Report
Dave Nicoski ...
  • Ross LaDuke
EUR 233.53 For Business Accounts Only

Int'l Macro Vision: Sector Synopsis

Int'l Equity Strategy

In using technical analysis, we let the market be our guide. That is, we analyze what is true in the market, utilizing the vast array of tools in our technical analysis toolbox which we then formulate into our outlook using a weight of the evidence approach. In a world where there are no shortages of things to worry about (trade wars, central banks, Trump impeachment, negative interest rates, low global growth, Brexit, Manufacturing weakness, elections, Hong Kong protests, the list goes on...), our tools help us cut through the noise and conjecture. After all, what if these concerns are ultimately viewed as irrelevant to the market? Or, what if concerns are valid but ultimately do not have an impact on the market?

As we close in on the December 15 US-China tariff “deadline,” our weight of the evidence approach leads us to believe the market remains in the early stages of a broad-based advance, meaning a buy-the-dip mentality is warranted. While we want to acknowledge that the potential for a US-China tariff escalation remains a risk for the market, we believe this is likely to be the case for the foreseeable future, and at this point in time the good outweighs the bad in the eyes of the market. To take a line straight from the title of our 10/31/19 Int'l Compass, global equities are beginning a new leg higher.

In our December International Strategy, we highlight various themes which lead to our positive outlook:

• Several major global indexes (MSCI ACWI, ACWI ex-US, EAFE) are on a bullish trajectory following breakouts in late-October. Global indexes hitting new highs is arguably the most important leading economic indicator of all which helps lead us to our bullish outlook.

• Several indicators we watch in order to get a gauge on the health of the global economy and equity markets are supportive of our positive outlook, including (1) interest rates, (2) high yield spreads, (3) the global cyclicals vs. staples ratio, (4) copper prices, (5) the copper/gold ratio, (6) small-cap vs. large-caps, and (7) crude oil prices.

• An extension of the above bullet point, price bottoms are taking shape within cyclical value areas of the market (e.g., Materials, Energy, Financials/Banks, Industrials, Major Auto Manufacturers, etc.).

• The US dollar (DXY) remains within the confines of a rising channel. At the same time, MACD signals a gradual deterioration in momentum and there is a lower high forming at $98.50; these are two signs that could foreshadow a breakdown, something that would be positive for global equities (especially EM).

In the remainder of our December International Strategy, we highlight areas of the market where we see actionable opportunities:

• Actionable Theme: Technology. The Vermilion equal-weighted international Technology Sector remains global leadership -- remain overweight/add exposure.

• Actionable Theme: Health Care. Global Health Care stocks are hitting on all cylinders, with plenty of opportunities across various industries (services, devices/equipment, pharmaceuticals, biotech, etc.) and geographies (Japan, Europe, China, etc.).

• Actionable Theme: Japanese Services and Manufacturing. Japanese stocks continue to develop positively, and it remains a favorite region to add exposure at current levels. We highlight some of our favorite setups within our Services and Manufacturing Sectors.
Underlyings
Accton Technology Corp.

Accton Technology is engaged in the research, development, manufacture and sale of computer network system, customer premises equipment, optoelectronic communication subsystem, application-specific integrated circuit (ASIC), uninterruptible power supply system, power supply and spare parts, integrated services digital network point of sale system and inverse multiplexer, cellular mobile communication network packet data network, wireless local area network (WLAN), wireless local loop (WLL) system; and import and export trading. Through its subsidiaries, Co. is also engaged in investment holding; and research, development and manufacture of bluetooth related products.

Bayer AG

Bayer is a life sciences group based in Germany. Co.'s operations are organized along three divisions: Pharmaceuticals (engaged in prescription pharmaceuticals for cardiology and women's healthcare); Consumer Health (engaged in non-prescription products in dermatology, dietary supplement, analgesic, gastrointestinal, allergy, cold and flu, foot care, sun protection and cardiovascular risk prevention categories); and CropScience (engaged in the development of seeds and plant traits; crop protection; and for gardens, the green industry and non-agricultural pest control). Co. also maintains an Animal Health business unit engaged in the development of products for farm and companion animals.

