Report
Dave Nicoski ...
  • Ross LaDuke
EUR 46.71 For Business Accounts Only

Vermilion Compass: Weekly Equity Strategy

Signs Point To Healthy Pullback Opportunity

The risk of a correction due to a “second wave” of infections has given way to optimism over increased monetary and fiscal stimulus and a potential COVID-19 steroid treatment. For now we view recent weakness as a countertrend move that helped correct the overbought conditions we noted last week. As long as the S&P 500 is above the 2940-2980 support zone we remain bullish and view this as a buyable pullback.

· Major Indexes Remain Above Key Support Levels; Small- & Mid-Caps Still Outperforming. The S&P 500 has held above the big support zone in the 2940-2980 area. We are constructive if the index is above this zone, though a breakdown would be a time to reduce exposure as it would signal a more significant correction is underway. We see potential for short-term resistance at 3123 from last Thursday morning's gap; the ability to fill this gap would be a bullish sign. Similarly, the Nasdaq 100, Dow Jones, MSCI ACWI, S&P 400 Mid Cap, and Russell 2000 are above their critical support levels. Additionally, RS for small- and mid-caps continue to make higher lows. All of the above suggests this is a constructive pullback opportunity... see charts below and pages 2-3.

· Discretionary vs. Staples. The ratio of Discretionary to Staples stocks gives us a crude barometer of risk appetites. With uptrends intact for both the cap- and equal-weighted ratios it tells us this recent pullback is likely to be a buying opportunity... see page 4.

· Copper vs. Gold Ratio & Treasury Yields. These two metrics have a high correlation due to their sensitivity to economic growth, and both offer ways to measure risk appetites. The copper vs. gold ratio is suggesting higher Treasury yields ahead... see page 5.

· Sector Relative Strength Rankings & Weighting Recommendations. The stay-at-home and growth areas (Technology, Communications, ZM, PTON, TDOC, AMZN, etc.) remain longer-term leadership and outperformed over the past week while the market priced-in the potential for a reclosing/slower reopen. This has created an opportunity to add exposure to cyclical value Sectors at more attractive levels.
Underlyings
Acushnet Holdings Corp.

Acushnet Holdings is a holding company. Through its subsidiaries, the company designs, develops, manufactures, and distributes golf products. The company's products include golf balls, golf clubs, wedges and putters, golf shoes, golf gloves, golf gear and golf and ski outerwear and apparel. The company is also engaged in custom imprinted golf balls. This includes printing corporate logos, tournament logos, country club or resort logos, and personalization on Titleist and Pinnacle golf balls. The company designs, assembles and sells golf clubs (drivers, fairways, hybrids and irons) under the Titleist brand, wedges under the Vokey Design brand and putters under the Scotty Cameron brand.

Ballard Power Systems Inc.

Ballard Power Systems is engaged in the design, development, manufacture, sale and service of proton exchange membrane fuel cell products for a variety of applications, focusing on the power product markets of Heavy-Duty Motive (consisting of bus, truck, rail and marine applications), Portable Power, Material Handling and Backup Power, as well as the delivery of Technology Solutions, including engineering services, technology transfer and the license and sale of Co.'s intellectual property portfolio and fundamental knowledge for a variety of fuel cell applications. A fuel cell is an electrochemical device that combines hydrogen fuel with oxygen (from the air) to produce electricity.

Brunswick Corporation

Brunswick is a global designer, manufacturer, and marketer of recreation marine products including marine engines, boats, and parts and accessories for those products. The company operates in the following segments: Marine Engine, which manufactures and markets a range of outboard, sterndrive, and inboard engine and propulsion systems under, among other brand names, Mercury, Mercury MerCruiser, Mercury Racing, and MotorGuide brands; and Boat, which manufactures and markets the following types of boats: fiberglass sport boats, cruisers, sport fishing and center-console, offshore fishing, aluminum and fiberglass fishing, pontoon, utility, deck, inflatable, tow/wake, and heavy-gauge aluminum.

Callaway Golf Company

Callaway Golf designs, manufactures and sells golf clubs (drivers, fairway woods, hybrids, irons, wedges and putters), golf balls, golf bags and other golf-related accessories. The company generally sells its golf-related products to golf retailers (including pro shops at golf courses and off-course retailers), sporting goods retailers, Internet retailers and mass merchants, directly and through its subsidiaries, and to third-party distributors in the U.S. and in various countries around the world. The company also sells pre-owned Callaway golf products through its website www.callawaygolfpreowned.com and sells Callaway golf products through its websites www.callawaygolf.com and www.odysseygolf.com.

Cree Inc.

