Report
Dave Nicoski ...
  • Ross LaDuke
EUR 237.15 For Business Accounts Only

Vermilion Compass: Weekly Equity Strategy

Upgrading Staples, downgrading Energy

Defensive Sector rotations continued last week as treasury yields remained suppressed. Price and RS trends improved for telecom, REITs, staples, pharma, and utilities. Energy and materials were the laggards as commodity prices tumbled, due in part to global growth and trade concerns. Leadership from defensive Sectors is not what we would expect as the S&P 500 approaches the 2,873 all-time high set in January, but it has certainly improved market breadth. What it comes down to is the multi-month uptrend for the S&P 500 that began in early April remains intact, and we are therefore maintaining our overall constructive outlook.

• Sector Relative Strength Rankings (RSRs). Consumer Staples strength helped the XLP's RS break out to a 4-month high. In light of this breakout we are upgrading Staples to market weight... see below and page 2. On the other end of the spectrum, crude oil price deterioration has caused a breakdown in price and RS for Energy equities. Therefore, we are downgrading the Sector to market weight... see pages 2-3.

• Semis deteriorating, but other cyclical pockets still strong. We spotlight our longstanding concerns in the semi space. Additionally, it is not only defensives that are showing strength. Financials (XLF) and banks (KBE, KRE), Industrials (XLI), and retail (XRT, RTH) have all recently shown price and RS improvements... see below and page 4.

• Big picture trends. We take a look at the S&P 500 and long-term breadth. We also revisit the USD, interest rates, growth vs. value, and large- vs. small-caps... see pages 4-6.

• In today's report we highlight attractive Groups within Technology, Financials, and Utilities: TE-66 3D Printing System, FN-47 REITs, Offices, FN-51 REITs Healthcare, and UT-06 Electric, Midwest... see pages 11-28.
Underlyings
3D Systems Corporation

3D Systems is a holding company. Through its subsidiaries, the company provides 3D printing solutions, including 3D printers for plastics and metals, materials, software, on demand manufacturing services and digital design tools. The company's solutions support applications in a range of industries and verticals, including healthcare, aerospace, automotive and durable goods. The company's healthcare capabilities include simulation, Virtual Surgical Planning (VSP?), and printing of medical and dental devices, models, and surgical guides and instruments. The company provides 3D printing technologies including Stereolithography, Selective Laser Sintering, Direct Metal Printing, MultiJet Printing and ColorJet Printing.

Columbia Property Trust Inc.

Columbia Property Trust is a real estate investment trust that owns and operates commercial real estate properties. The company conducts its business primarily through its subsidiary, Columbia Property Trust Operating Partnership, L.P., which acquires, redevelops, owns, leases, and operates real properties directly and through wholly and partially owned subsidiaries and joint ventures.

Corporate Office Properties Trust

Corporate Office Properties Trust is a real estate investment trust. Corporate Office Properties, L.P. (COPLP) and subsidiaries is the entity through which the company, the sole general partner of COPLP, conducts almost all of its operations and owns almost all of its assets. The company owns, manages, leases, develops and selectively acquires office and data center properties. The majority of the company's portfolio is in locations that support the United States Government and its contractors that engaged in national security, defense and information technology related activities servicing. The company also owns office properties in select urban/urban-like submarkets in the Greater Washington, DC/Baltimore region.

Digital Realty Trust Inc.

Digital Realty Trust is a real estate investment trust. The company is a global provider of data center, colocation and interconnection solutions for customers across a variety of industry verticals ranging from cloud and information technology services, communications and social networking to financial services, manufacturing, energy, healthcare, and consumer products. The company's Operating Partnership, Digital Realty Trust, L.P., is the entity through which the company conducts its business of owning, acquiring, developing and operating data centers. The company's portfolio of data centers provides available environments for the exchange, processing and storage of electronic information.

Equity Commonwealth

Equity Commonwealth is a real estate investment trust. The company is primarily engaged in the ownership and operation of office buildings. The company conducts substantially all of its activities through EQC Operating Trust.