Bayerische Motoren Werke AG

Bayerische Motoren Werke is a holding company, engaged in the development, manufacture and sale of cars and motorcycles. Co. owns three brands: BMW, MINI and Rolls-Royce. Co.'s BMW automobile range encompasses the 1 Series, including coupe and convertible models; the 3 Series, including sedan, touring, coupe and convertible models; the 5 Series, including sedan and touring models; the 6 Series, including coupe or convertible; the 7 Series large sedan; the Z4 roadster and coupe; the sports utility vehicles, X3, X5 and X6 and M models. Co. also provides cars under the MINI brand and motorcycles under the BMW brand. The Rolls-Royce brand provides three cars, Phantom, Coupe and Ghost.

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.

Chugai Pharmaceutical Co. Ltd.

Chugai Pharmaceutical is a pharmaceutical company. Along with its subsidiaries, Co. is engaged in the research and development of new prescription medicines and the subsequent manufacturing, marketing and distribution activities. Co. sells its pharmaceutical products to the nationwide appointed stores in Japan, as well as in overseas, such as Germany, the U.K., France, Taiwan, China, South Korea and the U.S. Co., through its subsidiaries, is also involved in the management of research facilities, and the research on drug discovery, as well as the provision of literature research services for pharmaceutical information, and pharmaceutical academic information.

Demant A/S

William Demant Holding is a holding company. Through its subsidiaries, Co develops, manufactures and sells products and equipment designed to aid the hearing and communication of individuals. Co. focuses on four areas: Hearing Devices, Diagnostic Instruments, Hearing Implants and Personal Communication. Co.'s hearing devices include Oticon, Bernafon, Sonic, Phonic Ear, and FrontRow. Co.'s Hearing implant consist of Oticon Medical. Co.'s diagnostic instruments include Maico, Interacoustics, Amplivox, Grason-Stadler, MedRx, and Micromedical. Co.'s personal communication consists of Sennheiser Communications.

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.

DTS Corp.

DTS is mainly engaged in the provision of information services. Along with its subsidiaries, Co. provides consulting in relation to the development of information system to the finance and public sector and corporate customers including telecommunications, manufacturing, retail, distribution, air transportation and others as well as design, development, operation and maintenance of systems, in-house developed solutions and ERP solutions. It is also engaged in design of total information systems including cloud-service and virtualization systems, operation and monitoring of the system operation either through personnel or remote access.

En-Japan Inc.

en-japan is mainly engaged in online job information businesses. Co. has two business segments. The Recruitment segment is engaged in the provision of working people's job information services, job change consulting services, temporary placement information services and part time job information services through websites, as well as the staff introduction and dispatching services. It is also engaged in the provision of online recruitment information for students. The Education and Evaluation segment is engaged in the planning and operation of training programs, as well as the support of establishment of human resource and evaluation systems.

Fresenius SE & Co. KGaA

Fresenius is a health care group providing products and services for dialysis, hospitals and outpatient medical care. Co. operates four business segments: Fresenius Medical Care; Fresenius Kabi; Fresenius Helios; and Fresenius Vamed. Fresenius Medical Care provides dialysis care and dialysis products for patients with chronic kidney failure. Fresenius Kabi is engaged in the provision of generic drugs, infusion therapies, clinical nutrition products, related medical devices and transfusion technology. Fresenius Vamed manages projects and provides services for hospitals and other health care facilities. Fresenius Helios is a private hospital operator which only operates in Germany.

Fujikura Ltd

Fujikura is mainly engaged in the manufacture, sale and installation of telecommunication cable, electric cable and electronic materials. Along with its affiliates, Co. operates in four business segments: power & telecommunication systems, electronics business, automotive products and real estate. Co.'s principal products include power cables, telecommunication cables, aluminum wires, enameled wires, optical fibers, optical fiber cables, telecommunication and optical components, fiber optic equipment, network equipment, flexible printed circuits, electronic wiring, HDD components, connectors, automotive wire harnesses, and others. Co. is also engaged in the leasing of real estate.

Fujitsu Limited

Fujitsu is the parent company of a group engaged in the information and communication technology businesses. Technology Solutions segment provides system integration, application development and integration, system consulting, IT and business process outsourcing services, cloud computing, SAP and Oracle applications services and managed infrastructure services (network and communication, technical and maintenance and service desk services). The segment also offers security platforms, servers, storage systems and software. Ubiquitous Solutions segment offers desktop PCs, notebook PCs, mobile phones and wearable devices. Device Solutions segment offers LSI devices and electronic components.

