Report
Dave Nicoski ...
  • Ross LaDuke
EUR 233.43 For Business Accounts Only

Vermilion Int'l Compass: Global Equity Strategy

Squarely in the neutral camp

At this point in time the major global indexes (MSCI ACWI, ACWI ex-US, EAFE, EM) have failed to break above their respective resistance levels, leaving us squarely in the neutral camp.

• We need to see more from cyclical value. We believe the aforementioned major global indexes are likely to remain below resistance or have limited upside unless and until we see more definitive signs of bottoming within cyclical value areas of the market (e.g., Materials, Energy, banks, major autos & parts, etc.)... see page 2.

• Indicators supportive of a neutral outlook. Several indicators that we watch in order to get a gauge on the health of the global economy and equity markets are supportive of our neutral outlook, as they are all generally consolidating. Indicators highlighted in this report include (1) high yield spreads in the US and Europe; (2) the global cyclicals vs. staples ratio; and (3) copper prices... see chart below and page 3.

• Actionable Theme: Utilities. The STOXX 600 Utilities supersector continues to be leadership -- remain overweight. We highlight three new names with timely buy opportunities: Uniper SE (UN01-DE), SUEZ SA (SEV-FR), and Albioma (ABIO-FR)... see page 4.

• Actionable Theme: Travel & Leisure. The STOXX Europe 600 Travel & Leisure supersector (a mix of restaurants, hotels/resorts/cruises, casinos/gaming, and airliners) displays early signs of price and RS bottoms. We highlight attractive and actionable stocks that are leading this reversal.... see page 5

• Actionable Theme: Consumer Staples. As the MSCI ACWI has rallied to overhead resistance, RS on the MSCI ACWI Consumer Staples Sector has pulled back to uptrend support. Remain overweight as long as the RS uptrend remains intact and use recent RS deterioration as an opportunity to add exposure... 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.

Ajinomoto Co. Inc.

Ajinomoto and its affiliates are mainly engaged in the manufacture and sale of food products, fine chemicals and pharmaceuticals in Japan and overseas. Co.'s principal food products for the retail and commercial markets include umami seasoning "AJI-NO-MOTO®," "HON-DASHI," and "Cook Do®," processes foods, frozen foods, instant noodles, coffee products, sweeteners and umami seasonings for processed food manufacturers. Co. also manufactures feed-use amino acids, amino-acids for pharmaceuticals and foods, amino acid-based products and specialty chemicals, as well as pharmaceuticals for gastrointestinal and metabolic diseases.

Albioma

Albioma is an independent energy producer that develops projects in the thermal biomass, solar power, and anaerobic digestion sectors. Co. provides industrial partners with expertise in energy production via hybrid combustion of biomass. In addition, Co. produces biogas by biological decomposition of organic matter in a confined oxygen-free medium, which it either converts into electricity and heat or purifies and then injects into the gas transmission network. It operates facilities on Reunion Island, Mayotte, Guadeloupe, Martinique, and French Guyana, mainland France and Southern Europe. Co. divides its operation into three segments: Thermal Biomass, Solar Power, and Anaerobic Digestion.

Arca Continental SAB de CV

Arca Continental is a bottling company based in Mexico. Co. is engaged in the production, distribution and sale of soft drinks of brands owned by The Coca-Cola Company (TCCC), as well as other brands owned by the Company. Under a bottling agreement with TCCC, Co. has exclusive rights to carry out these activities with Coca-Cola products in territories located in northern Mexico, where it operates with a product portfolio of soft drinks and carbonated and non-carbonated bottled water (purified or flavored) in various presentations, including private label brands. In addition, Co. distributes brands Topo Chico, Bokados snacks, Trechas sauces to markets in the U.S. through subsidiary Interex.

Asahi Group Holdings Ltd.

Asahi Group Holdings is a holding company. Co. and its subsidiaries are engaged in the manufacture and sale of alcoholic beverages, including beer, low-malt beer (happoshu), distilled spirits (shochu), wines and whiskey, as well as soft drinks and chilled beverages in its soft drinks business, along with baby foods, supplements and other products in the food business. Co.'s principal brands include "Asahi Super Dry," "Asahi Super Dry Back," "Asahi Dry Premium," "Asahi Style Free," "Asahi Dry Zero," "Clear Asahi," "Kanoka," "Black Nikka," "WONDA," "Mitsuya Cider" and "Calpis." Co. is also engaged in the manufacture and sale of beer and other alcohol products, and soft drinks in overseas.

