Report
Dave Nicoski ...
  • Ross LaDuke
EUR 48.12 For Business Accounts Only

Vermilion Int'l Compass: Global Equity Strategy

Reason For Caution

Various market dynamics have deteriorated recently which leads us to a more neutral outlook for the weeks ahead. For now we do not expect to see a significant correction, however we have reason to believe that this current consolidation period could go on longer than initially expected. Below we explain updates to our outlook.

· Deteriorating Market Dynamics: US Dollar & EM Equities. The 92 level has been our key line in the sand on the US dollar (DXY); we have suggested that if the DXY is above 92 we see it as a risk-off signal for global equities -- and here it is again above 92. We see 94.75-96 as the next important resistance area to monitor on the DXY. This DXY strength has resulted in EM equities testing the important $52 support level on EEM-US, and RS is breaking below key support. This raises concerns for the broad market and we are downgrading emerging markets to market weight... see charts below.

· Deteriorating Market Dynamics: RS Improving For Defensive Sectors. Stocks tend to be under pressure when RS for defensive Sectors (e.g., Utilities, Consumer Staples, Real Estate) is improving, which is exactly what we are seeing -- more on this below.

· Support Levels Holding. While EM equities (EEM-US) are testing the key $52 level, the other broad global indexes are hanging-in much better and are still above major supports. Important support levels we are watching include $90 on the MSCI ACWI (ACWI-US), $53 on MSCI ACWI ex-US (ACWX-US), and $73.50 on MSCI EAFE (EFA-US). If these indexes are above the respective levels we are constructive from a price perspective, however breakdowns would mean additional downside ahead.

· Actionable Theme: Defensive Sectors. We still recommend buying value Sectors (Energy, Materials, Financials, etc.) on pullbacks, however recent RS improvement for Utilities, Consumer Staples, Real Estate, and Communications warrants attention -- add selective exposure... see pages 2-15.

· Actionable Theme: Electronics/Appliances. Several electronics/appliances stocks are moving higher alongside homebuilders and home furnishings. Actionable ideas include Electrolux (ELUX.B-SE), De'Longhi (DLG-IT), and Maytronics (MTRN-IL)... see page 4.
Underlyings
A2A S.p.A.

A2A is a multiutility company. Co. primarily operates in the following sectors: the production, sale and distribution of electricity; the sale and distribution of gas; the production, distribution and sale of heat through district heating networks; waste management (from collection and sweeping to disposal) and the construction and management of integrated waste disposal plants and systems, also making these available for other operators; and integrated water cycle management.

Adani Green Energy Limited

Adani Green Energy Limited is an India-based power generation company. The Company builds and operates solar and wind energy power plants in India. It operates a fully-operational single-location solar power plant with a capacity of 648 Megawatts (MW) and other plants in various parts on India. Its commissioned power plants are located in Tamil Nadu, Punjab, Rajasthan, Gujarat, Madhya Pradesh, Maharashtra, Chattisgarh, Telangana, and Karnataka. The Company is also constructing wind and solar energy power plants in Australia and the United States.

ADF Group Inc.

ADF Group is engaged in the design and engineering of connections, fabrication and installation of complex steel superstructures, heavy steel built-ups, as well as architectural and miscellaneous metalwork for the five principal segments of the non-residential construction market namely, office towers and high-rises, commercial and recreational buildings, airport facilities, industrial complexes and nuclear facilities, and transport infrastructures.

Amorepacific Corp.

Amorepacific is engaged in the business of cosmetic products, healthcare products and personal care products. Co.'s cosmetic products consist of skin care products, makeup products and fragrances. Co.'s healthcare products include different kinds of green tea. Co.'s personal care products include shampoos, body cleansers and toothpastes. Co.'s products are under the brand names of "AMOREPACIFIC', "Sulwhasoo", "HERA", "IOPE", "LANEIGE', "Mamonde", "innisfree", and "ETUDE".

Apex International Co. Ltd.

Apex International Co Limited. Apex International Co., Ltd. is a Taiwan-based company principally engaged in the manufacture and sales of double-sided and multi-layer printed circuit boards (PCBs). Its PCBs are applied in electronic products, such as digital versatile disks (DVDs), liquid crystal display televisions (LCD TVs), fax machines, air conditioners, digital cameras, projectors, TV tuners, voltage converters and light-emitting diode (LED) lighting equipment; computer peripherals, such as DVD players, recordable machines, printers, power supplies, hard drives and motherboards; communication equipment, such as mobile phones, set-top boxes and satellite TV receivers, as well as automotive audio components. The Company distributes its products within Taiwan market and to overseas markets, including the rest of Asia, Europe, the Americas and Africa.

