Report
Dave Nicoski ...
  • Ross LaDuke
EUR 233.15 For Business Accounts Only

Vermilion Int'l Compass: Global Equity Strategy

Global Equities Beginning a New Leg Higher

Positive technical developments have continued and global equities are now breaking out to new highs -- something we noted was increasingly likely in last week's Int'l Compass. These breakouts and other technical developments highlighted below argue that this is the beginning of a new leg higher. Now is the time to be playing offense.

• MSCI ACWI, EAFE, and STOXX Europe 600 are Breaking Out. The ACWI, EAFE, and STOXX 600 are making bullish inflections, following in the footsteps of MSCI EM and Japan. The proliferation of breakouts is building a strong case that global equities are beginning a new leg higher... see charts below and page 2.

• Cyclical vs. Staple Ratios Sending Bullish Signals. The global (MSCI ACWI) and European/UK (MSCI Europe) Discretionary vs. Staples ratios are making long-term bullish inflections. This is a characteristic that is consistent with bull markets; last time we saw similar bullish reversals in these ratios was in mid-2016, and a massive 1.5+ year global rally ensued... see page 3.

• Actionable Theme: MSCI ACWI Industrials. The MSCI ACWI Industrials Sector exhibits bullish price and RS reversals -- add exposure. This type of action in price and RS for Industrials suggests the “global manufacturing recession/slowdown” is troughing. In today's report we highlight our favorite setups within Industrials, spanning the Vermilion international Manufacturing, Services, and Transportation Sectors... see pages 4-5.
Underlyings
ABB Ltd.

ABB specializes in power and automation technologies. Co. provides a broad range of products, systems, solutions and services that are designed to boost industrial productivity, increase power grid reliability, and enhance energy efficiency. Co.'s automation businesses serve a full range of industries with process optimization, control, measurement and protection applications. Co.'s power businesses focus on power transmission, distribution and power-plant automation, and support electric, gas and water utilities, as well as industrial and commercial customers.

Airports of Thailand Public Co. Ltd.

Airports of Thailand Public Co. is engaged in airport and hotel business in Thailand. Co. is the operator of the airport business in Thailand, which includes airport management and development of Thailand's international airports. As of Sept 30 2015, Co. operated six international airports which include the Suvarnabhumi airport, Don Mueang airport, Chiang Mai airport, Hat Yai airport, Phuket airport and Mae Fah Luang-Chiang Rai airport. The airports provide both domestic and international flights.

Azbil Corporation

Azbil is mainly engaged in building automation business. Co. offers building automation systems, wide area management systems, air conditioning management systems, actuators, control valves for air conditioning, various wireless sensors, building and energy management, maintenance and consultation services; distributed control systems, solution packages, equipment diagnosis equipment, converters, sensors and switches, maintenance and consultation services; gas and water work meters, healthy and medical emergency notification services, caring services, residential whole building air-conditioning systems; precise machine tools, special assembly machines, processing machines and others.

Compagnie d'Entreprises CFE SA

CFE is engaged in civil engineering, buildings and industrial construction, dredging works and electrical installations. Co. is also engaged in property development, environmental protection and building management. Co.'s works carried on by Co.'s civil engineering group includes the following: hydraulic engineering, harbor works, bridges, and other engineering works, tunnels, road construction, dams, storage tanks, piping and drainage and caissons sunken soft soil. Co.'s buildings and industrial construction sector is active in the following fields: administrative buildings, industrial construction, public utility buildings, redevelopment, and residential buildings.

Daetwyler Holding AG

Daetwyler Holding is a holding company. Through its subsidiaries, Co. is an international multi-niche player dedicated to industrial component supply and distribution of engineering and electronic components. Co. focuses on the manufacturing, pharmaceutical and datacom industries through its four divisions: Technical Components, Pharma Packaging, Cabling Solutions and Sealing Technologies.