Avenue Supermarts Ltd.

Avenue Supermarts Limited is an India-based company, which owns and operates DMart stores. DMart is a supermarket chain that offers customers a range of home and personal products under one roof. Each DMart store stocks home utility products, including food, toiletries, beauty products, garments, kitchenware, bed and bath linen, home appliances and others. The Company offers its products under various categories, such as bed and bath, dairy and frozen, fruits and vegetables, crockery, toys and games, kids apparel, ladies garments, apparel for men, home and personal care, daily essentials, grocery and staples, and DMart brands. DMart has a presence in over 110 locations across Maharashtra, Gujarat, Andhra Pradesh, Madhya Pradesh, Karnataka, Telangana and Chhattisgarh. The Company has multiple stores in cities, such as Mumbai, Ahmedabad, Baroda, Bengaluru, Hyderabad, Pune and Surat.

BRF SA

BRF is a holding company. Through its subsidiaries, Co. is engaged in the production and sale of poultry, pork, beef cuts, and processed food products, pasta, sauce, mayonnaise, frozen vegetables and soybean by-products under several brands. Co.'s processed products include marinated, frozen, whole and cut Chester® rooster and turkey meats, specialty meats, frozen processed meats, frozen prepared entrees, portioned products and sliced products. Co. also sells margarine, sweet specialties, sandwiches, mayonnaise, and animal feed. Co. has an advanced distribution system and uses distribution centers to deliver its products to more than 120 countries.

Carlsberg A/S Class B

Carlsberg is engaged in the production and sale of beer and other beverages. Co.'s brewing operations are concentrated in Northern and Western Europe, Eastern Europe and Asia, while markets outside these regions are serviced through exports and production under license. Co.'s other beverages include soft drinks, water and cider. In addition to beverage activities, Co. is also engaged in real estate.

Chocoladefabriken Lindt & Spruengli AG

Chocoladefabriken Lindt & Sprungli is a holding company based in Switzerland. Co. and its subsidiaries manufacture and sell premium chocolate products. Co.'s products are sold under the brand names: Lindt, Ghirardelli, Caffarel, Hofbauer and Kufferle. Worldwide, Co. maintains eight manufacturing plants (six in Europe and two in the United States) and sells mainly in countries within Europe and the NAFTA countries.

Coca-Cola European Partners Plc

Compass Group PLC

Compass Group is engaged in providing outsourced food and support services. The five sectors in which Co. operates are: Business & Industry, which provides food for employees during their working day; Healthcare & Seniors, which helps hospitals in the public and private sectors manage and enhance quality of food and support services; Education, which provides dining solutions from kindergarten to college; Sports & Leisure, which provides hospitality and service at sporting and leisure venues, exhibition centers, visitor attractions and events; and Defence, Offshore & Remote, which provides food and support services to companies in the oil and gas and mining and construction industries.

Cranswick plc

Cranswick is a supplier of food products. Co. engaged in the manufacturing and supplying of food products to U.K. grocery retailers, the food service sector and other U.K. and global food producers. Co. produces a range of products including fresh pork, convenience, gourmet products and poultry. Co.'s products include: Fresh & Added Value Pork; Traditional Air-Dried Bacon & Gammon; Sausages & Burgers; Handmade Pastry; Cooked Meats; Continental Products; Fresh Chicken; and Premium Cooked Poultry. As of Mar 31 2017, Co. had 15 manufacturing locations in the U.K.

Dino Polska S.A.

Dino Polska is engaged in the business of retail sale in non-specialized stores with food, beverages and tobacco. In addition, Co. conducts processing of meats and the resulting products are dedicated, in the form of culinary meat, to external recipients within Co.'s retail chain. As of December 31, 2016, Co. operated a network of 628 Dino stores.

EasyJet plc

EasyJet and its subsidiaries are a low-cost airline carrier operating principally in Europe. Co. operates in the European short-haul aviation market. As of Sept 30 2017, Co. operated 862 routes. Co.'s total fleet as at Sept 30 2017, comprised 279 aircraft, split between 156-seat Airbus A319s, 180-seat A320s, 186-seat A320s and 186-seat A320neos. Co.'s main markets are the U.K., France, Italy, Switzerland, Germany, Netherlands, Portugal and Spain.