ExOne Co

The ExOne is a provider of three-dimensional (3D) printing machines and 3D printed and other products, materials and services to industrial customers. The company's business primarily consists of manufacturing and selling 3D printing machines and printing products. The company provides pre-production collaboration and print products for customers through its network of production service centers and ExOne adoption centers. The company also supplies the associated materials, including consumables and replacement parts, and other services, including training and technical support that is necessary for purchasers of the company's 3D printing machines to print products.

FirstEnergy Corp.

FirstEnergy is a public utility holding company. The company and its subsidiaries are principally involved in the transmission, distribution and generation of electricity. The company's reportable operating segments are comprised of: Regulated Distribution, which distributes electricity through the company's utility operating companies and also controls regulated electric generation capacity located primarily in West Virginia, Virginia and New Jersey; and Regulated Transmission, which provides transmission infrastructure owned and operated by the transmission companies and certain of the company's utilities to transmit electricity from generation sources to distribution facilities.

Healthcare Trust of America Inc. Class A

Healthcare Trust of America is a real estate investment trust. The company focuses on owning and operating medical office buildings that serve healthcare delivery and are located on health system campuses, near university medical centers, or in community core outpatient locations. The company's properties include health systems, such as Baylor Scott & White Health, Highmark-Allegheny Health Network, Hospital Corporation of America, Tenet Healthcare System and Community Health Systems.

Healthpeak Properties Inc.

HCP is a real estate investment trust which invests in real estate serving the healthcare industry. The company acquires, develops, leases, and manages and disposes of healthcare real estate. The company's segments are: senior housing triple-net and senior housing operating portfolio, which include independent living facilities, assisted living facilities, memory care facilities, and continuing care retirement communities; life science, which contains laboratory and office space for biotechnology, medical device and pharmaceutical companies, scientific research institutions, government agencies and other organizations; and medical office, which contains physicians' offices and examination rooms.

LTC Properties Inc.

LTC Properties is a health care real estate investment trust. The company invests in seniors housing and health care properties. The company primarily invest in: Skilled nursing centers, which provide restorative, rehabilitative and nursing care for people not requiring the treatment available at acute care hospitals; Assisted living communities, which serves people who require assistance with activities of daily living, but do not require the constant supervision that skilled nursing facilities provide; Independent living communities, known as retirement communities or senior apartments; and Memory care communities, which provide options for people with Alzheimer's disease and other forms of dementia.

Mack-Cali Realty Corporation

Mack-Cali Realty is a real estate investment trust. The company owns and operates a real estate portfolio comprised of Class A office and office/flex properties located primarily in the Northeast. The company performs various real estate leasing, management, acquisition and development on an in-house basis. The company's industry segments are: commercial and other real estate and multi-family real estate and services. The company provides leasing, property management, acquisition, development, construction and tenant-related services for its commercial and other real estate and multi-family real estate portfolio. The company's multi-family services business also provides similar services for third parties.

Medical Properties Trust Inc.

Medical Properties Trust is a self-advised real estate investment trust. The company invests in: General acute care, which provides inpatient care for the treatment of acute conditions and manifestations of chronic conditions; Inpatient rehabilitation hospitals, which provides rehabilitation to patients with various neurological, musculoskeletal orthopedic, and other medical conditions following stabilization of their acute medical issues; and long-term acute care hospitals, a specialty-care hospital designed for patients with serious medical problems that require intense, special treatment for an extended period of time, sometimes requiring a hospital stay averaging in excess of three weeks.

Office Properties Income Trust

Government Properties Income Trust is a real estate investment trust. As of Dec 31 2016, the company owned 73 properties (95 buildings), excluding one property (one building) classified as discontinued operations. The company's properties are located in 31 states and the District of Columbia.

Omega Healthcare Investors Inc.

Omega Healthcare Investors is a real estate investment trust. The company has one reportable segment consisting of investments in healthcare-related real estate properties located in the United States and the United Kingdom. The company's main business is to provide financing and capital to the long-term healthcare industry with a particular focus on skilled nursing facilities, and assisted living facilities, and to a lesser extent, independent living facilities, and rehabilitation and acute care facilities and medical office buildings. The company's main portfolio consists of long-term leases and mortgage agreements.

