Report
Dave Nicoski ...
  • Ross LaDuke
EUR 46.71 For Business Accounts Only

Vermilion Int'l Compass: Global Equity Strategy

Mixed Market Environment Continues

The Hang Seng, EURO STOXX 50, MSCI ACWI ex-US, and MSCI EAFE display bearish short-term inflections. Additionally, 10-year yields in the US and Germany are breaking down below key support. These deteriorating market dynamics raise concerns of a deeper pullback, however other indicators remain largely positive. As a result, we continue to see a mixed, but overall constructive market.

Index Overviews. Some indexes are beginning to deteriorate while others remain constructive. Those deteriorating include (1) the Hang Seng which broke below our 27,400 support level, though is still testing support at 27,000. (2) The EURO STOXX 50 broke below 4040 short-term support, but still remains above key support at ~3875. (3) MSCI ACWI ex-US (ACWX-US) and MSCI EAFE (EFA-US) display uptrend violations, but are still above key longer-term support at $54 and $77, respectively. At the same time, the S&P 500 and MSCI ACWI (ACWI-US) remain in uptrends, MSCI EM (EEM-US) remains above major support at $52, China's Shanghai Composite is holding above 3500 base support, and Japan (TOPIX, TOPIX Small) is still consolidating. This is exactly what we would expect to see in a mixed market environment that we have referenced since late March... see page 2.
Yields in the US and Germany Breaking Down. The 10-Year Treasury yield is breaking below our critical 1.45% support level, the German 10-year yield is breaking below -0.29%, and yields in other countries are having similar downward moves. We view this as a risk-off signal that hurts value Sectors such as Financials, Materials, Manufacturing, and Transportation -- market weight/be very selective.
US Dollar. US dollar (DXY) strength continues to result in underperformance from non-US equities. Still, the DXY is approaching logical resistance at the downtrend (92.80), and as long as it remains below 93.50 we view it as a constructive sign for global equities.
Actionable Themes: Health Care & Real Estate. Recent deterioration in market dynamics lends to something we have said for months, which is defensive areas of the market are worth a look. Specifically, Real Estate and Health Care are attractive globally, while Consumer Staples remain bullish in Europe. Today we focus on Health Care and Real Estate Sectors -- add exposure... see pages 3-15.
Underlyings
Abbott India

Abbott India Limited is a healthcare company engaged in pharmaceuticals business. The Company has a portfolio of science-based offerings in diagnostics, medical devices, nutritionals and branded generic pharmaceuticals. Its business operations are divided into four business divisions: Women's Health & Gastrointestine, Gastroenterology and Hepatic Care; Specialty Care; GenNext & Vaccines, and Consumer Care. Women's Health & Gastrointestine, Gastroenterology and Hepatic Care division has a mix of global and local brands present in the pregnancy, constipation and liver diseases segments. The Specialty Care division consists of a range of products in the treatment of central nervous system and metabolic disorders. The GenNext division focuses on several therapy areas, including pain management, vitamins and pregnancy. Its vaccines include Enteroshield (typhoid vaccine) and Rotasure (rotavirus diarrhea vaccine). The Consumer Care division is present in the over the counter antacid segment.

Alpha FX Group

Co.'s principal activity is the provision of foreign exchange services for corporates exposed to currency market volatility through its 100%. owned subsidiary, Alpha FX Limited. Activities range from initial design and implementation of hedging strategies, to ongoing management and monitoring of currency risks.

AstraZeneca PLC ADS

Global X CleanTech ETF

Hunan Jiudian Pharmaceutical (A)

Lonza Group AG

Lonza supplies services and products that range from active pharmaceutical ingredients and stem-cell therapies to drinking water sanitizers, from vitamin B compounds and organic personal care ingredients to agricultural products, and from industrial preservatives to microbial control solutions. Co. operates in two segments: Lonza Pharma & Biotech, which clusters all of Co.'s offerings for pharmaceutical markets, focuses on providing custom development, custom manufacturing, cell therapy, viral therapeutics and bioscience solutions; and Lonza Specialty Ingredients, which includes offerings in its consumer care, agro ingredients, industrial solutions, wood protection and water treatment.

Menicon

Menicon is a contact lens manufacturer which engaged in the manufacture and sale of contact lenses and related products. Co. manufactures and sells rigid gas permeable contact lenses, soft contact lenses, and disposal contact lenses of 1 day disposal type, 2 weeks exchange type, and 1 month exchange type, as well as contact lens care products such as contact lens cleaner, disinfectant solution and preservation solution. Co. offers a fixed-rate membership system "MELS Plan" to provide guarantee services for loss, damage, and lens power change. In addition, Co. is also engaged in the veterinary business, environmental biotechnology business, and life science business.

Novo Nordisk A/S Class B

Novo-Nordisk is a global healthcare company engaged in the innovation of diabetes care. Co. also provides haemophilia care, growth hormone therapy and hormone replacement therapy. The Diabetes care business segment includes research, development, manufacturing and marketing of products within the areas of insulin, GLP-1 and related delivery systems, oral antidiabetic products (OAD) and obesity. The Biopharmaceuticals business segment includes research, development, manufacturing and marketing of products within the areas of haemophilia, growth hormone therapy, hormone replacement therapy, inflammation therapy and other therapy areas.

Recticel SA

Recticel is engaged in the production of a variety of polyurethane foams that are used in the furniture, technical, automotive, bedding and insulation industries. The Flexible Foam Business Line covers the manufacture, conversion and marketing of flexible polyurethane foam. The types of flexible foams are classified as Comfort, Technical Foams and Composite Foams. Co. is also engaged in the manufacture of foams used in mattresses and slat bases. In addition, Co. manufactures rigid polyurethane and phenolic foams for thermal insulation. Co.'s automotive activities include: manufacturing moulded seat cushions, window encapsulation and manufacturing interior trim components.

Rogers Corporation

Rogers designs, develops, manufactures and sells engineered materials and components. The company's segments are: Advanced Connectivity Solutions, which designs, develops, manufactures and sells circuit materials and solutions enabling connectivity for applications in wireless infrastructure, automotive, aerospace and defense, connected devices, and wired infrastructure; Elastomeric Material Solutions, which designs, develops, manufactures and sells engineered material solutions such as polyurethane and silicone materials used in cushioning; and Power Electronics Solutions, which designs, develops, manufactures and sells ceramic substrate materials, busbars and cooling solutions.

Shokubun Co. Ltd.

Shokubun is engaged in the food business. Co. and its subsidiaries operate in three business segments. Food Retailing segment is engaged in the sale of commercial foods, delivery of food materials, as well as the provision of plannings and management to franchised members. Co. covers delivery services in the Tokyo metropolitan area, Aichi, Gifu, Mie, Shiga, Kyoto and Osaka, Japan. Food Research Study and Wholesaling segment is involved in the research and study of food and food-related issues, as well as the wholesaling of food products, household products, gifts and novelty products. Nursing Food Business segment is engaged in the sale and advice of nursing food in the nursing facilities.

Tecan Group AG

Tecan provides laboratory instruments and automation solutions. Co. also provides solutions for various applied markets such as forensics, the food industry, crop research, the cosmetic industry and veterinary applications. Co.'s automation solutions include instruments, software packages, and configurable modules as well as regulatory and quality consulting, service and consumables. Co.'s segments include life sciences business, which supplies end users with automated workflow solutions directly; and partnering, which develops and manufactures OEM instruments and components that are distributed by partner companies under their own names.

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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