Hisamitsu Pharmaceutical Co. Inc.

Hisamitsu Pharmaceutical is a pharmaceutical company. Co.'s principal divisions are pharmaceuticals and related products, and other. Co. is engaged in the manufacture and sale of pharmaceuticals and related products in Japan and overseas. Co.'s principal brands are called "SALONPAS," "Air Salonpas," "ByeBye Fever," "Lifecella Gel Mask," "MOHRUS PATCH," and "KEPLAT." Co. is also involved in the urban cable television broadcasting business and Internet connection service business; the sale and rearing of experimental animals; and the provision of non-life insurance agency services and advertising agency services.

Honda Motor Co. Ltd.

Honda Motor is the parent company of a group mainly develop, manufacture and distribute motorcycles, automobiles, power products, and also provide financing for the sale of those products. Principal manufacturing facilities are located in Japan, the United States of America, Canada, Mexico, the United Kingdom, Turkey, China, India, Indonesia, Malaysia, Thailand, Vietnam, Argentina, and Brazil. Co.'s principal business segments are motorcycles, automobiles, financial services, and power products & other business. Co.'s principal automobile products include passenger cars such as "Legend," "Accord," "Inspire," "Civic," "Insight," "City," "Acura RL," "Acura TL," "Acura TSX," and "Acura CSX".

Kanematsu Electronics Ltd.

Kanematsu Electronics is mainly engaged in the domestic trading of electronic information processing-related equipment, as well as the development and maintenance of software and hardware. Co. has two business segments. The System segment is engaged in the design and construction of information system, the provision of operation and consultation services for information system, the sale and leasing of software and information technology ("IT") system, the development and sale of software, as well as the maintenance and operation of information system. The Service & Support segment provides system-related consulting and educational services as well as maintenance services.

Koc Holding A.S.

Koc Holdings is an investment holding company. Through its subsidiaries, Co. is engaged in the business of natural gas, marketing, petroleum shipping, liquefied petroleum gas, power generation, production and trading of petroleum products and mining in the energy sector, production, trading, insurance and car rental in the automotive sector, production and sales, procurement, research and developement in the consumer durables sector, consumer finance, banking, custody, financial consulting, leasing, brokerage, real estate and portfolio management and brokerage banking in the finance sector, and tourism, trading, technology, ship construction and foreign trade in the other sectors.

MEDIATEK INC.

Mediatek is engaged in the research, development, manufacture and sales of multi-media integrated circuit ("IC"), IC for computer peripherals, IC for advanced consumer electronics, IC for other special applications and decoders of optical storage; software application design, testing, maintenance and technical consultation services for IC; the import and export of products related to IC. Co.'s product items include optical storage chipset; CD-ROM chipset and single chip, DVD-ROM chipset and single chip, CD-R/RW chipset, combi chipset; and advanced digital consumer chipset DVD-Player chipset (RF chip, servo controller chip and highly integrated chip).

Meitec Corporation

Meitec is mainly engaged in the provision of temporary and full-time staffing and engineering outsourcing services. Along with its subsidiaries, Co. operates in three business segments. The Temporary Staffing segment is engaged in the provision of temporary staffing services mainly focusing on the engineers staffing business in the manufacturing industry. The Recruiting & Placement segment is engaged in the provision of job placement and information portal site businesses for engineers. The Engineering Solutions segment is engaged in the provision of technology support services for printed-circuit board design.

NGK Insulators Ltd.

NGK Insulators and its affiliates are mainly engaged in the manufacture and sale of electric power related equipment as well as industrial ceramic and beryllium copper products; and the provision of plant engineering. Co.'s principal products include insulators, hardware for insulator assemblies, current-limiting arching horn, bushing shells, fuse cut-outs, line arrester, NAS (sodium-sulfur) batteries, automotive ceramics, corrosion-resistant ceramic apparatuses, gas analyzer, industrial heating system, refractory products, radioactive waste treatment system, beryllium copper wrought products, molds and ceramic components for electronics and semiconductor manufacturing equipment.

Nihon Unisys Ltd.

Nihon Unisys is mainly engaged in the provision of information technology solution services. Co.'s principal business segments are system services, support services, outsourcing, software, and hardware. Co. offers software development, system engineering services, and consulting services. Co.'s principal services include software and hardware maintenance and support services, installation services as well as contracted information system administration services. Co. also provides software through software license agreement, and hardware through sales or lease contracts.

