Report
Dave Nicoski ...
  • Ross LaDuke
EUR 46.46 For Business Accounts Only

Vermilion Compass: Weekly Equity Strategy

Downgrading Consumer Staples To Underweight

Market dynamics remain largely bullish and we continue to see signs of improving risk appetites. As a result, we are on the verge of shifting to an outright bullish stance.

High Yield Spreads, Defensive Areas. High yield spreads hit new 2021 narrows on Friday as they moved to 14-year lows. Additionally, defensive areas including Staples (XLP), Utilities (XLU), and Gold (GLD) are breaking to new 2021 RS lows, and we are downgrading Consumer Staples to underweight -- reduce exposure/avoid. These are very bullish risk-on signals for the broad market... see charts below and pages 2-3.
10-Year Treasury Yield Implications. There is a lot riding on the 10-year yield and the 1.45% support level. For one, a break below this level would signal a flight to safety which would be a risk-off signal for the broad market. Additionally, it is possible that as long as the 10-year is below ~1.6%, or certainly on a break below 1.45%, that we could see more outperformance from growth. Of course, this would likely mean an upgrade for Technology, and potential downgrades for Financials, Manufacturing, Transportation, Materials, or even Energy. We continue to monitor the situation closely... see pages 2-5.
Small- & Micro-Caps. The Russell 2000 has been consolidating sideways for 5 months, a great visual representation of the current mixed market environment. We are monitoring for breakouts from the Russell 2000 (IWM) and Russell Micro-Caps (IWC), above $234.50 and $159, in order to shift to an outright bullish stance. Ultimately, we expect breakouts to happen, but until it does, we expect more chop and mixed markets ahead. On the other hand, a break below $211.50 on the IWM would be problematic for the broad market... see page 6.
S&P 500. The S&P 500 remains bullish as it breaks to all-time highs. As long as 4164-4168 support holds, our near-term target is 4350-4400. Should 4164 fail to hold, our next key support level would be in the 4056-4110 range; we are constructive as long as 4056 holds... see page 6.
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.

Atlas Corp.

Boot Barn Holdings

Boot Barn Holdings is a retail chain focused on western and work-related footwear, apparel and accessories. The company's stores, which are freestanding or located in strip centers, feature an assortment of brands and styles, coupled with store associates. The company's product offering is anchored by a selection of western and work boots and an assortment of coordinating apparel and accessories. The company also carries assortments of denim, western shirts, cowboy hats, belts and belt buckles, western-style jewelry and accessories. The company's work assortment includes footwear, outerwear, overalls, denim and shirts for the physically demanding jobs.

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.

Caleres Inc.

Caleres is a footwear retailer and wholesaler. The company is engaged in the operation of retail shoe stores and e-commerce websites as well as the design, sourcing and marketing of footwear for women, men and children. The company's Famous Footwear segment includes its Famous Footwear stores, which features a selection of athletic, casual and dress shoes for the entire family. The company's Brand Portfolio segment provides retailers and consumers a portfolio of brands by designing, sourcing and marketing footwear for women and men at a variety of price points. The company's Brand Portfolio segment sells footwear on a wholesale basis to retailers as well as through its branded retail stores and e-commerce businesses.

Capri Holdings Limited

Cato Corporation Class A

Cato is a fashion retailer which operates under the names Cato, Cato Fashions, Cato Plus, It's Fashion, It's Fashion Metro and Versona. The Cato concept provides fashion apparel and accessories in junior/missy and plus sizes. The Cato concept's stores and e-commerce website feature an assortment of apparel and accessories, including dressy, career, and casual sportswear, dresses, coats, shoes, lingerie, costume jewelry and handbags. The It's Fashion and It's Fashion Metro concepts provide fashion with styles for the family. The Versona concept's stores and e-commerce website provide fashion apparel items, jewelry and accessories. The company also provides its own credit card and layaway plan.

Chico's FAS Inc.

Chico's FAS is a retailer of women's private branded, casual-to-dressy apparel, intimates and complementary accessories. The company operates under the Chico's, White House Black Market (WHBM) and Soma brand names. Chico's primarily sells private branded clothing focusing on women 45 and older. WHBM primarily sells clothing focusing on women 35 and older with clothing and accessory items including everyday basics, polished casual apparel, relaxed workwear, black and white pieces, and feminine all-occasion dresses. The Soma brand primarily sells lingerie, sleepwear and loungewear products focusing on women. The company's boutiques are located in the U.S., Puerto Rico, the U.S. Virgin Islands and Canada.

Costamare Inc.

Costamare is an international owner of containerships. Co. is engaged in chartering vessels to many of the world's liner companies. As of Feb 23 2018, Co. has a fleet of 71 containerships with a total capacity in excess of 466,000 twenty foot equivalent units (TEUs). Co.'s strategy is to time charter its containerships to a geographically diverse, financially strong and loyal group of liner companies. Co.'s containerships operate primarily under multi-year charters and therefore are not subject to the effect of seasonal variations in demand. Some of Co.'s customers are A.P. Moller-Maersk, MSC, Evergreen, Hapag Lloyd and COSCO.

Diana Shipping Inc.

