flow Control, which designs and manufactures valves and pumps, and also provides specialist support services to the global power generation, industrial, oil and gas and other aftermarket-orientated process industries.

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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