Nippon Shinyaku Co. Ltd.

Nippon Shinyaku is engaged in the manufacture and sale of pharmaceuticals and functional food and ingredients. The Pharmaceuticals segment is engaged in the manufacture and sale of medicines to treat urological diseases, hematologic cancer, gastrointestinal diseases, allergy, inflammation, and other diseases. Co.'s main products include "Zalutia" for urinary disorder, "Vidaza" for myelodysplastic syndrome, and "Tramal" for chronic pain. The Functional Food segment manufactures and sells health food ingredients, preservatives, protein preparations and nutritional ingredients, apices and condiments. Co. is also engaged in the provision of insurance agency and real estate leasing businesses.

Nomura Research Institute Ltd.

Nomura Research Institute is mainly engaged in the provision of consulting, financial and industrial IT services, and IT platform services. Consulting Services segment offers management consulting and system consulting services. Financial IT Solutions segment provides IT services including system development, operation outsourcing, and shared-online services for securities, insurance, banking, and other financial industries. Industrial IT Solutions segment provides IT services for distribution, manufacturing, service, and healthcare industries. IT Platform Services segment offers IT infrastructure services, managed services, and advanced information technology services.

Novo Nordisk A/S Class B

Novo-Nordisk is a global healthcare company engaged in the innovation of diabetes care. Co. also provides haemophilia care, growth hormone therapy and hormone replacement therapy. The Diabetes care business segment includes research, development, manufacturing and marketing of products within the areas of insulin, GLP-1 and related delivery systems, oral antidiabetic products (OAD) and obesity. The Biopharmaceuticals business segment includes research, development, manufacturing and marketing of products within the areas of haemophilia, growth hormone therapy, hormone replacement therapy, inflammation therapy and other therapy areas.

Obayashi Corporation

Obayashi is a general contractor engaged in the provision of building construction and civil engineering works at domestic and overseas. Co.'s principal business segments are construction (including domestic and overseas civil engineering and building construction), real estate, and others. Co.'s principal contracts include construction of government buildings, office buildings, educational and cultural facilities, hotels, commercial buildings, and sports and leisure facilities; and civil engineering projects, including tunnels, bridges, dams, river works, urban infrastructure, railroads.

Otsuka Corporation

Otsuka is an independent vendor of information technology ("IT")-related products. Along with its subsidiaries and associated companies, Co. operates in two business segments. The System Integration segment is engaged in the provision of system consulting, hardware and software sales, software development, equipment installation work, network construction, and related services. The Service and Support segment is engaged in the provision of total services for office supplies, hardware and software maintenance services, and telephone support and outsourcing services. In addition, Co., through its subsidiaries, is engaged in the repair of automobiles and the insurance agency business.

RIB Software SE

RIB Software designs, develops and sells software solutions for the construction industry and provides software maintenance, consulting and support services for its customers. Co. operates in three segments: Licence/Software, which focuses on the sale of software solutions for installation on the customer's hardware as well as on maintenance and support services for customers; Software, which as a service/cloud comprises Co.'s solution provided in the domain of online platforms for tendering and processes, project collaboration, and web services; and Professional Services, which comprises consulting and support services for supporting customers in the implementation of software.

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.

Sartorius Stedim Biotech SA

Sartorius Stedim Biotech is a provider of equipment and services for the development, quality assurance and production processes of the biopharmaceutical industry. Co.'s solutions cover fermentation, filtration, purification, fluid management and lab technologies and membrane chromatography, including various conventional lab products to biopharmaceutical laboratories. Co.'s technologies, products and services are used to develop and manufacture medications and vaccines using biological methods. Co.'s products covers all upstream and downstream steps in the production of active pharmaceutical ingredients. It specializes in single-use products and offers technical consulting and services.

SCSK Corporation

SCSK and its affiliates are mainly engaged in the provision of IT services. Co.'s services include development, maintenance and operation of enterprise systems, manufacturing management systems, management information systems, supply chain management systems and customer relationship management systems for the manufacturing, communications, distribution and financial industries. Co. also provides application management outsourcing, business process outsourcing, cloud computing, IT management and IT hardware/software sales services.