Daihen Corporation

DAIHEN is mainly engaged in the manufacture, sale and repair of transformers, welding machines, industrial robots, high frequency power and clean transport robots. The Electrical Equipment segment is involved in the manufacture, sale and repair of various transformers, power receiving and distribution facilities, switches, as well as controlled monitoring systems. The Welding and Mechatronics segment provides electrical welding machines, plasma cutting machines, industrial air cleaners, industrial robots and others. The Semiconductor segment offers high frequency power and clean transport robots. The Others segment is involved in the real estate leasing business.

DCC Plc

DCC is a procurement, sales, marketing, distribution and business support services company. Co. operates across four separate divisions: DCC Energy, which is involved in the sales, marketing and distribution of oil and liquefied petroleum gas; DCC Healthcare, which provides products and services to healthcare providers and health & beauty brand owners; DCC Technology, which is involved in the sales, marketing and distribution of technology products; and DCC Environmental, which provides a range of waste management and recycling services.

Ebara Corporation

Ebara and its subsidiaries are engaged in the manufacture and sale of wind and hydraulic power devices, precision equipment and environmental devices, as well as the support, engineering, construction, and operation of related facilities. Co.'s principal business segments are fluid machinery and systems, environmental engineering, precision machinery, and other. Co. is engaged in the manufacture, sale, and maintenance of pumps, blowers, compressors, turbines, and refrigeration and heating equipment; the engineering, construction, operation, and maintenance of environmental improvement equipment, and waterworks and sewage system; and the manufacturing, sale, and maintenance of vacuum pumps.

Edenred SA

Edenred designs and delivers services to clients, companies or public sectors, enabling them to offer beneficiaries additional purpose-directed purchasing power, such as the Ticket Restaurant® meal voucher, and provides prepaid corporate services. Co.'s product offering ensures that allocated funds are used as intended, allowing its clients to manage: Employee benefits (Ticket Restaurant®, Ticket Alimentacion®, Ticket CESU, Childcare Vouchers®, etc.); Expense management process (Ticket Car®, Ticket Clean way®, Repom®, etc.); and Incentive and rewards programs (Ticket Compliments®, Ticket Kadeos®, etc.). Co. also supports public institutions in managing their social benefits programs.

Furukawa Co. Ltd.

Furukawa and its affiliates are mainly engaged in the manufacture and sale of industrial machineries. Co.'s principal business segments are industrial machinery, rock drills, UNIC, metals, electronic metals, chemicals, real estate and other. Co. offers environmental machinery, pumps, plants, crushers, steel bridges and foundry pieces; rock drills, including hydraulic breakers and crushers, various drills and air tools; in-car cranes and carriers for automobile transportation; copper, gold, silver, sulfuric acid and other metals; and high-purity metallic arsenic, crystals, optical parts, gallium nitride boards and others. Co. is also engaged in the real estate and transportation businesses.

GEA Group AG

GEA Group focuses on the development and production of process technology and components for production methods. Co. segments include: GEA Food Solutions, which manufactures machinery for preparing, marinating, processing, cutting, and packaging meat, poultry, and other foods; GEA Farm Technologies, which manufacturers product solutions for milk production and livestock farming; GEA Mechanical Equipment, which concentrates in separators, decanters, valves, pumps, and homogenizers; GEA Process Engineering, which designs and develops of process solutions for the pharmaceutical, and chemical industries; and GEA Refrigeration Technologies, which concentrates in refrigeration technology.

Harmonic Drive Systems Inc.

Harmonic Drive Systems is mainly engaged in the manufacture and sale of precision actuators and controllers of precision speed reducer equipment that combine motors and sensors, precision positioning devices and systems, as well as precision speed reducer equipment, and the sale of precision planet speed reducer equipment. Through its affiliates, Co. is also engaged in the development, manufacture and sale of harmonic drive products, mechatronics products, cast iron products, electronic devices for marine, industry, as well as information system equipment and hydraulic equipment. Co. provides products under the brand names "HarmonicDrive®," "AccuDrive®" and "Harmonicsyn®."