Paramount Group Inc.

Paramount Group is a real estate investment trust focused on owning, operating, managing, acquiring and redeveloping Class A office properties in select central business district submarkets of New York City, San Francisco and Washington, D.C. The company conducts its business through, and substantially all its interests in properties and investments are held by, Paramount Group Operating Partnership LP, a Delaware limited partnership (the Operating Partnership). The company is the sole general partner of the Operating Partnership. The company's reportable segments are separated by region based on the three regions in which the company conducts its business: New York , San Francisco and Washington D.C.

Physicians Realty Trust

Physicians Realty Trust is a self-managed healthcare real estate company. The company acquires, selectively develops, owns and manages healthcare properties that are leased to physicians, hospitals, and healthcare delivery systems. The company invests in real estate that is integral to providing healthcare services. The company's properties are located on a campus with a hospital or other healthcare facilities or strategically affiliated with a hospital or other healthcare system. The company's principal investments include medical office buildings, outpatient treatment facilities, and other real estate integral to health care providers.

Proto Labs Inc.

Proto Labs is a digital manufacturer of custom prototypes and production parts. The company's primary manufacturing product lines include Injection Molding, which uses three-dimensional (3D) computer-aided design-to-computer numerical control (CNC) machining technology for the automated design and manufacture of molds; CNC Machining, which uses commercially available CNC machines to provide milling and turning; 3D Printing, which includes stereolithography, selective laser sintering, direct metal laser sintering, Multi Jet Fusion and PolyJet processes; and Sheet Metal, which includes e-commerce-enabled custom sheet metal parts, providing customers with prototype and low-volume production parts.

Sabra Health Care REIT Inc.

Sabra Health Care REIT operates as a real estate investment trust that, via its subsidiaries, owns and invests in real estate serving the healthcare industry. The company's business consists of acquiring, financing and owning real estate property to be leased to third party tenants in the healthcare sector. The company has healthcare investments that provide services including skilled nursing/transitional care, assisted and independent living, mental health and acute care. The company's investment portfolio consists of real estate properties held for investment, investment in a direct financing lease, investments in loans receivable, preferred equity investments and investment in an unconsolidated joint venture.

SL Green Realty Corp.

SL Green Realty is a self-managed real estate investment trust. The company is engaged in the acquisition, development, ownership, management and operation of commercial and residential real estate properties, mainly office properties, located in the New York metropolitan area. Substantially all of the company's assets are held by, and all of its operations are conducted through, SL Green Operating Partnership, L.P. (the Operating Partnership). All of the management, leasing and construction services that are provided to the properties that are wholly-owned by the company and that are provided to certain joint ventures are conducted through SL Green Management LLC which is 100% owned by the Operating Partnership.

Stratasys Ltd.

Universal Health Realty Income Trust

Universal Health Realty Income Trust is real estate investment trust. The company invests in health care and human service related facilities including acute care hospitals, rehabilitation hospitals, sub-acute facilities, medical office buildings, free-standing emergency departments and childcare centers.

Ventas Inc.

Ventas is a real estate investment trust with a portfolio of seniors housing, research and innovation, and healthcare properties located throughout the United States, Canada and the United Kingdom. The company has three segments: triple-net leased properties, which invests in and owns seniors housing and healthcare properties and leases those properties to healthcare operating companies under triple-net or absolute-net leases; senior living operations, which invests in seniors housing communities and engages independent operators to manage those communities; and office operations, which acquires, owns, develops, leases and manages medical office buildings and research and innovation centers.

Welltower Inc.

Welltower is a real estate investment trust. The company's segments are: Seniors Housing Operating, which includes seniors apartments, independent living and independent supportive living, continuing care retirement communities, Alzheimer's/dementia care, and care homes with or without nursing; Triple-net, which includes independent living and independent supportive living, continuing care retirement communities, Alzheimer's/dementia care and care homes with or without nursing, as well as long-term/post-acute care; and Outpatient Medical, which consists of outpatient medical buildings including physician offices, ambulatory surgery centers, diagnostic facilities, outpatient services and/or labs.

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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