Canopy Growth Corporation

Canopy Growth is a licensed producer of medical marijuana in Canada. The principal activities of Co. are the production and sale of marijuana out of its facility in Smiths Falls, Ontario as regulated by the "Marijuana for Medical Purposes Regulations".

China Power International Development Ltd

China Power International Development is a power generation comp-any, involved in the development, construction, owning, operating, and managing power plants in the People's Republic of China (the PRC). Co. is principally engaged in investment, development, operation and management of coal-fired power, hydropower and wind power plants in Mainland China. Co.'s power generation businesses are mainly located in the power grid regions of Eastern, Southern, Central and Northern China. Co.'s segments include Generation and sales of coal-fired electricity, and Generation and sales of hydropower electricity.

China Resources Power Holdings Co. Ltd.

China Resources Power is an investment holding company. Through its subsidiaries Co. is principally engaged in the construction and operations of power stations and coal mining. Co. invests, develops, operates and manages coal-fired power plants, wind farms, hydro-electric projects and other renewable energy projects in China, and invests, develops, constructs and operates coal mines in China. Co.'s segments include Thermal power, Renewable energy, and Coal mining. As of Dec 31 2014, Co. had 39 coal-fired power plants, 2 hydro-electric plants, 1 gas-fired plant and 56 wind farms in commercial operation. The total attributable operational generation capacity of Co. is 31,331 MegaWatt.

Christine International Holdings

Christine International Holdings Limited is a China-based investment holding company principally engaged in the production and sales of bakery products. Its products mainly include bread and cakes, moon cakes and pastries. The Company operates in prime locations and major cities in the Yangtze River Delta region, including Shanghai, Jiangsu province and Zhejiang province. The Company's principal subsidiaries include Christine BVI, Deluxe International Holdings Limited, Shanghai Christine Shanghai Sweet Art Foodstuff Co., Ltd., Shuang Hong Bakery and Shanghai Keli Foodstuff Co., Ltd.

Compania Cervecerias Unidas S.A.

Electric Power Development Co. Ltd.

Electric Power Development is a wholesale power company with a presence throughout Japan. Along with its affiliates, Co. is engaged in the hydraulic and thermal power generation businesses; the wholesale electricity supply to other electric companies by independent power producers; the wholesale electricity supply for power producers and suppliers; the wind power generation business; the design, construction and maintenance of power generating facilities; the provision of fuels and materials for electric power generation; the electrical power generation investment business; the engineering and consulting businesses in overseas; the new electricity businesses; and other.

EnBW Energie Baden-Wurttemberg AG

EnBW operates as an energy company in Germany. Co. operates in three segments: Electricity, Gas, and Energy and Environmental Services. The Electricity segment engages in the generation, trading, transmission, distribution, and sale of electricity. It produces electricity through nuclear power, coal, gas, water, and other renewable energy sources, such as solar, wind, and biomass. The Gas Segment consists of the midstream area, including the import agreements and infrastructure, storage and trading. Energy and Environmental Services segment provides grid and energy related services, thermal and non-thermal waste disposal, and water supply services.

Fortum Oyj

Fortum is an energy company. Co.'s operations are organised in five divisions: Hydro Power and Technology and Nuclear and Thermal Power, which are engaged in its hydro, nuclear and thermal power generation, services, portfolio management and trading as well as technology and research and development functions; Heat, Electricity Sales and Solutions, which consists of Co.'s combined heat and power production, district heating and business-to-business heating solutions, solar business, electricity sales and related customer offering; Russia, which consists of power and heat generation as well as heat distribution in Russia; and Distribution, which focuses on distribution activities in Sweden.

Glanbia Plc

Glanbia is a performance nutrition and ingredients group, engaged in providing performance nutrition, cheese, dairy ingredients, specialty non-dairy ingredients and vitamin and mineral premixes. Co. segments include: Global Performance Nutrition, which is involved in the branded performance nutrition business; Global Ingredients, which manufactures cheddar cheese, provides dairy and non-dairy nutritional ingredients and micro-nutrient premixes; Dairy Ireland, which is engaged in the manufacture and sale of a range of consumer products and farm inputs; and Joint Ventures & Associates, which is engaged in the manufacture and sale of cheese, dairy ingredients and dairy consumer products.

Global X China Clean Energy ETF

Heineken Malaysia

Guinness Anchor is principally engaged in the production, packaging, marketing and distribution of beverages, primarily alcoholic. Through its subsidiary, Co. is also engaged in marketing and promotion of beverages primarily alcoholic in Malaysia, and property holding and land development. Co.'s products are sold under the brand names Tiger Beer, Heineken, Guinness, Anchor Smooth, Anchor Strong Beer, Kilkenny, Paulaner, Malta, Sol, Anglia Shandy and Strongbow.

