Report
Dave Nicoski ...
  • Ross LaDuke
EUR 47.74 For Business Accounts Only

Vermilion Compass: Weekly Equity Strategy

PX Forming Coiled Spring Between 4200 and 4050

We continue believe that upside is limited with the S&P 500 testing the top-end of our anticipated 2023 trading range (4165-4200). Our gameplan remains unchanged; reduce risk near resistance (where we are now) and add risk near support (the December 2022 lows at 3765 and/or the 2022 lows at 3490). Therefore, we continue to recommend a tactical overweight to defensives (Consumer Staples, Utilities, Health Care, and gold miners). A break above 4200 on the S&P 500 would likely mean a test of 4300-4325, which we would view as a golden selling opportunity. On the other hand, a break below 4050 (a key support/resistance level since February 2023) would likely kickstart a meaningful pullback.

S&P 500. The S&P 500 has been trading within a tight range for quite some time (1.5-months), between resistance at 4200 and support at 4050. We view this as a coiled spring; the longer the consolidation, the greater the eventual move in either direction. We expect the resolution of this consolidation to produce a fast and furious move.
10Y-2Y Treasury Yield Spread. The 10-year vs. 2-year Treasury yield spread initially inverted on April 1st, 2022 and inverted again on July 5th, 2022 (and remains inverted). Historically, every 10Y-2Y Treasury yield inversion has resulted in a recession, typically 16-24 months after the inversion. We are 13.5-months out from the initial inversion, suggesting a recession is around the corner.
U.S. Dollar (DXY); High Yield Spreads; 10-Year Treasury Yield. These three key macro indicators continue to consolidate; the DXY between support at $101 and resistance at $105.50, the 10-year Treasury yield between support at 3.35% and resistance at 3.63%, and high yield spreads within a multi-month pennant formation. Upside breakouts would likely come alongside a pullback for the equity market indexes, while a move lower would likely mean more short-term upside for equities... see page 3.
Big Picture Trends. Aside from a possible selling panic low on May 4th for the banks (KRE, KBE), they generally are not showing any other signs of bottoming. We also discuss gold, silver, gold miners, and copper... see pages 4-6.
Underlyings
AAON Inc.

AAON is engaged in the manufacture and sale of air conditioning and heating equipment consisting of standard, semi-custom and custom rooftop units, chillers, packaged outdoor mechanical rooms, air handling units, makeup air units, energy recovery units, condensing units, geothermal/water-source heat pumps and coils. These products are marketed and sold to retail, manufacturing, educational, lodging, supermarket, medical and other commercial industries. The company's of rooftop units include the RQ Series, the RN Series, the RL Series and the RZ Series. The company's condensing units include the CB Series, the CF Series, the CN Series, and the CL Series.

ADMA Biologics Inc

ADMA Biologics is a biopharmaceutical and immunoglobulin company that manufactures, markets and develops plasma-derived biologics for the treatment of immune deficiencies and the prevention and treatment of certain infectious diseases. The company's marketed products consist of: Nabi-HB, which is indicated for the treatment of acute exposure to blood containing Hepatitis B surface antigen; and Bivigam, which is indicated for the treatment of primary humoral immunodeficiency. The company is also developing a pipeline of plasma-derived therapeutics, including its key pipeline product candidate, RI-002, for the treatment of Primary Immune Deficiency Disease.

Amphastar Pharmaceuticals Inc

Amphastar Pharmaceuticals is a pharmaceutical company focused on developing, manufacturing, marketing and selling generic and injectable, inhalation, and intranasal products, as well as insulin active pharmaceutical ingredient. The company has two reportable segments: finished pharmaceutical products and active pharmaceutical ingredients (API) products. The finished pharmaceutical products segment manufactures, markets and distributes enoxaparin, naloxone, phytonadione, lidocaine, medroxyprogesterone acetate, Primatene? Mist, as well as various other critical and non-critical care drugs. The API segment manufactures and distributes recombinant human insulin API and porcine insulin API.

Chinook Therapeutics Inc

Comfort Systems USA Inc.

Comfort Systems USA provides mechanical contracting services, which include heating, ventilation and air conditioning (HVAC), plumbing, piping and controls, as well as off-site construction, electrical, monitoring and fire protection. The company provides construction, renovation, expansion, maintenance, repair and replacement services for mechanical and related systems in commercial, industrial and institutional properties. The company's installation business related to newly constructed facilities involves the design, engineering, integration, installation and start-up of mechanical and related systems. The company also provides remote monitoring of temperature, pressure, humidity and air flow for HVAC systems.