Entain PLC

GVC Holdings is a holding company. Through its subsidiaries, Co. is an online gaming company, provides business to consumer and business to business services to the online gaming and sports betting markets in Europe and Latin America. Co. operates in two segments, Sports and Gaming. Co. offers sports betting, casinos, games, and poker through online and mobile under the Sportingbet brand; and online bingo, sportsbook, casino, and poker access under the Betboo brand, as well as operates an online casino Website for German-speaking markets under the CasinoClub brand. Co. also various online poker games, including No Limit Texas Hold'em, Fixed Limit Texas Hold'em, and Pot Limit Texas Hold'em.

Flight Centre Travel Group Limited

Flight Centre Travel Group is engaged in the travel retailing in both the leisure and corporate travel sectors, plus wholesaling.

Flutter Entertainment Plc

Paddy Power Betfair is a sports betting and gaming operator. Co. operates four sports betting and gaming brands: Paddy Power, Betfair, Sportsbet, and TVG. In addition, Co. operates across four operating divisions: Online, which is an online sports betting operator in the U.K. and Ireland; Australian, which is known as Sportsbet and is focused on sports betting, with products and marketing around national sports events; Retail, which operates Paddy Power betting shops across the U.K. and Ireland; and U.S., which consists of TVG, a horseracing TV channel and online pari-mutuel wagering operator active in over 30 states, and Betfair, an online casino and horse-racing Exchange in New Jersey.

Hindustan Unilever Limited

Hindustan Unilever is predominantly engaged in manufacturing and distributing consumer products mainly in India. Co. operates five main business segments: Soaps and Detergents include soaps, detergent bars, detergent powders, detergent liquids, scourers, etc.; Personal Products include products in the categories of Oral Care, Skin Care (excluding soaps), Hair Care, Deodorants,Talcum Powder, Colour Cosmetics, Ayush services; Beverages include tea and coffee; Package Foods include Branded Staples (Atta, Salt, Bread, etc.), Culinary Products (tomato based products, fruit based products, soups, etc.) and Frozen desserts; Others include Exports, Chemicals, Water business, Infant Care Products.

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.

Kotobuki Spirits Co. Ltd.

Kotobuki Spirits Co., Ltd. is a holding company primarily engaged in the manufacture and sale of confectionery products. The Company operates in seven segments. The KCC segment, Kotobuki Seika segment and Kujuku Island Group segment are primarily engaged in the production and sale of confectionery products under various shop brands. The Tajima Kotobuki segment, Shukurei segment and Sales Subsidiary segment are engaged in the sale of confectionery products. The Others segment is engaged in the operation of nonlife insurance agency business, and the sale of health food. As of March 31, 2015, the Company had 18 subsidiaries.

Kweichow Moutai Co. Ltd. Class A

Kweichow Moutai is engaged in the manufacture and sale of "Guizhou Moutai" series distilled spirits; manufacture and sale of beverages, food and packaging materials; development of anti-counterfeiting technologies; and research and development of relevant IT products. Through its subsidiaries, Co. is also engaged in the wholesale of agricultural vice-local products, building materials, decoration materials, metal materials, machineries, electronic products, telecommunication products, hardware, rubber products, general merchandises and furniture. Co.'s products include millesimes liquor, gift liquor, common liquor and other liquor series.

Matsumotokiyoshi Holdings Co. Ltd.

Matsumotokiyoshi Holdings is a holding company. Co., through its affiliates, operates in three business segments. The Retail segment is engaged in the sale of drugs and medicines, cosmetics, food, miscellaneous daily goods, commodities and others through nationwide stores. The Wholesale segment provides commodities to its affiliates and franchisee. The Management Support segment is engaged in the construction and repairing of stores, the management of corporate groups and indirect business trust, the non-life and life insurance agency businesses, as well as the distribution of newspaper advertising fliers. As of Mar 31 2017, Co. operates total 1,555 stores throughout Japan.

