Report
Dave Nicoski ...
  • Ross LaDuke
EUR 235.08 For Business Accounts Only

Vermilion Int'l Compass: Global Equity Strategy

Not too bullish, not too bearish

Despite several indexes recently touching new 52+ week highs, broad global indexes (MSCI ACWI, ACWI ex-US, EAFE, and EM) remain near logical resistance, and indicators continue to send mixed signals. As a result we are hesitant to get too bullish or bearish. Instead we want to focus on Sector/Group/industry themes where we bottoming price and RS, or attractive pullback opportunities within established price and RS uptrends. Below we highlight some of these themes along with indicators that support our overall constructive -- yet tempered -- outlook.

• Positive economic/market signals: High yield spreads. US and European high yield spreads have continued to narrow and are indicating a recession is not in the cards, something that is ultimately conducive to higher equity prices.

• Neutral to slightly negative economic/market signals. Neutral indicators include the price of copper, the global Discretionary vs. Staples ratio, and oil prices. We consider these neutral because they are generally consolidating; they are not breaking out or breaking down. One slightly negative signal is coming from small-caps, which are underperforming globally relative to large-caps. Europe and Japan are the exceptions, as the respective small- vs. large-cap ratios are neutral... see page 2.

• USD (DXY) still looking toppy. A lower high or a failure to break to new highs on the DXY should help int'l equities in their march higher... see page 2.

• Actionable Themes: Consumer Discretionary and Technology Sectors. The vast majority of these stock recommendations hail from Japan, and Group CD-15 Japanese Consumer Electronics Manufacturers (Sony, Nintendo, FUJIFILM, etc.) exhibits bottoming price and RS -- add exposure... see pages 3-5.

• Actionable Theme: “Defensives.” Specifically we highlight six stocks within the Consumer Staples and Services Sectors that offer timely entry points. While not exactly a traditional defensive Sector, Services contains many growth stocks which are largely immune to the current low global growth environment... see page 6.
Underlyings
Accor SA

Accor is a hotel operator. Co. offers its guests and partners the expertise of a hotel operator and brand franchisor (HotelServices) and a hotel owner and investor (HotelInvest). Co. divides its activities into three segments: Luxury-upscale, Midscale and Economy. Luxury-upscale makes up 11% of Co.'s portfolio and comprises brands such as Sofitel, Pullman, MGallery, and Grand Mercure; Midscale makes up 43% of its portfolio and comprises the Novotel, Suite Novotel, Mercure and Adagio brands; and Economy makes up 46% the Co.'s portfolio, comprising the brands ibis, ibis Styles, ibis budget and hotelF1. At Dec 31 2013 Co. operated around 3,600 hotels and 460,000 rooms in 92 countries.

Amadeus IT Group SA Class A

Amadeus is a transaction processor for the global travel and tourism industry. Co. provides transaction processing power and technology solutions to both travel providers (including full service carriers and low-cost airlines, hotels, rail operators, cruise and ferry operators, car rental companies and tour operators) and travel agencies (both online and offline). Co. acts both as a worldwide network connecting travel providers and travel agencies through a processing platform for the distribution of travel products and services (through the Distribution business), and as a provider of a portfolio of IT solutions which automate certain business processes (through the IT solutions business).

Ams AG

AMS provides advanced sensor and analog solutions for high value and emerging markets. Co.'s markets include Consumer and Communications and Industrial, Medical, Automotive. Co. delivers a broad range of innovative technology solutions for consumer electronics and communication device manufacturers including intelligent light sensors, MEMS microphone ICs, NFC solutions, active noise-cancelling ICs and ultra-low power management solutions. Co. offers customized, application-specific integrated circuits and standard solutions for a broad range of industrial applications including automation and control, position sensors, building automation, security and high-resolution seismic analysis.

Anheuser-Busch InBev SA/NV

Anheuser-Busch Inbev is engaged in the brewing of beer. Co. manages a portfolio of well over 200 brands that includes brands such as Budweiser, Stella Artois and Beck's; multi-country brands such as Leffe and Hoegaarden; and other brands such as Bud Light, Skol, Brahma, Quilmes, Michelob, Harbin, Sedrin, Klinskoye, Sibirskaya Korona, Chernigivske and Jupiler. Co. also produces and distributes soft drinks, particularly in Latin America. Co.'s operations are organized along seven business segments: North America, Mexico, Latin America North, Latin America South, Europe, Asia Pacific and Global Export & Holding Companies.

BE Semiconductor Industries N.V.