Diana Shipping is a holding company. Through its subsidiaries, Co. is a global provider of shipping transportation services. Co. specializes in transporting dry bulk cargoes, including such commodities as iron ore, coal, grain and other materials along worldwide shipping routes. As of Dec 31 2017, Co.'s operating fleet consisted of 50 dry bulk carriers, of which 22 are Panamax, five are Kamsarmax, five are Post-Panamax, fourteen are Capesize and four are Newcastlemax vessels, having a combined carrying capacity of approximately 5.8 million dwt.

Eagle Bulk Shipping

Euroseas Ltd.

Express Inc.

Express is a holding company. Through its subsidiaries, the company is an apparel and accessories retailer providing both women's and men's merchandise. The company provides apparel and accessories for work, casual, jeanswear, and going-out. The company has a portfolio of apparel products, including the Editor pant, and 1MX shirt. The company also sells its products through its e-commerce website, www.express.com, and its mobile app, and has franchise agreements with franchisees who operate the company's locations in Latin America. The company has one segment, which includes the operation of its brick-and-mortar retail and outlet stores, e-commerce operations, and franchise operations.

Gap Inc.

The Gap is an apparel retail company. The company provides apparel, accessories, and personal care products for men, women, and children under the Old Navy, Gap, Banana Republic, Athleta, Intermix, and Hill City brands. The company has stores in the U.S., Canada, the U.K., France, Ireland, Japan, Italy, China, Hong Kong, Taiwan, and Mexico, and has franchise agreements with unaffiliated franchisees to operate Old Navy, Gap, and Banana Republic stores throughout Asia, Europe, Latin America, the Middle East, and Africa. Under these agreements, third parties operate stores that sell apparel and related products under the company's brand names.

Genco Shipping & Trading Ltd.

Genesco Inc.

Genesco is a retailer and wholesaler of branded footwear, apparel and accessories. The company's segments include: Journeys Group, which includes Journeys, Journeys Kidz and Little Burgundy retail stores, e-commerce and catalog operations and sells footwear and accessories for young men, women and children; Schuh Group, which includes e-commerce operations and sells a range of branded casual and athletic footwear along with a private label offering; Johnston & Murphy Group, which includes retail stores, e-commerce and catalog operations and wholesale distribution; and Licensed Brands, which includes include the sale of footwear marketed under the Dockers? brand.

Matson Inc.

Matson is a holding company engaged in the provision of ocean transportation and logistics services. The company's Ocean transportation segment business is conducted through Matson Navigation Company, Inc., which provides a lifeline of ocean freight transportation services to the domestic non-contiguous economies of Hawaii, Alaska and Guam, and to other island economies in Micronesia and operates an expedited service from China to Long Beach, CA, and provides services to Okinawa, Japan and various islands in the South Pacific. The company's Logistics business is conducted through Matson Logistics, Inc., an asset-light business that provides a variety of logistics services to its customers.

Safe Bulkers Inc.

Safe Bulkers is an international provider of marine drybulk transportation services, transporting bulk cargoes, particularly coal, grain and iron ore, along worldwide shipping routes for consumers of marine drybulk transportation services. As of Feb. 9, 2018, Co. had a fleet of 39 drybulk vessels, with an aggregate carrying capacity of 3,513,800 dwt and an average age of 7.6 years. Co. deploys its vessels on both period time charters and spot time charters. The vessels on period time charters provide Co. with relatively stable cash flow and utilization rates, while the vessels in the spot market allow Co. to maintain its flexibility in low charter market conditions.

Shoe Carnival Inc.

Shoe Carnival is a family footwear retailers. The company provides customers a a range of dress, casual and athletic footwear for men, women and children with an emphasis on national name brands. The company operates stores in the states and Puerto Rico and provides online shopping at www.shoecarnival.com. The company's stores carry complementary accessories such as socks, belts, shoe care items, handbags, sport bags, backpacks, scarves and wallets, while its e-commerce site provides certain handbags, sport bags and backpacks. Women's, men's and children's non-athletic footwear categories are further divided into dress, casual, sport, sandals and boots.

Star Bulk Carriers Corp.

Star Bulk Carriers is an international company providing worldwide transportation solutions in the drybulk sector through its vessels-owning subsidiaries for a range of customers of major and minor bulk cargoes including iron ore, coal, grain, cement, fertilizer, along worldwide shipping routes. As of Dec 31 2016, Co. owned and operated a fleet of 73 vessels consisting primarily of Newcastlemax, Capesize as well as Kamsarmax, Ultramax and Supramax vessels with a carrying capacity between 52,055 dwt and 209,537 dwt. Co.'s vessels transport a range of major and minor bulk commodities, including ores, coal, grains and fertilizers, along worldwide shipping routes.

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.

Vera Bradley Inc.

Vera Bradley is a designer of women's handbags, luggage and travel items, fashion and home accessories, and gifts. The company sells its products through two reportable segments: Direct and Indirect. The Direct business consists of sales of Vera Bradley products through the company's full-line and factory outlet stores, verabradley.com, the company's online outlet site, direct-to-consumer eBay sales, and the company's annual outlet sale in Fort Wayne, IN. The Indirect business consists of sales of Vera Bradley products to specialty retail locations, as well as department stores, national accounts, third party e-commerce sites, third-party inventory liquidators, and sales generated through licensing agreements.

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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