Hindustan Aeronautics

Hindustan Aeronautics Limited is an India-based aerospace and defense company. The Company designs and develops a range of aircrafts that include fighter aircrafts, trainer aircrafts, transport aircrafts, military helicopters, and civil helicopters. It also develops aircraft engines, avionics and accessories, such as special test equipment, ground handling equipment, and ground support equipment. The Company manufactures its aircraft using both indigenous and licensed Russian and Western origin technologies. Its range of aircrafts includes Su-30 MKI, HTT-40, MiG, Hawk Mk 132, Dornier 228, Light Combat Aicraft, Lakshya, Jaguar DARIN-III, and Mirage 2000. The Company's helicopter range includes ALH Dhruv, ALH Mk IV Rudra, Light Combat Helicopter, Cheetal, Cheetak, and Lancer. Its avionics products include ACS-235, VOR/ILS, TACAN, IFF, RAM, PAR, INGPS, and other radar and display processing systems. It also manufactures power control, fuel control, and landing gear systems.

Hitachi Ltd.

Hitachi and its subsidiaries are engaged in the development, manufacture and sale of diversified product mix ranging from electricity generation systems to consumer products and electronic devices. Co.'s businesses are diverse, and include information and telecommunication systems, social infrastructure and industrial systems, electronic systems and equipment, construction machinery, high functional materials and components, automotive systems, life & eco systems, financial services, and others including logistics services, optical disk drive, as well as real estate business.

IDEC Corporation

IDEC and its subsidiaries are mainly engaged in the manufacture and sale of control equipment. Co. provides control instruments, such as switches, indicators, relays and circuit protectors; control devices and factory automation ("FA") systems, such as programmable controllers, programmable indicators, FA computer systems and bar code systems; control peripheral devices, such as switching power supplies, terminal blocks, and multi-purpose control boxes; explosion and disaster prevention equipment, such as explosion-proof apparatus, disaster prevention equipment, security devices and related systems. In addition, Co., through its associated company, is engaged in the solar power business.

Kawasaki Heavy Industries Ltd.

Kawasaki Heavy Industries is a manufacturer of transport equipment and industrial equipment. Co. is engaged in the manufacture and sale of ships, jet engines, turbines, generating machinery, hydraulic machinery, and industrial robots. Co. also offers railway vehicles, snow removing equipment, aircrafts, industrial machinery, boilers, environmental equipment, steel structures, crushing machines, motorcycles, all-terrain vehicles (ATV), utility vehicles, personal watercrafts, and general-purpose gasoline engines, as well as precision machinery such as hydraulic equipment and industrial robots. In addition, Co. is also involved in the agency business of sale and order of its products.

KEI Industries

Kei Industries is a cable and stainless steel wire manufacturing company based in India. Co.'s operations are organized along two business lines: the Cables business line, which is engaged in the manufacturing of cables for diverse applications such as power, control, instrumentation, Thermocouple, winding cables, etc.; and the Stainless Steel Wires business line which is engaged in the production of stainless steel wire in various gages for use in industries such as Engineering, Chemical, and Construction with applications such as Weaving & Braiding, Knitting Wire, Cold Heading, Scrubber Wire, Spring Wire and others.

Kurita Water Industries Ltd.

Kurita Water Industries and its subsidiaries are engaged in the manufacture and sale of water treatment chemicals and systems. Water Treatment Chemicals segment provides boiler water treatment chemicals, cooling water treatment chemicals, wastewater treatment chemicals and process treatment chemicals. Water Treatment Facilities segment provides ultra pure water production systems, water treatment systems for general industrial use, wastewater treatment systems, wastewater reclamation systems, and condensate demineralizers. Co. also provides operation and maintenance of water treatment facilities, chemical cleaning, tool cleaning, and soil and groundwater remediation services.

Legrand SA

Legrand is a global specialist in electrical and digital building infrastructure based in France. Co. offers a full range of control-and-command, cable management, energy distribution and "Voice-Data-Image" products and systems which are suitable for the international commercial, industrial, and residential segments of the low voltage market. Co. markets its products under internationally recognized general brand names, including Legrand and Bticino. Each product group is marketed in all of Co.'s major geographic markets (France, Italy, Rest of Europe, USA/Canada and Rest of the World).

