Vermilion Int'l Compass: Global Equity Strategy
Reiterating Japan Overweight -- Add ExposureOur bullish outlook (since early-November 2023) remains intact, and we continue to recommend buying dips as long as MSCI ACWI (ACWI-US) and EM (EEM-US) remain above important supports at $110 and $41-$42, respectively.
Reiterating Japan Overweight -- Add Exposure. The Nikkei 225 displays a 2-month base breakout, and the TOPIX and TOPIX Small indexes are on the cusp of 3-month breakouts to multi-decade highs. This signals a continuation of the uptrend in Japan -- add exposure. Additionally, the 2+ year RS uptrend is holding at support, and we are reiterating our overweight Japan recommendation... see charts below.
Country/Region Overweights. Current country/region overweights remain unchanged, and include Taiwan, Japan, and Poland.
MSCI ACWI and Emerging Markets. Important supports continue to hold on MSCI ACWI (ACWI-US) and EM (EEM-US) at $110 and $41-$42, respectively. Our bullish outlook remains appropriate as long as these supports continue to hold... see page 2.
Risk-On Signals. In addition to important supports holding, other risk-on signals that support our bullish outlook include: local tops that could end up being major tops in U.S. Treasury yields and foreign sovereign yields, the U.S. dollar (DXY) remains below $107.40 resistance, important energy commodities (WTI crude oil and gasoline) are well-below significant resistances. Additionally, defensive Sectors continue to underperform, bond market volatility (MOVE index) is at 2.25-year lows, and U.S. and European high yield spreads remain near 2+ year narrows... see page 2.
Rotation Away From Technology? The global Technology Sector (IXN-US) remains leadership and our favorite Sector (we have been highlighting buys within Technology in every single Int'l Compass report since March 28, 2024). With that said, the Technology Sector is extended and appears to be going through a consolidation phase (which we view as healthy) as market participants rotate to laggard areas. Stay long the many Tech names we have highlighted in recent months, and buy on pullbacks.
Actionable Themes: Energy, Health Care, Telecommunications, and Utilities. We highlight our favorite buys within these Sectors, which are likely to benefit from a short-term rotation away from Technology... see pages 3-13.
Cnooc is an investment holding company. Through its subsidiaries, Co. is principally engaged in the exploration, development, production and sale of crude oil, natural gas and other petroleum products in offsore of the People's Republic of China. Co.'s core operation areas are Bohai, Western South China Sea, Eastern South China Sea and East China Sea in offshore China. Co. has oil and gas assets in Asia, Africa, North America, South America, Oceania and Europe. As of Dec 31 2016, net proved reserves for oil, gas, and synthetic oil were 2,015.4 million barrels, 7,486.1 billion cubic feet, and 7,486.1 million barrels, respectively.
Cosmo Energy Holdings is an integrated oil business group based in Japan. Co.'s operations are organized along four operating divisions: Oil Exploration and Production segment is engaged in exploration and production of oil through three oil fields located in Abu Dhabi and Qatar; Petroleum segment operates three refineries and production of petroleum based products; Petrochemical segment is involved in development and production of petrochemical products such as para-xylene (PX) and mixed xylene (MX) for polyester fiber and polyethylene terephthalate (PET) bottles; and Other Businesses segment is predominately engaged in wind power generation and wind power generation facilities.
JXTG Holdings is a petroleum and metal industries holding company based in Japan. Co. was formed by the management integration of Nippon Oil and Nippon Mining Holdings. Co. comprises three core companies operating in the fields of Petroleum Refining and Marketing, Oil and Natural Gas Exploration and Production, and Metals. Co. conducts operations integrated from upstream resource development to petroleum refining and marketing, chemicals, copper smelting and refining, recycling and environmental services, and electronic materials. Co. operates in four business segments: energy, oil and natural gas exploration and production, metals, and others.
KeyCorp is a bank holding company. Through its principal subsidiary, KeyBank National Association and certain other subsidiaries, the company has the following main business segments: Consumer Bank, which serves individuals and small businesses by providing a variety of deposit and investment products, personal finance and financial wellness services, lending, mortgage and home equity, student loan refinancing, credit card, treasury services, and business advisory services; and Commercial Bank, which is focused principally on serving the needs of middle market clients in the following industry sectors, including consumer, energy, healthcare, industrial, public sector, real estate, and technology.
Kunlun Energy is an investment holding company. Through its subsidiaries, associates and joint ventures, Co. is engaged in the exploration and production of crude oil and natural gas in the People's Republic of China (the PRC), the Republic of Kazakhstan, the Sultanate of Oman, Peru, the Kingdom of Thailand, the Azerbaijan Republic, and the sales of natural gas, Liquefied Natural Gas (LNG) processing, LNG terminal and transmission of natural gas in the PRC. Co. has two operating segments: Exploration and Production; and Natural Gas Distribution. As of Dec 31 2014, Co. had 65.0 million barrels of proven crude oil reserves and 79.95 billion cubic feet of proven natural gas reserves.
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.
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