SUEZ SA

Suez is active in each stage of the water and waste cycles. Co. is organized around three main segments: Water Europe (water distribution and treatment services, particularly under concession contracts, to individuals, local authorities and industrial clients); Waste Europe (waste collection and treatment services for local authorities and industrial clients; these services include collection, sorting, recycling, composting, energy recovery and landfilling for both non-hazardous and hazardous waste) and International (water, waste and engineering services, with a special focus on risk-management resulting from specific local environments by setting up partnerships).

Sundrug Co. Ltd.

Sundrug is mainly engaged in the operation of drugstore chain throughout Japan. Co. operates in two business segments. The Drugstore segment operates the drugstore chains such as “Sundrug,” “Sundrug Pharmacies,” “Drug Tops,” “Seikoudou Yakkyoku,” and “Sundrug Plus.” These drugstores sell pharmaceuticals, cosmetics, and household products. The Discount store segment is engaged in the operation of discount stores selling foods and household products under the name of "Direx." As of Mar 31 2017, Co. operates 831 drugstores including franchise stores, and 239 discount stores.

TUI AG

TUI is engaged in the tourism business, operating in some 180 countries. Co.'s segments include Hotels & Resorts, Cruises and Other Tourism. The Hotels & Resorts segment comprises all Group-owned hotels and hotel companies in TUI Group. The segment comprises majority participations in hotels, joint ventures with local partners, stakes in companies. The Cruises segment consists of Hapag-Lloyd Cruises and the joint venture TUI Cruises. Other Tourism segment comprises central functions such as destination services, IT, aviation control and the French airline Corsair.

Uniper SE

Uniper SE is a Germany-based energy generation and energy trading company. The Company operates through three segments: European Generation, Global Commodities and International Power Generation. The European Generation segment generates power and owns coal, gas, oil and combined gas and steam power plants, hydroelectric power plants, nuclear power stations in Sweden, a biomass plant in France, as well as solar and wind power facilities; the Global Commodities segment bundles the Company's energy trading activities, as well as its gas storage and supply business, and the International Power Generation segment comprises equity investments in energy generation companies in the Russian Federation and Brazil.

Wesfarmers Limited

Wesfarmers is engaged in the retailing operations including supermarkets, merchandise and department stores, fuel, liquor and convenience outlets; retailing of home improvement and outdoor living products and supply of building materials; retailing of office and technology products; coal mining and production; gas processing and distribution; industrial and safety product distribution; and chemicals and fertilisers manufacture; and investments. Co.'s retail operations includes Coles, which operates Coles Supermarkets, Coles Express, Liquorland, Vintage Cellars, First Choice Liquor, and Spirit Hotels, among others; while its departmental operations include Kmart and Target retailers.

William Hill PLC

William Hill is a gambling company. Co. is engaged in gambling business across four divisions: Online, which comprises all online and telephone activity outside of Australia, including sports betting, casino, poker sites and other gaming products along with telephone betting services; Retail, which comprises all activity undertaken in licensed betting offices including gaming machines; Australia, which provides sports betting products online, by telephone and mobile devices; and U.S., in which Co. is the operator of land-based sports betting shops in Nevada. Other activities include on-course betting and greyhound stadia operations.

Woolworths Holdings Limited

Woolworths Holdings is a retail company. Co.'s divisions include: Woolworths South Africa, David Jones (DJ), and Country Road Group (CRG). The Woolworths South Africa division is a retailer offering private label products. Co.'s offering include a range of clothing and general merchandise, food products, and financial services. The DJ division is a premium department stores. Co.'s offering include a range of private label brands in women's-wear, men's-wear, shoes, accessories, beauty, children's-wear, home furnishings, general merchandise and food as well as financial services. The CRG division is an apparel retailer. Co.'s offering include apparel, accessories, footwear and home-ware.

X5 Retail Group N.V. Sponsored GDR RegS

X5 Retail Group is a holding company. The main activity of Co. is the development and operation of grocery retail stores. Co. operates a retail chain of soft-discount, supermarket and hypermarket stores under the brand names "Pyaterochka", "Perekrestok" and "Karusel" in major population centres in Russia, including but not limited to Moscow, St. Petersburg, Nizhniy Novgorod, Rostov-on-Don, Kazan, Samara, Lipetsk, Chelyabinsk, Perm, Ekaterinburg and Kiev, Ukraine.

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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