CRH PLC ADS

GMS Inc.

GMS is a holding company. Through its subsidiaries, the company is engaged as a building products including wallboard, suspended ceilings systems, or ceilings, steel framing and other complementary building products. The company's product offering are: wallboard for interior and exterior walls and ceilings in residential and commercial structures; ceilings, which consists of suspended mineral fiber, soft fiber and metal ceiling systems; Steel Framing, which consists of steel track, studs and the various other steel products; and Other Products, which includes complementary products such as insulation, lumber, ready-mix-joint compound and various other interior construction products and ancillary products.

Ideaya Biosciences

IDEAYA Biosciences is an oncology-focused precision medicine company, focuses on the discovery and development of targeted therapeutics for patient populations selected using molecular diagnostics. The company's product candidate in clinical development is IDE196, a protein kinase C inhibitor for genetically-defined cancers having GNAQ or GNA11 gene mutations.

Installed Building Products Inc.

Installed Building Products is a holding company. Through its subsidiaries, the company primarily install insulation, waterproofing, fire-stopping, fireproofing, garage doors, rain gutters, window blinds, shower doors, closet shelving and mirrors and other products for residential and commercial builders located in the continental U.S. The company provides its portfolio of services for new and existing single-family and multi-family residential and commercial building projects from its national network of branch locations. The company provides a range of insulation materials, including: fiberglass and cellulose insulation, and spray foam insulation.

Lennox International Inc.

Lennox International provides climate control solutions. The company designs, manufactures and markets products for the heating, ventilation, air conditioning and refrigeration markets. The company's segments are: Residential Heating and Cooling, which manufactures and markets furnaces, air conditioners, heat pumps, packaged heating and cooling systems, equipment and accessories, comfort control products, and replacement parts and supplies; Commercial Heating and Cooling, which manufactures and sells unitary heating and cooling equipment; and Refrigeration, which manufactures and markets equipment for the global commercial refrigeration markets under the Heatcraft Worldwide Refrigeration name.

Martin Marietta Materials Inc.

Martin Marietta Materials is a natural resource-based building materials company. The company supplies aggregates (crushed stone, sand and gravel) through its network of quarries, mines and distribution yards. The company also provides cement and downstream products, namely, ready mixed concrete, asphalt and paving services. The company conducts its Building Materials business through three segments: Mid-America Group, Southeast Group and West Group. The Mid-America and Southeast Groups provide aggregates products only. The West Group provides aggregates, cement and downstream products. The company also has the Magnesia Specialties segment, which includes its magnesia-based chemicals and dolomitic lime businesses.

Morphic Holdings

Morphic is a holding company. Through its subsidiaries, the company is a biopharmaceutical company, focuses on the discovery and development of oral small-molecule integrin therapeutics. The company's lead product candidates in clinical development are MORF-720, a selective oral avb6 specific integrin inhibitor for the treatment of idiopathic pulmonary fibrosis; and a4b7 specific integrin inhibitors for the treatment of inflammatory bowel disease. The company's product candidates in discovery stage include an avb1 integrin for the treatment of fibrosis; two TGF-b activations for gastrointestinal cancers and fibrosis; and other aI domain integrins.

OWENS CORNING

Owens Corning is engaged in manufacturing and delivering a range of insulation, roofing, and fiberglass composite materials. The company's Composites segment includes vertically integrated downstream activities. The company manufactures, fabricates and sells glass reinforcements in the form of fiber. The company's Insulation segment includes a portfolio of high, mid and low-temperature products with a geographic mix of United States, Canada, Europe, Asia-Pacific and Latin America, a market mix of residential, commercial, industrial and other markets, and a channel mix of retail, contractor and distribution. The company's products in the Roofing segment are laminate and strip asphalt roofing shingles.

Simpson Manufacturing Co. Inc.

Simpson Manufacturing, through its subsidiary, designs, engineers and manufactures wood and concrete building construction products. The company's wood construction products are used in light-frame construction and include connectors, truss plates, fastening systems, fasteners and pre-fabricated lateral systems. The company's concrete construction products are used in concrete, masonry and steel construction and include adhesives, mechanical anchors, carbide drill bits, powder actuated tools, and fiber reinforced materials. The company also provides engineering services in support of some of its products and provides design and other software that facilitates the specification, selection and use of its products.