Cree is a provider of bandgap semiconductor products for power and radio-frequency (RF) applications and lighting-class light emitting diode (LED) products. The company's products are used for applications such as transportation, power supplies, inverters, wireless systems, indoor and outdoor lighting, electronic signs and signals and video displays. The company operates in two segments: Wolfspeed, which consists of silicon carbide and gallium nitride (GaN) materials, power devices and RF devices based on silicon and bandgap semiconductor materials; and LED Products, which consists of LED chips and LED components. The company's LED chip products include blue and green LED chips based on GaN and related materials.

Dick's Sporting Goods Inc.

Dick's Sporting Goods is an omni-channel sporting goods retailer offering sports equipment, apparel, footwear and accessories. The company also owns and operates Golf Galaxy, Field & Stream and other specialty concept stores, and Dick's Team Sports HQ, an all-in-one youth sports digital platform offering scheduling, communications and live scorekeeping through its GameChanger mobile apps, free league management services, custom uniforms and fan wear, and access to donations and sponsorships. The company provides products to its customers through its retail stores and online. The company is also involved in local communities, sponsoring teams in various sports.

FuelCell Energy Inc.

FuelCell Energy is engaged in delivering distributed baseload power solutions. The company develops distributed power generation solutions and operates and provides service for the life of the power plant. The company's primary fuel cell products provide power generation for customers, including the sub-megawatt SureSource 250? and SureSource 400? in Europe, and the 1.4 megawatt (MW) SureSource 1500?, the 2.8 MW SureSource 3000?, and the 3.7 MW SureSource 4000? globally. The company's power plants utilize a variety of available fuels to produce electricity electrochemically, and produces none of the particulate pollutants associated with combustion-based power generation solutions.

Hibbett Sports Inc.

Hibbett Sports is an athletic-inspired fashion retailer primarily located in small and mid-sized communities across the country primarily in the South, Southwest, Mid-Atlantic and the Midwest regions. The company's merchandise assortment features a primary selection of brand name merchandise focusing on athletic footwear, athletic and fashion apparel, team sports equipment and related accessories. The company's Hibbett Sports stores includes free-standing stores, and stores in enclosed malls. The company's City Gear stores are located primarily in strip centers. The company's Sports Additions stores provides athletic footwear with the remainder consisting of headwear and apparel.

Johnson Outdoors Inc. Class A

Johnson Outdoors manufactures and markets seasonal outdoor recreation products used primarily for fishing from a boat, diving, paddling, hiking and camping. The company has four business segments: Fishing, which includes the Minn Kota electric motors for quiet trolling, the Humminbird sonar and GPS equipment for fishfinding, navigation and marine cartography, and Cannon downriggers for controlled-depth fishing; Camping, which includes consumer, commercial and military tents and accessories, sleeping bags, camping furniture and stoves; Watercraft Recreation, which designs and markets canoes and kayaks; and Diving, which manufactures and markets underwater diving products for recreational divers.

Malibu Boats Inc. Class A

Malibu Boats is a holding company. Through its subsidiary, Malibu Boats Holdings, LLC, the company is a designer, manufacturer and marketer of recreational powerboats, including performance sport boats, sterndrive and outboard boats under four brands: Malibu, Axis, Cobalt, and Pursuit. The company's product portfolio is used for a range of recreational boating activities including, among others, water sports such as water skiing, wakeboarding and wake surfing, as well as recreational boating. The company also provides various accessories and aftermarket parts. The company's boats are constructed of fiberglass, available in a range of sizes, hull designs and propulsion systems (i.e., inboard, sterndrive and outboard).

Marine Products Corp.

Marine Products manufactures fiberglass motorized boats distributed and marketed through its independent dealer network. The company' product offerings include its subsidiaries, Chaparral Boats, Inc. (Chaparral) sterndrive, outboard and jet pleasure boats and Robalo Boats, LLC (Robalo) outboard sport fishing boats. The company designs, manufactures and sells recreational fiberglass powerboats in the sportboat, sport fishing and jet boat markets. The Chaparral product line includes: SSi Sport Boats, SSX Sport Boats, Surf Series, SunCoast Bowriders, OSX Sport Boats, and Vortex Jet Boats. The Robalo product line includes: Center Consoles, Cayman Bay Boats, and Dual Consoles.

MarineMax Inc.

MarineMax is a recreational boat and yacht retailer. Through its retail locations, the company sells new and used recreational boats, including pleasure and fishing boats. The company also sells related marine products, including engines, trailers, parts, and accessories. In addition, the company provides repair, maintenance, and slip and storage services; arranges related boat financing, insurance, and extended service contracts; provides boat and yacht brokerage sales; yacht charter services; and operates a yacht charter business in the British Virgin Islands. The company also owns Fraser Yachts Group S.R.L., a yacht brokerage and yacht services company with operations in various countries.

