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

Vermilion Compass: Weekly Equity Strategy

USD breakout; Foreign markets reeling

Turmoil in Turkey and a collapsing lira has led to a breakout in the USD and global equity market weakness. Foreign emerging and developed markets are getting hit considerably harder than the US given concerns over European bank exposure and EM contagion. We have highlighted in recent months our belief that strong foreign markets are likely to aid in our advance to new highs. Given the absence of strength overseas, this remains a top concern for our markets... see below.

• Outlook unchanged: mixed picture but constructive overall. The primary development over the last week is the breakout in the USD and outsized weakness for global ex-US markets. We believe a breakdown to new 52-week lows for broad emerging and developed int'l indexes could spell further weakness and consolidation for US markets.

• Sector Relative Strength Rankings (RSRs). Equal-weighted Technology, Consumer Discretionary, and Health Care - three of our overweight recommendations - were the top three Sector performers last week as small-caps outperformed... see page 2.

• Big picture trends. Growth continues to outperform value and the Russell 1000 Growth index remains attractive on an absolute basis. Similarly, price and RS uptrends remain intact for the Tech-heavy Nasdaq. Remain overweight these markets. We also take a look at the Discretionary vs. Staples and large-cap vs. small-cap ratios... see pages 3-4.

• In today's report we highlight attractive Groups within Consumer Discretionary and Services: CD-38 Retailers, Teenagers, SV-01 Data Processing & Outsourcing Svcs, Large-Cap, and SV-02 Data Processing & Outsourcing Svcs, Mid-Cap... see pages 8-21.
Underlyings
Abercrombie & Fitch Co. Class A

Abercrombie & Fitch, through its subsidiaries, is a retailer which primarily sells its products through its wholly-owned store and direct-to-consumer channels, as well as through various third-party wholesale, franchise and licensing arrangements. The company provides an assortment of apparel, personal care products and accessories for men, women and children under the Hollister, Abercrombie & Fitch and abercrombie kids brands. The company has operations in North America, Europe, Asia and the Middle East. The company's operating segments are brand-based: Hollister and Abercrombie, the latter of which includes the company's Abercrombie & Fitch and abercrombie kids brands.

American Eagle Outfitters Inc.

American Eagle Outfitters is a multi-brand retailer. The company operates retail stores and online at www.ae.com and www.aerie.com. The company provides a range of apparel and accessories for men and women under the American Eagle Outfitters brand, and intimates, apparel and personal care products for women under the Aerie brand. The company operates stores in the U.S., Canada, Mexico, Hong Kong, and China. The company also has license agreements with third-parties to operate American Eagle Outfitters and Aerie stores throughout Asia, Europe, India, Latin America and the Middle East. The company also operates two other brands, Tailgate, a vintage, sports-inspired apparel brand, and Todd Snyder New York, a menswear brand.

Automatic Data Processing Inc.

Automatic Data Processing is a provider of cloud-based human capital management (HCM) solutions to employers, providing solutions to businesses of various sizes. The company's two reportable business segments are Employer Services, which provides a range of technology-based HCM solutions, including payroll services, benefits administration, talent management, HR management, workforce management, compliance services, insurance services and retirement services; and Professional Employer Organization, which provides clients with employment administration outsourcing solutions through a relationship in which employees who work for a client are co-employed by the company and the client.

Black Knight Inc.

Black Knight is a provider of software, data and analytics solutions to the mortgage and consumer loan, real estate and capital market verticals. The company's solutions facilitate and automate business processes across the homeownership lifecycle. The company's business is organized into two segments: Software Solutions, which provides software and hosting solutions that facilitate and automate business processes across the homeownership lifecycle; and Data and Analytics, which supports the company's software solutions and is designed to help lenders and servicers make informed decisions, improve performance, identify and predict risk and generate qualified leads.

Broadridge Financial Solutions Inc.

Broadridge Financial Solutions is a holding company. Through its subsidiaries, the company provides investor communications and technology-driven solutions to financial services clients. The company's services include investor communications, securities processing, data and analytics, and customer communications solutions. The company has two segments: Investor Communication Solutions, which involves the processing and distribution of proxy materials to investors in equity securities and mutual funds, as well as the facilitation of related vote processing; and Global Technology and Operations, which provides securities processing solutions for capital markets, wealth management, and asset management firms.

Buckle Inc.

The Buckle is a retailer of casual apparel, footwear, and accessories for young men and women. The company markets a selection of mainly brand name casual apparel including denims, other casual bottoms, tops, sportswear, outerwear, accessories, and footwear. The company provides denims from brands such as Miss Me, Rock Revival, KanCan, Flying Monkey, and Levi's. The company also incorporates services such as hemming, gift wrapping, layaways, a guest loyalty program, the Buckle private label credit card, personalized stylist services, and an order system that allows stores to obtain specifically requested merchandise from other the company stores or from the company's online order fulfillment center.