LISI SA

LISI manufactures multifunctional fasteners and assembly and structural components for three business sectors: aerospace, automotive, and perfurmery. Co.'s activities are also split into three divisions: LISI Aerospace division, LISI Medical division and LISI Automotive division. LISI Aerospace division produces fasteners and assembly components for the aerospace and motor racing markets. LISI Medical division produces medical implants and is a sub-contractor of auxiliary parts. LISI Automotive division produces automotive fasteners and assembly components.

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.

Nippon Steel Trading

Nippon Steel & Sumikin Bussan is mainly engaged in the wholesale and import/export of steel products, raw materials, machinery, textiles and foodstuffs. Co. principal products include steel sheets, steel pipes and tubes, rods and bars and construction materials; machinery and facilities for steel production, general industrial machinery, cast and forged steel products, railroad car components, automotive parts, nonferrous raw materials, nonferrous rolled ed products and carbon fibers; raw cotton, yarn, woven and knitted textiles, outerwear and inner wear for men, women and children, and infant's wear; and fresh and processed meat products, seafood products and agricultural products.

Nippon Yusen Kabushiki Kaisha

Nippon Yusen Kabushiki Kaisha is a shipping and transportation company. Through its affiliates, Co. provides global logistics based on international marine transportation business, cruises, terminal and harbor transport, shipping-related services, real estate, and other business. Co. operates various types of carriers including container ships, bulker and specialized carriers, tankers and gas carriers to carry iron ore, coal, cement, crude oil, gas, wood chips, grain, fertilizer, dry bulk and reefer cargoes, chemical products and other products.

Obara Group

Obara Group is a holding company engaged in the manufacture and sale of welding equipment and flat surface polishing equipment. Co. is a supplier of total welding solutions introducing resistance welding systems for automotive industry, arc welding tools for shipbuilding and construction industries, and laser equipment for electric industries. SpeedFam polishers are for material substrates used for electronic components on PC, mobile phones. Cleaner cleans most minute particles off from parts, such as memory disks, flat panel display and other opto-electronic parts. Co. also provides consumable sets including slurries, abrasives, carriers, and plates for a wide range of applications.

Qube Holdings Ltd.

Qube Holdings is engaged in providing logistics solutions across multiple aspects of the import-export supply chain. Co. is also involved in the management and development of properties. Co.'s segments include: logistics, which provides a range of services relating to the import and export of containerized cargo; ports & bulk division, which provides a range of logistics services relating to the import and export of mainly non-containerized freight, with focus on automotive, bulk and break bulk products; and strategic assets which include, among others, its 66.7% interest in the Moorebank Industrial Property Trust; a 37.5% interest in the Quattro Grain joint venture.

Safran S.A.

Safran designs, develops and manufactures high technology electronics through three businesses: Aerospace, Defense and Security. Aerospace includes Aerospace Propulsion (propulsion systems for commercial aircraft, military transport, training and combat aircraft, rocket engines, civil and military helicopters) and Aircraft Equipment (mechanical, hydromechanical and electromechanical equipment); Defense (optronic, avionic and electronic systems); and Security (biometric technologies for fingerprint, iris and face recognition, identity management products, access management and transaction security, including tomographic systems for detection of dangerous or illicit substances in baggage).

Shimizu Corporation

Shimizu is a general contractor engaged in the provision of construction and engineering works at domestic and overseas. Construction segment is engaged in the construction and civil engineering works of office buildings, educational facilities, medical and welfare facilities, production and logistics facilities, residential buildings, commercial facilities, recreational facilities, as well as roads, tunnels and other transportation facilities, energy-related facilities, waste disposal sites, urban development projects, and disaster-prevention and conservation projects. Real Estate segment is engaged in the real estate development, leasing and sales.

SPIE SA

Spie is a provider of electrical engineering and IT services and an infrastructure and building contractor. Co. helps to design, finance, manage and implement an array of projects ranging from high-speed TGV and conventional rail lines to metros and light rail systems. In addition, Co. offers telecom and information network services. Through the Commercial Segment, Co. is engaged in construction and renovation projects. Co. also offers wired building services as well as multi-disciplinary industrial maintenance and facilities management solutions.