MasterCraft Boat Holdings

MasterCraft Boat Holdings is a holding company. Through its subsidiaries, the company is a designer, manufacturer, and marketer of recreational powerboats sold under MasterCraft, NauticStar, Crest, and Aviara brands. The company's segments include: MasterCraft, which produces MasterCraft and Aviara boats for water skiing, wakeboarding, wake surfing, and general recreational boating; NauticStar, which produces boats for saltwater fishing and general recreational boating; and Crest, which produces pontoon boats which are primarily used for general recreational boating. In addition, the company provides various accessories, including trailers and aftermarket parts.

Plug Power Inc.

Plug Power is a provider of alternative energy technology focused on the design, development, commercialization and manufacture of hydrogen and fuel cell systems used for the material handling and stationary power markets. The company's products and services include: GenDrive, which is a hydrogen fueled proton exchange membrane fuel cell system providing power to material handling electric vehicles, electric forklifts and ground support equipment; GenFuel, which is a hydrogen fueling delivery, generation, storage and dispensing systems; and ProGen, which is a fuel cell stack and engine technology that used in mobility and stationary fuel cell systems, and as engines in electric delivery vans.

Polaris Inc.

Polaris designs, engineers and manufactures powersports vehicles which include, off-road vehicles, including all-terrain vehicles and side-by-side vehicles for recreational and utility use, snowmobiles, motorcycles, global adjacent markets vehicles, including commercial, government and defense vehicles, and boats. The company's products, together with related Parts, Garments and Accessories, as well as aftermarket accessories and apparel, are sold through dealers, distributors and retail stores principally located in the United States, Canada, Western Europe, Australia and Mexico.

Pool Corporation

Pool is a wholesale distributor of swimming pool supplies, equipment and related leisure products and a distributor of irrigation and related products. The company's products include: maintenance products; repair and replacement parts for pool equipment; packaged pool kits including walls, liners, braces and coping for in-ground and above-ground pools; pool equipment and components for new pool construction and the remodeling of existing pools; irrigation and related products; building materials; commercial products; and other pool construction and recreational products, which consist of a number of product categories and include discretionary recreational and related outdoor lifestyle products.

Smith & Wesson Brands, Inc.

Sportmans Warehouse Holdings

Sportsman's Warehouse Holdings is a holding company. Through its subsidiaries, the company is an outdoor sporting goods retailer that carries merchandise from manufacturers such as Browning, Carhartt and Coleman. The company also carries private label and make-up offerings under the Rustic Ridge?, Killik?, Lost Creek and Sportsman's Warehouse brands as well as make-up items through vendors such as Tikka, and Camp Chef. Further, the company provides its customers with various in-store, technical support services such as gunsmithing and firearm service plans. The company's stores are organized into six departments: Camping; Clothing; Fishing; Footwear; Hunting and Shooting; and Optics, Electronics, Accessories and Other.

Sturm Ruger & Company Inc.

Sturm, Ruger & Company is primarily engaged in the design, manufacture, and sale of firearms to domestic customers. The company has two reportable operating segments, which are firearms and castings. The firearms segment manufactures and sells rifles, pistols, and revolvers under the Ruger name and trademark. Most firearms are available in several models based upon caliber, finish, barrel length, and other features. The castings segment manufactures and sells investment castings made from steel alloys and metal injection molding (MIM) parts for internal use in the firearms segment. The castings and MIM parts sold to outside customers, either directly or through manufacturers' representatives.

Vista Outdoor Inc

Vista Outdoor is a designer, manufacturer and marketer of consumer products in the outdoor sports and recreation markets. The company's Outdoor Products product lines are action sports, archery/hunting accessories, outdoor cooking, golf, hydration products, optics, shooting accessories and tactical products. The Shooting Sports segment designs, develops, produces, and sources ammunition and firearms for the hunting and sport shooting markets, as well as ammunition for local law enforcement, the U.S. government and international markets. The Shooting Sports product lines include centerfire ammunition, rimfire ammunition, shotshell ammunition, reloading components, and firearms.

YETI Holdings

Yeti is a designer, marketer, and distributor of products for the outdoor and recreation market which are sold under the YETI brand. The company's product portfolio is comprised of three categories: Coolers and Equipment; Drinkware; and Other. The company's Coolers and Equipment category includes hard coolers, soft coolers, outdoor equipment and other products, as well as accessories and replacement parts for these products. The company's Drinkware category includes its stainless-steel drinkware products and related accessories. In addition, the company's Other category is primarily comprised of ice substitutes, and YETI-branded gear, such as shirts, hats, and other miscellaneous products.

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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