BE Semiconductor Industries N.V. (Besi) is a holding company. The Company is engaged in the development, manufacturing, marketing, sales and service of semiconductor assembly equipment for the global semiconductor and electronics industries. It operates through three segments: Die Attach, Packaging and Plating. It develops assembly processes and equipment for leadframe, substrate and wafer level packaging applications in a range of end user markets, including electronics, computer, automotive, industrial and solar energy. The Company offers products, such as Die attach equipment, which include single chip, multi-chip, multi module, flip chip, thermo-compression bonding (TCB) and enhanced wafer level ball grid array (eWLB) die bonding systems, and die sorting systems; Packaging equipment, which include wafer level molding and singulation systems, and Plating equipment, which include metal plating systems and related process chemicals.

Canon Electronics Inc.

Canon Electronics is engaged in the manufacture and sale of electronic components and electronic information equipment. Component segment is engaged in the manufacture and sale of high-precision shutter units for digital cameras and video cameras, diaphragm units, laser scanner units for laser beam printers, compact step motors, thin-film magnetic sensors and magnetic heads. Electronic Information Equipment segment is engaged in the manufacture and sale of document scanners, handheld terminals and laser beam printers. Co. is also engaged in the development and sale of security software and industry-specific software, as well as the sale of customer relationship management systems.

Canon Marketing Japan Inc.

Canon Marketing Japan is mainly engaged in the sale of Canon products. Business Solutions segment provides multifunction printers, copiers, scanners, fax machines, software and office supplies manufactured by Canon and other companies. IT Solutions segment offers consulting, development, installation, operation and maintenance services of information and business process systems and software. Imaging system segment is engaged in the wholesale of Canon cameras, digital cameras, camcorders, home printers, copiers, binoculars, flashes and projectors. Industrial/Medical segment offers semiconductor manufacturing equipment, industrial products and medical equipment.

Disco Corporation

DISCO and its affiliates are mainly engaged in the manufacture, sale and maintenance of precision cutting, grinding and polishing machines. Co. is also engaged in the manufacture and sale of precision diamond abrasive tools, and disassembly and recycling of precision cutting, grinding and polishing machines. Co.'s principal precision machines are dicing and cutting saws, laser saws, grinders, polishers, wafer mounters, die separators, surface planers, water jet saws, and products for new processes. Co.'s principal precision processing tools are dicing blades, grinding wheels, and dry polishing wheels.

Elis SA

Elis is a multi-service group in the rental, laundry and maintenance of textile, hygiene and well-being items in Europe and Latin America. Co. serves hundreds of thousands of customers of all sizes, belonging to various professional customer segments: hospitality, healthcare, industry, trade and services. Co. also has a manufacturing business carried out by two entities, Le Jacquard FranASSais and Kennedy Hygiene Products which together form one of the company's operating segments.

Experian PLC

Experian is an information services group. Co. has four businesses: Credit Services, which collects data to analyze the credit histories of people and businesses, sorting through information about the credit they applied for and how they repaid the credit; Decision Analytics, which combines Co.'s data with data from its clients and third parties, and uses software and analytics to access, organize and analyze this data to help its clients to minimize the risk of fraud; Marketing Services, which helps Co.'s clients to plan, build and deliver their marketing campaigns; and Consumer Services, which, among others, monitors the information in people's credit reports for suspected fraud patterns.

FUJIFILM Holdings Corp

FUJIFILM Holdings is a holding company engaged in the manufacture and sale of imaging information products. Co.'s principal businesses are divided into three segments: imagining solution, information solution and document solution. Co.'s principal products and services are color films, digital cameras "FinePix," photofinishing equipment, color paper, as well as chemicals and services for photofinishing; equipment and materials for medical systems and life sciences, equipment and materials for graphic arts, flat panel display materials, recording media and optical devices; office copy machines/MFPs, printers, as well as production systems and services.

Harvey Norman Holdings Ltd

Harvey Norman Holdings is engaged in integrated retail, franchise, property and digital system. Co.'s business activities include: franchisor; sale of furniture, bedding, computers, communications and consumer electrical products in New Zealand, Singapore, Malaysia, Slovenia, Ireland, Northern Ireland and Croatia; property investment; lessor of premises to Harvey Norman®, Domayne® and Joyce Mayne® franchisees and other third parties; media placement; and provision of consumer finance and other commercial advances.

Hikari Tsushin Inc.

HIKARI TSUSHIN is a holding company. Co., through its affiliates, operates in three principal business segments. Corporate segment is engaged in the door-to door sale of office automation ("OA") equipment, eco-friendly products, telecommunication line service, and enterprise solution services for small and medium-sized enterprises. It also provides the communication line such as fixed line and broadband line. SHOP segment is engaged in the sale of mobile phones, mobile Wi-Fi routers and mobile applies (contents) through its nationwide sales channels. Insurance segment is engaged in the sale of insurance policies to customers using telemarketing at its nationwide call centers.

IBIDEN CO. LTD.