Sumitomo Corporation

Sumitomo is a trading company conducting commodity transactions in all industries utilizing worldwide networks. Co. is engaged in the trading of range of goods and commodities; the planning, coordination and operation of urban and industrial infrastructure projects; consulting in areas such as system integration and technology development; transportation and logistics; investing in a variety of industries ranging from biotechnology to communications; developing natural resources; manufacturing and processing products such as steel products and textiles; developing and managing real estate; and operating retail stores.

TADANO Ltd.

Tadano is mainly engaged in the manufacture and sale of construction machinery. Co.'s principal products include construction cranes, such as all-terrain cranes, rough terrain cranes, truck cranes, truck loader cranes and telescopic crawler cranes; vehicle-based cranes, such as cargo cranes, vehicle-hauling cranes and others; as well as aerial platform work vehicles, such as aerial platform work vehicles, hole-digging construction vehicles, elevated highway and bridge checking vehicles, illuminating vehicles and others. Co. also provides machinery parts, secondhand cars and lifters, as well as repairing services.

Toda Corporation

Toda is a general contractor mainly engaged in the construction and engineering work in Japan and overseas. Architectural Construction segment is engaged in the research, planning, design, management and execution of building construction and civil engineering work, the provision of architectural and comprehensive engineering and the provision of consulting related to construction projects in Japan and overseas. Civil Engineering segment is engaged in the provision of civil engineering work including highway, bridge and tunnel construction in Japan. Real Estate segment is engaged in the sale, leasing and brokerage of real estate, as well as the management of buildings.

Valqua

Nippon Valqua Industries is mainly engaged in the manufacture and sale of sealing products and functional resins for semiconductor, electric/electronic, automotive, vacuum, food, power generation and aircraft industries. Seal Product segment is engaged in the manufacture and sale of sealing products including rubber gaskets, fluorocarbon resin gaskets, metallic/semi-metallic gaskets, molded packings, gland packings, expansion joints and other sealing products. Functional Resin Product segment is engaged in the manufacture and sale of PTFE materials, films, tubes, sealing materials, bellows and other molded products, lining pipes, PTFE substrates and other special products.

VINCI SA

Vinci is engaged in building, civil engineering and facilities management. Through its subsidiaries, Co. is engaged in five divisions comprising of: the Building division which provides retail solutions including construction and fit-out in both the retail and commercial sectors; the Civil Engineering division; the Air division which provides program management, engineering and construction services to customers with airport infrastructure requirements; the Technology division; and the VINCI Facilities division which provides facilities management, repair and maintenance and small works in both the private and public sectors.

Voltas Ltd.

Voltas is an air conditioning company based in India. Co. offers engineering solutions for industries in areas such as heating, ventilation and air conditioning, refrigeration, electro-mechanical projects, textile machinery, mining and construction equipment, water management & treatment, cold chain solutions, building management systems, and indoor air quality. Co. is principally active in the management and execution of electro-mechanical projects and the installation and servicing of diverse technology-based systems. Co.'s operations are organized along three business segments: Electro-Mechanical Projects & Services; Engineering Products & Services; and Unitary Cooling Products.

West Japan Railway Company

West Japan Railway is one of the companies that was formed upon the privatization and separation of Japanese National Railways ("JNR") in 1987. Co. operates a railway network covering 18 prefectures in western Honshu and the northern tip of Kyushu, with a total of 5,036.7 km of railway with 1,186 stations and 6,562 rolling stocks as of Mar 31 2017. Co. is engaged in the provision of "Sanyo Shinkansen" and urban network passenger transport service; the operation of convenience stores, department stores and hotels; the operation and management of shopping centers; and the provision of travel agency, advertising agency, as well as maintenance and engineering services.

WSP Global Inc.

WSP Global is engaged in offering consulting services ranging from planning to execution, including conceptual and development studies, feasibility and economic studies, preliminary engineering and detailed design, plans and specifications, work supervision, environmental planning and projects and construction management. Co. operates in two geographic segment, Canada and International (Trinidad and Tobago and other countries). Through its subsidiaries, Co. operates in five industries: building, municipal infrastructure, industrial and energy, transportation and environment.

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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