Vermilion Compass: Weekly Equity Strategy
THEMES:• Bullish big picture. There's no reason to bury the lede here: the technical weight of the evidence favors a bullish outlook. This has been our stance all year (and preceding last year's Presidential election). Too many observations fall under the bullish column: (1) intact uptrends in the major indices; (2) global leadership in Tech; (3) attractive trends in Financials, despite their short-term consolidation; (4) slow improvements in Consumer Discretionary, especially overseas; and (5) widespread bullish patterns throughout international markets. Accordingly, while allowing for occasional backing and filling, we remain bullish.
• Review of recent recommendations. Below we revisit our latest Group-based recommendations (Insights reports). Fortunately, the market has “cooperated†with our recommendations so far, and they all remain intact as buys. Also worth noting, all four are cyclical in nature, reflecting our stance on the market:
1. Cyber Security (5/4): Intact -- Accumulate. Front and center in the headlines, cyber security stocks, a theme we reiterated two weeks ago, are breaking out. Examples include QLYS, SPLK, and FEYE. Though less so now, this remains one of the technically “unexploited†areas in Tech.
2. Rails (4/26): Intact -- Accumulate. Our Rail recommendation remains intact, as the Group still boasts great breadth. Every large-cap name has or is emerging from a cyclical base pattern. CP just joined their ranks; the stock is breaking out this week -- buy.
3. Global Airlines (4/26): Intact -- Accumulate. Led by foreign names, global airline stocks are inflecting towards 12-month highs. U.S. majors -- DAL, UAL, and AAL -- are trading at attractive entry points.
4. Restaurants (4/26): Intact -- Accumulate. Our Large-Cap Fast Food Group is leading this trend higher, with bullish inflections and breakouts visible in MCD, YUM, and CMG. Stick with this trend.
• Actionable Theme: Health Care. Health Care continues to recover. It's one of the few areas where the equal-weighted sector is outperforming the cap-weighted version -- a sign of leadership from the smaller, less-defensive names (based on S&P 500 sectors). In general, equipment-related Groups are leading this rally, and in today's report we highlight opportunities in related Groups including Health Care Equipment & Supplies (HC-10), Cardiovascular Products (HC-11), and Surgical Devices (HC-13).
• Highlighted charts: ABMD, ABT, ATRC, ATRI, BAX, BDX, BSX, CNMD, CMG, CP, CRY, CSII, EW, EXAC, GRFS, HACK, HRC, IART, ISRG, IVC, JNJ, LMAT, MDT, MMSI, QLYS, SNN, SYK, TLGT, UAL
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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.
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