Euronet Worldwide Inc.

Euronet Worldwide is an electronic payments provider. The company provides payment and transaction processing and distribution solutions to financial institutions, retailers, service providers and individual consumers. The company operates three segments: Electronic Financial Transaction Processing, which processes transactions for a network of automated teller machines and point-of-sale terminals; epay, which provides distribution and processing of prepaid mobile airtime and other electronic content and payment processing services for various prepaid products, cards and services; and Money Transfer, which provides consumer-to-consumer and global account-to-account money transfer services.

Fidelity National Information Services Inc.

Fidelity National Information Services is a provider of technology solutions for merchants, banks, and capital markets firms globally. The company's solutions include merchant acquiring solutions; payment solutions; global eCommerce solutions; processing and ancillary applications solutions; digital solutions; fraud, risk management and compliance solutions; electronic funds transfer and network services solutions; card and retail payment solutions; wealth and retirement solutions; item processing and output services solutions; securities processing and finance solutions; global trading solutions; asset management and insurance solutions; and corporate liquidity solutions.

First Data Corporation Class A

First Data engages in commerce-enabling technology and solutions for merchants, financial institutions, and card issuers. The company's segments are: Global Business Solutions, which provides retail point-of-sale (POS) merchant acquiring and eCommerce services as well as offerings such as mobile payment services and cloud-based Clover POS operating system; Global Financial Solutions, which provides credit, retail private-label, commercial card as well as licensed financial software systems; and Network & Security Solutions, which provides electronic funds transfer network solutions, debit card processing solutions, stored value network solutions, and security and fraud solutions.

Fiserv Inc.

Fiserv is a provider of financial services technology. The company provides account processing systems, electronic payments processing products and services, internet and mobile banking systems, and related services. The company's segments are: First Data, which provides merchant acquiring, e-commerce, mobile commerce, and other business solutions; Payments and Industry Products, which provides electronic bill payment and presentment services, internet and mobile banking software; and Financial Institution Services, which provides financial institutions with account processing services, item processing and source capture services, loan origination and servicing products, and cash management, among others.

FLEETCOR Technologies Inc.

FleetCor Technologies is provider of commercial payment solutions. The company's five primary product lines are Fuel, which provides fuel payment solutions to businesses and government entities who operate vehicle fleets, as well as to main oil companies;Lodging, which provides lodging payment solutions to employees who travel overnight for work purposes; Tolls, which provides an electronic toll and parking payments product; Corporate Payments, which include virtual cards, purchasing cards, travel and entertainment cards; and Gift, which provides gift card product management and processing services. Additionally, the company provides other payment products including fleet maintenance and employee benefits.

Global Payments Inc.

Global Payments is a pure play payment technology company providing payments and software solutions to merchants and financial institutions. The company has three segments: Merchant Solutions, which includes authorization services, chargeback resolution, and payment security services; Issuer Solutions, which provides solutions that enable financial institutions and other financial service providers to manage their card portfolios and reduces technical difficulty and overhead on a single platform; and Business and Consumer Solutions, which provides general purpose reloadable prepaid debit and payroll cards, demand deposit accounts and other financial service solutions through its Netspend? brand.

HealthEquity Inc

HealthEquity provides technology-enabled services platforms that enable consumers to make healthcare saving and spending decisions. The company's platform provides an ecosystem where consumers can access their tax-advantaged healthcare savings, compare treatment options and pricing, evaluate and pay healthcare bills, receive personalized benefit and clinical information, earn wellness incentives, and make educated investment choices to grow their tax-advantaged healthcare savings. The company's products and services include healthcare saving and spending platform; health savings accounts; investment platform and advisory services, reimbursement arrangements; and HealthEquity retirement.

Jack Henry & Associates Inc.

Jack Henry & Associates is a provider of information processing solutions for community banks. The company's range of products and services includes processing transactions, automating business processes, and managing information for financial institutions and corporate entities. The company's proprietary solutions are marketed through three primary business brands: Jack Henry Banking, which is a provider of integrated data processing systems; Symitar, which is a provider of data processing solutions for credit unions of various sizes; and ProfitStars, which is a provider of agnostic products and services to financial institutions that are primarily not main customers of the company

MASTERCARD INCORPORATED

Mastercard is a technology company in the global payments industry. The company's solutions enabling consumers to use electronic forms of payment instead of cash and checks. The company provides a range of payment solutions and services using its brands, including Mastercard?, Maestro? and Cirrus?. The company is a multi-rail network that provides customers one partner to turn to for their domestic and cross-border payment needs. The company has additional payment capabilities that include automated clearing house transactions. The company also provides offerings such as cyber and intelligence products, information and analytics services, consulting, loyalty and reward programs and processing.