Shionogi & Co. Ltd.

Shionogi is the parent company of a group engaged in the research and development, purchase, manufacture and sale of pharmaceutical products. Co.'s principal prescription drugs are "Crestor Tablet" for hyperlipidemia treatment, "Irbetan Tablet" for antihypertensive, "Cymbalta Capsule" for treatment for depression and depressive symptoms, "Finibax" and "Finibax Kit" for carbapenem antibiotic, "Differin Gel" for acne vulgaris treatment, "Pirespa Tablet" for idiopathic pulmonary fibrosis treatment, and "OxyContin Tablet" and "OxiNorm Powder" for cancer pain analgesic, and OTC drugs including "Sedes First," "Sedes Hi G," "Pylon," "Rapiacta Bag" and "Rapiacta Vial."

Sumitomo Dainippon Pharma Co. Ltd.

Sumitomo Dainippon Pharma is engaged in the manufacture, sale/purchase, and import/export of pharmaceuticals, food additives, veterinary products, diagnostic agents and research materials. Pharmaceutical segment manufactures and sells medical and general pharmaceuticals including hypertension and angina drugs, digestive tract function prokinetic agents, peripheral circulation stimulant, and carbapenem antibiotics. Other business segment manufactures, purchases and sale of veterinary medicines, food additives, industrial chemicals, extracts, diagnostic drugs and materials for research and inspection; purchases and sells feed and feed additives.

Taiwan Semiconductor Manufacturing Co. Ltd.

Taiwan Semiconductor Manufacturing is a foundry in the semiconductor industry which engages mainly in the manufacturing, selling, packaging, testing and computer-aided design of integrated circuits and other semiconductor devices and the manufacturing of masks. Co. also engages in the researching, developing, designing, manufacturing and selling of solid state lighting devices and related applications products and systems, and renewable energy and efficiency related technologies and products. Co.'s products include logic semiconductors, mixed-signal/radio frequency semiconductors, CMOS image sensor semiconductors and high voltage semiconductors.

Toda Corporation

Toda is a general contractor mainly engaged in the construction and engineering work in Japan and overseas. Architectural Construction segment is engaged in the research, planning, design, management and execution of building construction and civil engineering work, the provision of architectural and comprehensive engineering and the provision of consulting related to construction projects in Japan and overseas. Civil Engineering segment is engaged in the provision of civil engineering work including highway, bridge and tunnel construction in Japan. Real Estate segment is engaged in the sale, leasing and brokerage of real estate, as well as the management of buildings.

Topco Scientific Co. Ltd.

TOPCO SCIENTIFIC CO., LTD. is a Taiwan-based company principally engaged in the distribution of semiconductor related products. The Company provides semiconductor materials, including silicon wafers, solar silicon wafers, thermal couples, fluoro thermoplastics, polished wafers, epitaxy wafers, reclaim wafers, insulating materials and others, as well as liquid crystal display (LCD)/electronic materials and optoelectronic products, including light emitting diode (LED) chips, liquid crystal module (LCM) processing equipment and other products. The Company is also involved in environmental protection business, as well as the provision of solar related products. The Company distributes its products primarily in domestic market.

Toyota Industries Corp.

Toyota Industries is mainly engaged in the manufacture and sale of automobiles, industrial vehicles and textile machinery, as well as logistics business. Co. operates in three business segments: automobile, industrial vehicle and textile machinery. The Automobile segment manufactures and sells automobiles, engines and compressors for automotive air-conditioners, foundry pieces and electronic equipment. The Industrial Vehicle segment provides forklift trucks, warehouse equipment, automatic warehouse, vehicles for high-place work. The Textile Machinery segment offers weaving machines and spinning machines, as well as yarn quality measurement equipment and cotton grading equipment.

Toyota Motor Corp.

Toyota Motor is an automobile manufacturer. Co. is primarily engaged in the design, manufacture, and sale of sedans, minivans, compact cars, sport-utility vehicles, trucks and related parts and accessories throughout the world. Co. provides financing, vehicle and equipment leasing and certain other financial services primarily to its dealers and their customers to support the sales of vehicles and other products manufactured by Co. Co.'s principal business segments are automotive operations, financial services operations and other operations. Co. sells its vehicles in approximately 190 countries and regions, and markets for its automobiles in Japan, North America, Europe and Asia.

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.

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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