IBIDEN is an electronics related business group based in Japan. Co. operates in two business segments: Electronics segment manufactures and sells printed wiring boards ("PWBs") and package substrates; and Ceramics segment manufacture and sells environment-related ceramics products, graphite specialty products, and ceramics fiber. In addition, Co. manufactures and sells housing equipment and melamine decorative laminates; designs and constructs slopes, garden landscape and environmental facilities. Co.'s other business activities include synthetic plastic processing; agriculture, livestock and fishery processing; oil products sales; information services; automobile transportation and others.

InterContinental Hotels Group PLC

InterContinental Hotels Group is a hotel companies. Co.'s hotel brands are InterContinental Hotels & Resorts, Kimpton Hotels & Restaurants, Hualuxe Hotels & Resorts, Hotel Indigo, EVEN Hotels, Crowne Plaza Hotels & Resorts, Holiday Inn, Holiday Inn Express, Staybridge Suites, Holiday Inn Club Vacations, Holiday Inn Resorts, Candlewood Suites, and Avid Hotels. As of Mar 2 2017, Co.'s had total hotels of 5,348 with 4,433 franchised, 907 managed, eight owned and leased hotels, and 1,655 total hotels in the pipeline.

JB Hi-Fi Limited

JB Hi Fi is engaged in the retailing of home consumer products. Co. provides a range of brands with particular focus on consumer electronics, software including music, games and movies, whitegoods and appliances.

Meituan Class B

MEITUAN DIANPING is a China-based e-commerce platform providing life services. The Company connects consumers and businesses to provide services satisfying people's daily eating needs. The Company owns an instant food ordering and delivery brand, Meituan, as well as provides services through its mobile application, Meituan. The Company is also engaged in the operation of a bike-sharing brand, Mobike.

Nintendo Co. Ltd.

Nintendo is mainly engaged in the development, manufacture, and sale of home-use game hardware/software and peripheral equipment as well as software under the name of "Nintendo DS," "Nintendo 3DS," "Game Boy," "Nintendo 64,"" Game Boy Advance," "Wii," "Nintendo GameCube," "Game Boy Color" and "e-Reader (trading card games)." Co.'s principal software trademarks include "Pokemon," "Super Mario Bros.," "The Legend of Zelda," "STARFOX64" and others. Co. also provides online games and repair services. In addition, Co. is involved in the manufacture and sale of Japanese playing cards called "Karuta," playing cards and board games, as well as the management of intellectual property rights.

Nitori Holdings Co. Ltd.

Nitori Holdings is a holding company engaged in the retail sale of household furniture and home furnishings. Co. operates its chain stores under the name of "Nitori" "Nitori Express" and "Deco Home Nitori" offering household furniture, floor coverings, curtains, bedding, kitchenware, housewares, other home furnishings, small household appliances, garden supplies, outdoor goods, exercise equipment and miscellaneous daily goods. Co. also operates shopping malls "Nitori Mall." In addition, Co. provides kitchen and bathroom remodeling services, as well as office and commercial facility design services. As of Feb 20 2017, Co. operates 428 stores throughout Japan and 43 stores in overseas.

Oracle Corporation Japan

Oracle is engaged in the provision of information technology services. New License and Cloud segment is engaged in the licensing services of its database management software, middleware, and application software, as well as providing access to its software and hardware through Oracle Cloud SaaS, PaaS and IaaS offerings. Updates and Product Support segment provides software upgrade and patch, and technical support. Hardware Systems segment offers servers, storage, networking, virtualization software, operating systems and management software to support diverse IT environments, including cloud computing environments. Services segment offers consulting services.

Renesas Electronics Corporation

Renesas Electronics is a semiconductor solution provider. Co.'s solutions include electronic products and systems for communications, computing and peripherals, consumer electronics, as well as automotive and industrial sectors. Along with its subsidiaries and associated company, Co. operates in four business segments: automotive, industrial, broad-based and other semiconductors. Co.'s principal products are microcontrollers, microprocessors, smart analogs, secure MCUs (Microcontroller Units), embedded systems platform, software, tools, IPDs (Intelligent Power Devices), power MOSFET (Metal-Oxide-Semiconductor Field-Effect Transistors), analog and mixed-signal ICs, and transistors.

Restaurant Brands International Inc

Restaurant Brands International is a holding company. Through its subsidiaries, Co. is engaged as a quick service restaurant (QSR) company with over 20,000 restaurants in approximately 100 countries and U.S. territories as of Dec 31 2016. Co.'s Tim Hortons® and Burger King® brands have similar franchise business models with complementary daypart mixes. Tim Hortons restaurants are QSRs with a menu that includes coffee, tea, espresso-based hot and cold drinks, baked goods, including donuts, Timbits®, bagels, sandwiches, soups and more. Burger King restaurants are QSRs that feature flame-grilled hamburgers, chicken and other sandwiches, french fries, soft drinks and other food items.