Paychex Inc.

Paychex is a provider of integrated human capital management (HCM) solutions for payroll, benefits, human resource (HR), and insurance services for small- to medium-sized businesses. The company's portfolio of HCM and employee benefit-related services include: payroll processing services; payroll tax administration services; employee payment services; regulatory compliance services (new-hire reporting and garnishment processing); HR Solutions Administrative Services Organization; retirement services administration; HR administration services, including time and attendance; other HR services and products; business services; Professional Employer Organization services; and insurance services.

PayPal Holdings Inc

PayPal Holdings is a technology platform and digital payments company that enables digital and mobile payments on behalf of consumers and merchants worldwide. The company's combined payment solutions include its PayPal, PayPal Credit, Braintree, Venmo, Xoom and iZettle products and services. PayPal's payment solutions enable the company's customers to send and receive payments. PayPal helps merchants and consumers connect, transact, and complete payments, whether they are online, on a mobile device, in an app, or in person. The company provides proprietary payment solutions accepted by merchants that enable the completion of payments on the company's Payments Platform on behalf of its customers.

RealPage Inc.

RealPage is a provider of software and data analytics to the real estate industry. The company's platform consists of four categories of solutions: Property Management, which manages primary property management business processes, including leasing, accounting, budgeting, purchasing, facilities management, and support and advisory services; Leasing and Marketing, which manages primary leasing and marketing processes; Resident Services, which provides a platform to improve the transactional of prospects and renters and improve a property's reputation; and Asset Optimization, which provides analytics-based decision support for investment performance throughout the phases of real estate investment.

Square Inc. Class A

Square is a commerce ecosystem that combines software with hardware to enable sellers to turn mobile devices and computing devices into payment and point-of-sale solutions. With the company's offering, a seller can accept payments via magnetic stripe, Europay, MasterCard, and Visa, or Near Field Communication; or online via Square Invoices, Square Virtual Terminal, or the seller's website or app. Also, sellers can gain access to reporting and analytics, next-day settlements, digital receipts, payment dispute and chargeback management, security, and Payment Card Industry compliance. The company's Cash App enable individuals to send and receive money electronically to and from individuals and businesses.

Tillys

Tilly's is a retailer of casual apparel, footwear and accessories for young men, young women, boys and girls. The company's stores are located in malls, lifestyle centers, power centers, community centers, outlet centers and street-front locations. Customers may also shop online, where the company features the same assortment of product as is carried in its stores, supplemented by additional online-only styles. The company provides a mix of merchandise for young men, young women, boys and girls across the apparel, footwear and accessories categories. The company's apparel merchandise includes branded, fashion, and core styles for tops, outerwear, bottoms, and dresses.

Total System Services Inc.

Total System Services is a payment solutions provider that provides payment processing services, merchant services and related payment services to financial and nonfinancial institutions. In addition, the company provides general purpose reloadable prepaid and payroll cards, demand deposit accounts and other financial service solutions to the underbanked and other consumers and businesses. The services the company provides are divided into three operating segments: Issuer Solutions, whereby the company is a third party processor for credit card issuers in North America and Europe; Merchant Solutions, whereby the company operates as a merchant acquirer; and Consumer Solutions, whereby the company is a prepaid program manager.

Visa Inc. Class A

Visa is engaged in digital payments. The company facilitates payments between consumers and businesses. The company is focused on its proprietary network, VisaNet, to provide products and services. The company provides a portfolio of business payment solutions, including small business, corporate (travel) cards, purchasing cards, virtual cards/digital credentials, non-card cross-border business-to-business payment options and disbursement accounts, covering various main industry segments around the world. The company also provides several capabilities and services, including fraud prevention and security, processing, loyalty, merchant and digital solutions, consulting and data solutions.

Worldpay Inc. Class A

Worldpay is a holding company. Through its subsidiaries, the company provides electronic payment processing services to merchants and financial institutions. The company operates two segments: Merchant Services, which provides merchant acquiring and payment processing services to national merchants, regional and small-to-mid sized businesses; and Financial Institution Services, which provides card issuer processing, payment network processing, fraud protection, card production, prepaid program management, automated teller machine driving and network gateway and switching services that utilize the company's proprietary Jeanie debit payment network to a set of financial institutions.

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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