Report
Dave Nicoski ...
  • Ross LaDuke
EUR 46.69 For Business Accounts Only

Vermilion Int'l Compass: Global Equity Strategy

Commodities Bullishly Inflecting; Buy Energy, Materials

A weight-of-the-evidence approach continues to support our constructive intermediate-term outlook. Below we highlight recent positive developments and areas of the market that are actionable at current levels.

· Recent Positive Developments. Recent positive developments include the MSCI ACWI and EAFE (ACWI-US, EFA-US) breaking to new highs while the MSCI ACWI ex-US and EM (ACWX-US, EEM-US) indexes are holding above important support. Additionally, the global cyclicals vs. staples ratio (RXI-US / KXI-US) displays a bullish short-term reversal as cyclicals reassert their leadership status. Lastly, the US dollar (DXY) has weakened and commodities are bullishly inflecting -- specifically the Bloomberg Commodity index and WTI and Brent crude oil -- add exposure (more on this below)... see charts below and page 2.

· Actionable Theme: Energy and Materials. Crude oil and the Bloomberg Commodity index have been consolidating for 1.5-months, and now display bullish short-term price and RS inflections. We believe these commodities are likely to take out their 2021 highs which would provide a tailwind for the Energy and Materials Sectors -- add exposure... see page 3 and 5-11.

· Actionable Theme: Additional Cyclical Sectors. Cyclical Sectors continue to outperform relative to defensives. In today's report we highlight attractive and actionable stocks within Financials, Consumer Discretionary, and Technology... see page 4 and 11-14.
Underlyings
Acerinox SA

Acerinox is the parent company of a group engaged in the manufacture and sale of flat and long stainless steel products, and stainless steel wires. Co.'s major products include slabs, billets, black coils, plates, hot-rolled coils, hot-rolled sheets, flat bars, hot-rolled re-bars, hot-rolled black bars, engraved sheets, cold-rolled coils, cold-rolled sheets and circles. Co. also provides long stainless steel products, such as wire rods, angles, hot rolled flat bars, hot rolled re-bars, reinforced bars in coils, cold rolled re-bars, hot rolled black bars, cold drawn bars, and smooth turned bars. In addition, Co. offers wires, welding wire bars, and bars for electrodes.

ArcelorMittal

Artisan Partners Asset Management Inc. Class A

Artisan Partners Asset Management is a holding company. Through its subsidiaries, the company is an investment management firm. The company manages a range of United States, non-United States and global investment strategies that are diversified by asset class, market cap and investment style. The company provides its investment management services primarily to institutions and through intermediaries that operate with institutional-like decision-making processes by means of separate accounts and pooled vehicles. The company also provides investment advisory services to range of investors, including non-United States investors with access to several of its investment strategies.

Blackstone / GSO Senior Floating Rate Term Fund

BP PLC ADS

Canadian Natural Resources Limited

Canadian Natural Resources is an independent crude oil and natural gas exploration, development and production company. Co.'s exploration and production operations are focused in North America, largely in Western Canada; the U.K. portion of the North Sea; and CA'te d'Ivoire, Gabon, and South Africa in Offshore Africa. Co. had total proved reserves of 5.71 billion barrels of oil equivalent. Co.'s gross proved crude oil, bitumen (thermal oil), synthetic crude oil and natural gas liquids reserves totaled 4.70 billion barrels and its gross proved natural gas reserves totaled 6,106.00 billion cubic feet.

Cenovus Energy Inc.

Cenovus Energy is in the business of development, production and marketing of crude oil, natural gas and natural gas liquids ("NGLs") in Canada with refining operations in the U.S. Co. operates in two business segments: Upstream, which includes Co.'s development and production of crude oil, NGLs in Canada, is organized into two operations: Oil sands and conventional; and Refining and Marketing, which is focused on the refining of crude oil products into petroleum and chemical products at two refineries located in the U.S. This segment also markets Co.'s crude oil and natural gas, as well as third-party purchases and sales of product.

China Petroleum & Chemical Corporation Class H

Companhia Vale do Rio Doce CEDEAR

Energy Income Fund

Energy Income Fund is a closed-end investment fund company. The Fund's investment objectives are to provide unitholders of the Fund with monthly cash distributions and to achieve a total return on a portfolio of securities that is greater than the total return provided by the benchmark index, as selected by the Manager, from time to time. As of Dec 31 2010, the Fund had total assets of C$48,358,125 and total investments at fair value of C$47,527,323.

Evercore Inc Class A

Evercore is a holding company. Through its subsidiaries, the company is an investment banking advisory firm. The company's segments include: Investment Banking, which includes the advisory business through which it provides advice to clients on mergers, acquisitions, divestitures, shareholder activism and other corporate transactions, and the Evercore International Strategy and Investment business through which it provides macroeconomic, policy and fundamental equity research and agency-based equity securities trading for institutional investors; and Investment Management, which includes the wealth management business through which it provides investment advisory, wealth management and fiduciary services.