Ryoyo Electro Corp.

Ryoyo Electro and its affiliates are mainly engaged in the wholesale distribution of domestic and overseas made semiconductors and system information equipment. Products Co. handles include semiconductors and integrated circuit (MPU, memory, system LSI, ASIC and ASSP); computer systems and peripheral servers, storages, LAN Systems, workstations, PCs, monitors, printers and projectors; electronic devices (LCD and contact image sensors); and software (windows, office, UNIX-related software, networking software, backup software, security-related software and imaging software). In addition, Co. provides liquid crystal panels, liquid crystal display modules, and contact image sensors.

Sino-American Silicon Products Inc.

Sino-American Silicon Products Inc. is a Taiwan-based company principally engaged in the research, development, design, manufacture and distribution of semiconductor silicon wafer materials and related components. The Company's principal products include solar silicon ingots, solar silicon wafers, semiconductor ingots, semiconductor wafers, solar cells and solar module products. The Company mainly operates through two business segments: semiconductor business segment and solar business segment. The Company is also engaged in the provision of related technology, management and consultancy services. The Company mainly operates its business in Taiwan, the rest of Asia and the Americas.

Soitec SA

Soitec is a manufacturer of silicon and integrated circuits. Co. offers products based on Silicon-on-Insulator (SOI), which serves to support the manufacturing of more energy-efficient integrated circuits. Co.'s operations can be divided into three divisions: Electronics, Solar Energy and Lighting. The Electronics division manufactures and sells substrates and components intended for the microelectronics industry; the Solar Energy division manufactures and sells photovoltaic modules, designs and constructs turnkey projects, and operates photovoltaic power plants; and the Lighting division isolates resources to develop materials designed for the production of light emitting diodes.

Sony Corporation

Sony is engaged in the development, design, production, manufacture, offer and sale of various kinds of electronic equipment, instruments and devices for consumer, professional and industrial markets such as network services, game hardware and software, televisions, audio and video recorders and players, still and video cameras, mobile phones, and semiconductors. Co. is engaged in the development, production, manufacture, and distribution of recorded music and the management and licensing of the words and music of songs as well as the production and distribution of animation titles. Co. is also engaged in the production, acquisition and distribution of motion pictures and television.

STMicroelectronics NV

STMicroelectronics is a global independent semiconductor company that designs, develops, manufactures and markets a broad range of semiconductor integrated circuits (“ICs”) and discrete devices. Co. offers a diversified product portfolio and develops products for a wide range of market applications, including automotive products, computer peripherals, telecommunications systems, consumer products, industrial automation and control systems. Within its diversified portfolio, Co. is focused on developing products that leverage its technological strengths in creating customized, system-level solutions with digital and mixed-signal content.

Tokyo Electron Ltd.

Tokyo Electron is a supplier of semiconductor production equipment ("SPE") and flat panel display ("FPD") selling through global network that spans Japan, the U.S., Europe and Asia. Co.'s principal products are coater/developers, plasma etch systems, thermal processing systems, single wafer deposition systems, cleaning systems (auto wet station, single wafer cleaning system, pre-clean system and scrubber system), wafer prober, FPD coater/developers and FPD plasma etch/ash systems. In addition, Co., through its subsidiaries, is engaged in the provision of transportation services, insurance services, as well as the support services for Co.'s photovoltaic cell ("PV") production equipment.

Tripod Technology Corp.

Tripod Technology is principally engaged in the design, manufacture and distribution of printed circuit boards ("PCBs"), electronic cash register, and computerized production equipment. Co. provides double-sided PCBs and multilayer PCBs, which are applied in the manufacture of personal computers and peripheral products, communication products, industrial instruments, consumer electronic products and automobile products.

Winbond Electronics Corp.

Winbond Electronics is engaged in the design, development, manufacture and marketing of Very Large Scale Integration ("VLSI") integrated circuits ("ICs") used in a variety of microelectronic applications. Co. had two business groups, namely, Logic Business and Memory Business Group. Logic Business Group has three product lines: microcontroller-based IC, motherboard and flat panel display IC, and network communication IC. Memory Business Group's products include "Mobile Memory Solutions", such as Specialty DRAM, Flash, and Pseudo SRAM. Co.'s major products include DRAM, NOR Flash and logic IC.

Yonghui Superstores Co. Ltd. Class A

YONGHUI SUPERSTORES CO., LTD. is a China-based company, principally engaged in the operation of regular chain supermarkets. The Company primarily engages in the dealing of fresh meat products, agricultural products, processed foods, daily necessities, clothing, household appliances, electronic products and imported goods, among others. The Company operates its businesses principally through the operation of general merchandise stores, superstores and supermarkets, among others. The Company is also engaged in the provision of related services. The Company mainly conducts its businesses within domestic markets.

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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