Intertape Polymer Group Inc.

Intertape Polymer Group provides packaging and protective solutions for industrial markets in North America, Europe and other geographies. Co. develops, manufactures and sells a variety of paper and film-based pressure-sensitive and water-activated tapes, polyethylene and polyolefin packaging films, woven coated fabrics and complementary packaging systems for industrial and retail use. Co.'s products consist of carton sealing tapes, including pressure-sensitive and water-activated tapes; packaging equipment; industrial and performance tapes including masking, duct, electrical, foil, process indicator, sheathing, sports and reinforced filament tapes; and stencil products, among others.

JBS S.A.

JBS is a producer of animal protein, such as beef, pork, lamb and poultry. Co. is also a leather producer. Co. is also operated in the segments of personal hygiene and cleaning products, collagen, can making, casings, biodiesel, vegetable, recycling and transports. Co.'s businesses are divided into: JBS USA, responsible for the operations in the U.S., Australia, Canada, Mexico and Porto Rico; JBS Mercosul, that encompasses activities in Brazil, Argentina, Paraguay and Uruguay; and JBS Foods operate in poultry, pork and further processed and convenience food in Brazil and elsewhere.Australia, Canada and the US.Australia, Canada and the US.

JSW Energy Ltd.

JSW Energy is primarily engaged in the business of generation of power, operation and maintenance of power plants, trading in power and mining related activities.

Kansai Electric Power Company Incorporated

Kansai Electric Power is engaged in the supply of electric power to residential, commercial and industrial customers in the Kinki area. Electric Power segment is engaged in the generation, transmission and distribution of electric power through hydro, thermal, nuclear power and renewable energy. Gas/Other Energies segment is engaged in the supply of city gas, the operation of LNG terminals, the overseas power generation and other energy related services. IT and Communications segment provides internet connection services for individual and corporate customers, as well as IT services for corporate customers. Co. is also engaged in the real estate development, leasing and management.

Kyushu Electric Power Company Incorporated

Kyushu Electric Power is an electric company engaged in the generation, transmission and distribution of electric power mainly in the Kyushu Region with 78,619 million kWh of electricity sales as of Mar 31 2017. Co. is also engaged in the research, design, construction and supervision of electric and civil engineering construction work, the environment protection for power plants; the sale of electric machine tools, natural uranium, gas and LNG; the new energy generation and heat supply businesses; the data communication, broadband, fixed phone and IT related businesses; the environmental, recycling, real estate, housing and nursing care businesses.

Prestige Consumer Healthcare Inc

Prestige Consumer Healthcare is a holding company. Through its subsidiaries, the company develops, manufactures, markets, sells and distributes over-the-counter (OTC) healthcare products to mass merchandisers and drug, food, dollar, convenience, and club stores in North America (the U.S. and Canada) and in Australia and certain other international markets. The company's portfolio of OTC Healthcare products includes, among others, DenTek oral care products, Monistat women's health products, Nix lice treatment products, Chloraseptic sore throat treatments, Clear Eyes eye care products, Compound W wart treatments, Luden's throat drops, BC and Goody's pain relievers and Debrox earwax remover.

STG International Ltd.

Tata Consumer Products Limited

Tata Tea is a holding company based in India. Through its subsidiaries, Co. is engaged in the cultivation, manufacture, sale and export of tea, instant tea, coffee, instant coffee, pepper and in investment holding operations. Co. has five major brands in the Indian market - Tata Tea, Tetley, Kanan Devan, Chakra Gold and Gemini -- catering to all major consumer segments for tea. Co. has a 100% export-oriented unit (KOSHER & HACCP certified) manufacturing Instant Tea in Munnar, Kerala. The Tata Tea and Tetley portfolios of branded offerings caters specifically to the Australian, Middle East, West Asia, North Africa, Poland, Russia and Kazakhstan markets.

Vilmorin & Cie SA

Vilmorin & Cie SA is engaged in the production, marketing and sale of vegetable and crop seeds for agricultural production and market gardeners. The Vegetable seeds division is involved in the production and sale of vegetable seeds under the brand names, such as Hazera-Nickerson, Vilmorin SA, HM.Clause and Mikado Kyowa Seed, among others, intended for the professional food market, including market gardeners, processors, and specialists in canning, specialists in deep-freezing and freeze-drying. The Field Seeds division is focused on field seeds, including corn, straw cereals, grape and sunflower seeds for European and American clients. The Garden Products division is structured around two companies, Vilmorin Jardin and Suttons. In March 15, 2013, it acquired the Bisco Bio Sciences of India. In October 2013, it announced that it has recently taken over Shamrock. In November 2013, it acquired Eureka Seeds Inc. In March 2014, it acquired Seed Asia based in Bangkok.

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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