FP Newspapers

FP Newspapers through a 49% interest in FP Canadian Newspapers Limited Partnership owns the Winnipeg Free Press, the Brandon Sun, and their related businesses, as well as the Canstar Community News division, the publisher of eight community and special interest newspapers in the Winnipeg region.

JFE Holdings Inc.

JFE Holdings is a holding company. Co.'s principal business segments are steel, engineering, and trading. Co., through its subsidiaries and associated companies, is engaged in the manufacture and sale of steel products including sheets, plates, shapes, pipes and tubes, stainless and specialty steels, electrical steels, bars and wire rods, and iron powders; and the provision of engineering services in such fields as energy industries, environmental industries, and water and waste water facilities; as well as the domestic and overseas trading including both importing and exporting, mainly steel products, but also raw materials for steel, non-ferrous metals, chemicals, machinery and ships.

KunLun Energy Co. Ltd.

Kunlun Energy is an investment holding company. Through its subsidiaries, associates and joint ventures, Co. is engaged in the exploration and production of crude oil and natural gas in the People's Republic of China (the PRC), the Republic of Kazakhstan, the Sultanate of Oman, Peru, the Kingdom of Thailand, the Azerbaijan Republic, and the sales of natural gas, Liquefied Natural Gas (LNG) processing, LNG terminal and transmission of natural gas in the PRC. Co. has two operating segments: Exploration and Production; and Natural Gas Distribution. As of Dec 31 2014, Co. had 65.0 million barrels of proven crude oil reserves and 79.95 billion cubic feet of proven natural gas reserves.

MFS Intermediate Income Trust

NIPPON STEEL CORP.

Nippon Steel & Sumitomo Metal and its affiliates are mainly engaged in the manufacture and sale of steel products, chemicals and nonferrous metals. Co. is also involved in the engineering and construction works; the manufacture and sale of semiconductor components and materials, electronic components and materials, metal-processed products, and ceramic components and materials; the manufacture and sale of chemicals products, coke and coal tar chemicals products and electronic materials; and the provision of engineering and consulting services pertaining to computer systems.

NLMK (GDR)

OMV AG

OMV is an international energy company with activities in Exploration and Production (E&P), Refining and Marketing including petrochemicals (R&M), and Gas and Power (G&P). Co. explores and develops oil and gas resources and supply energy to over 100 million people. OMV has three operating segments: Exploration and Production (E&P), Refining and Marketing, including petrochemicals (R&M), and Gas and Power (G&P), as well as the segment Corporate and Other (Co&O).

Paragon AG

Paragon develops, produces and sells electrical, electronic, and electromechanical components, devices, and systems for the automotive industry. Co.'s segments include Sensors, which develops and markets solutions for air quality within the vehicle cabin; Acoustics, which develops and markets products designed to ensure the transmission of speech from its point of origination to its destination; Cockpit, which develops and markets products for the cockpit; Electromobility, which develops and markets battery packs for utility vehicles and buses; and Body Works Kinematics, which develops and markets technical solutions for the moving parts of the automobile body, both exterior and interior.

Petro Rio S.A.

Petro Rio is an independent Brazilian oil and natural gas exploration and production (E&P) holding company. Co. maintains selected and secured strategically located exploration blocks in onshore basins in Brazil and offshore basins in Namibia, focusing its exploration and development efforts on areas that are underexplored but with high untapped hydrocarbon potential. Co. has a portfolio of 28 exploratory blocks onshore and offshore, of which 16 onshore blocks are in the Solimoes Basin, for which it is the operator with a 55% stake.

POSCO

POSCO is engaged in the manufacture and distribution of steel rolled products and plates in the domestic and overseas markets. Co. manufactures and sells a diversified line of steel products, including cold rolled and hot rolled products, stainless steel products, plates, wire rods and silicon steel sheets. Also, Co. is able to meet a broad range of customer needs from manufacturing industries that consume steel, including automotive, shipbuilding, home appliance, engineering and machinery industries. Co. operates two steel plants, Pohang Works and Gwangyang Works in the Republic of Korea.

REPSOL SA

Stelco Holdings Inc

Stelco Holdings Inc is Canada-based company and owner of one of the technologically advanced integrated steelmaking facilities in North America. The Company produce flat-rolled value-added steels, including coated, cold-rolled and hot-rolled steel products as well as metallurgical coke. With gauge, crown, and shape control, as well as reliable uniformity of mechanical properties, The Company's steel products are supplied to customers in the construction, automotive and energy industries across Canada and the United States, as well as to a variety of steel service centers, which are regional distributors of steel products. The Company operates from two facilities: LEW near Nanticoke, Ontario and HW in Hamilton, Ontario.

Suncor Energy Inc.

Suncor Energy is an energy company. Co.'s operations include oil sands development and upgrading, onshore and offshore oil and gas production, petroleum refining, and product marketing under the Petro-Canada brand. Co.'s segments include: oil sands, which develop and produce synthetic crude oil and related products through the recovery and upgrading of bitumen; exploration and production, which include offshore activity, and the exploration and production of crude oil, natural gas, and natural gas liquids; and refining and marketing, which include the refining of crude oil products, and the distribution and marketing of these and other purchased products, as well as a lubricants plant.

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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