Summit Materials Inc. Class A

Summit Materials is a holding company. Through its subsidiaries, the company is a construction materials company. The company produces and sells aggregates, cement, ready-mix concrete, asphalt paving mix and concrete products and owns and operates quarries, sand and gravel pits, cement plants, cement distribution terminals, ready-mix concrete plants, asphalt plants and landfill sites. The company is engaged in paving and related services. The company has operations in various states across the United States and in British Columbia, Canada. The company operates a municipal waste landfill in its East segment, and has construction and demolition debris landfills and liquid asphalt terminal operations in its West and East segments.

TopBuild Corp.

TopBuild is an installer and distributor of insulation and other building products to the construction industry. The company's products and services are primarily for residential new construction, commercial construction, and residential repair/remodel activity. The company operates in two segments: installation, which installs various insulation applications that include fiberglass batts and rolls, blown-in loose fill fiberglass, blown-in loose fill cellulose, and polyurethane spray foam; and distribution, which distributes insulation and other building products including rain gutters, fireplaces, closet shelving, and roofing materials through its Service Partners business.

Trex Company Inc.

Trex Company is a manufacturer of composite decking and railing products, which are marketed under the brand name Trex?. In addition, the company is a national provider of custom-engineered railing and staging, systems for the commercial and multi-family market, including sports stadiums and performing arts venues. The company operates in two reportable segments: Trex Residential Products, which provides a set of product offerings in the decking, railing, fencing, steel deck framing, and outdoor lighting categories; and Trex Commercial Products, which designs and engineers custom railing solutions, which are used in collegiate sports facilities, standardized architectural and aluminum railing systems.

U.S. Lime & Minerals

United States Lime & Minerals through its Lime and Limestone Operations, is a manufacturer of lime and limestone products, supplying primarily the construction (highway, road and building contractors), industrial (paper and glass manufacturers), environmental (municipal sanitation and water treatment facilities and flue gas treatment processes), metals (steel producers), oil and gas services, roof shingle manufacturers and agriculture (poultry and cattle feed producers) industries. The company, through its wholly owned subsidiary has royalty interests and a non-operated working interest with respect to oil and gas rights on the company's land located in Johnson County, TX, in the Barnett Shale Formation.

Vericel

Vericel is a provider in cell therapies and specialty biologics for the sports medicine and severe burn care markets. The company markets two cell therapy products in the U.S: MACI, which is an autologous cellularized scaffold product indicated for the repair of symptomatic, single or multiple full-thickness cartilage defects of the knee with or without bone involvement in adults; and Epicel, which is a permanent skin replacement Humanitarian Use Device for the treatment of adult and pediatric patients with deep-dermal or full-thickness burns comprising greater than or equal to 30% of total body surface area. The company holds a license to commercialize NexoBrid for the debridement of severe thermal burns.

VIKING THERAPEUTICS

Viking Therapeutics is a biopharmaceutical company focused on the development of therapies for metabolic and endocrine disorders. The company's main clinical program's drug candidate, VK2809, is an orally available, tissue and receptor-subtype selective agonist of the thyroid hormone receptor beta in development for patients with non-alcoholic fatty liver disease and elevated low-density lipoprotein cholesterol. The company's second clinical program's primary drug candidate, VK5211, is an orally available, non-steroidal selective androgen receptor modulator in development for patients recovering from non-elective hip fracture surgery. The company is also developing VK0214 for X-linked adrenoleukodystrophy.

Vulcan Materials Company

Vulcan Materials is a supplier of construction aggregates and a producer of asphalt mix and ready-mixed concrete. The company has four segments: Aggregates, which produces and sells aggregates (crushed stone, sand and gravel, sand, and other aggregates) and related products and services; Asphalt, which produces and sells asphalt mix in Alabama, Arizona, California, New Mexico, Tennessee and Texas, and includes asphalt construction paving in Alabama, Tennessee and Texas; Concrete, which produces and sells ready-mixed concrete; and Calcium, which consists of a Florida facility that mines, produces and sells calcium products.

Watsco Inc.

Watsco is a distributor of air conditioning, heating and refrigeration equipment and related parts and supplies in North America. The products the company distributes consist of: equipment, including residential ducted and ductless air conditioners, gas, electric, and oil furnaces, commercial air conditioning and heating equipment systems, and other equipment; parts, including replacement compressors, evaporator coils, motors, and other component parts; supplies, including thermostats, insulation material, refrigerants, ductwork, grills, registers, sheet metal, tools, copper tubing, concrete pads, tape, adhesives, and other ancillary supplies; and plumbing and bathroom remodeling supplies.

Xenon Pharmaceuticals Inc

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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