Report
Dave Nicoski ...
  • Ross LaDuke
EUR 233.15 For Business Accounts Only

Vermilion Int'l Compass: Global Equity Strategy

EM Breakout -- Add Exposure

The laundry list of market characteristics consistent with historical bull markets continues to grow, helping support our ongoing belief that global equities are in the early stages of a broad-based advance.

• US Dollar; EM Equities. The US dollar (DXY) exhibits signs of rolling over, something we outlined as increasingly likely in our 12/10/19 Int'l Macro Vision strategy. This is bullish for global equities -- especially EM -- and has paved the way for the MSCI EM index to break above key resistance. Add exposure... see chart below and page 2.

• Europe and Japan. The STOXX Europe 600 index is breaking topside 20-year resistance and Japan's TOPIX exhibits a bullish reversal topside its 2-year downtrend. New highs are not a sell signal... see page 3.

• Actionable Theme: Materials & Energy. In recent weeks we have pointed to improvements within these late-cyclical Sectors as helping support our bullish market outlook. In an environment where the US dollar is rolling over and EM equities are moving into a leadership position, Materials & Energy are among two of the main Sectors that stand to benefit. This is beginning to show up in the charts... see page 4.

• Actionable Theme: Manufacturing. The global Manufacturing Sector is bottoming in terms of price and RS, exactly what we would expect to see in a troughing global economy... see page 5.

• Actionable Theme: Health Care. Today's focus within Health Care is on Group HC-07 Pharmaceuticals, Japan. The Group exhibits bullish price and RS reversals -- add exposure.. see page 6.

• Actionable Theme: Apparel/Luxury Goods. Consumer Discretionary has several bright spots, e.g., Apparel & Luxury Goods. Actionable ideas include Industria de Diseno Textil, S.A. (ITX-ES), Kering SA (KER-FR), Prada S.p.A. (1913-HK), and boohoo group Plc (BOO-GB)... see page 7.
Underlyings
Aida Engineering Ltd.

Aida Engineering is mainly engaged in the manufacture and sale of automated press machines, industrial robots and dies. Co. offers multipurpose servo presses, precision forming presses, mid and large-size presses, high-speed automatic press machines and cold forging presses. Co. also offers conveyor equipment including transfer units, material-handling robots and servo transfer units, as well as coil feeders and tooling dies. In addition, Co. is engaged in the provision of spare parts, maintenance, equipment upgrading and overhaul services. Co. operates its operations in Japan, Asia, the U.S., Canada, Mexico, Brazil and Europe.

Bharat Forge Ltd

Bharat Forge Limited is engaged in the business of steel forgings, finished machined crankshafts, and front axles assembly and components. The Company's segments include Forgings and Projects (Capital goods). Forgings produces and sells steel forging products comprising forgings, finished machined crankshafts, front axle assembly and components, and ring rolling, among others. Projects (Capital goods) include engineering, procurement and commissioning business for power and infrastructure related projects. It manufactures a range of components for various sectors, including automobiles (across commercial and passenger vehicle), oil and gas, aerospace, locomotives, marine, energy (across renewable and non-renewable sources), construction, mining and general engineering. It has factories at Pune, Satara and Baramati. Its manufacturing facilities are spread across India, Germany, France and Sweden. It operates in Delhi, Noida, Hyderabad, Jamshedpur, Kolkata, Chennai and Mumbai.

Carl Zeiss Meditec AG

Carl Zeiss Meditec is a holding company. Co.'s businesses are focused on two primary areas: Ophthalmology and Microsurgery. In Ophthalmology, Co.'s operations are divided in to two strategic business units: Ophthalmic Systems, which includes a range of laser and diagnostic systems for ophthalmology; and Surgical Ophthalmology, which consists of activities in the field of ophthalmic implants and consumables. In Microsurgery, Co. provides surgical microscopes and visualization solutions, e. g. for ear, nose and throat surgery, or neurosurgery. These products are mainly used to assist with the removal of tumors, as well as the treatment of vascular diseases and functional disorders.

CGG
CGG

CGG is a global participant in the geophysical seismic industry. Co. manufactures geophysical equipment and provides marine, land, and airborne data acquisition services. Co. also provides geosciences services, including data imaging, seismic data characterization, geosciences and petroleum engineering consulting services, and collecting, developing and licensing geological data. Co.'s clients are in oil and gas exploration and production industies. Co. divides its activities into four segments: Equipment, Contractual Data Acquisition, Geology, Geophysics and Reservoir (GGR), and Non-Operated Resources, including eight business lines, six Corporate functions, and four Group Departments.

Companhia Vale do Rio Doce CEDEAR

Divi's Laboratories Limited

Divi's Laboratories is a manufacturer of Active Pharmaceutical Ingredients and Intermediates. The major portion of its turnover is on account of export of its products to European and American countries. Co.'s product portfolio comprises two segments i) Generic APIs (active pharma ingredients) and Nutraceuticals and ii) Custom Synthesis of APIs, intermediates and specialty ingredients for innovator pharma giants. Co. has two Subsidiaries viz., Divis Laboratories (USA) Inc., and Divis Laboratories Europe AG looking after manufacturing and marketing of Neutraceutical products in North American and European Countries.

Faurecia SA

Faurecia is an automobile equipment supplier based in France. Co.'s activities can be divided into four business units: Automotive Seating (design of vehicle seats, manufacture of seating frames and adjustment mechanisms, and assembly of complete seating units); Emissions Control Technologies (design and manufacture of exhaust systems); Interior Systems (design and manufacture of instrument panels, door panels and modules, and acoustic components); and Automotive Exteriors (design and manufacture of front ends and safety modules). Some of Co.'s customers are PSA Peugeot Citroen, VW Group, Renault-Nissan, Ford Group, BMW and GM Group.

Fortescue Metals Group Ltd

Fortescue Metals Group is an iron ore producer. As of June 30 2016, Co.'s operations had four mine sites in the Pilbara. The Chichester Hub, which includes the Cloudbreak and Christmas Creek mines, is located in the Chichester Ranges and the Solomon Hub, in the Hamersley Ranges, includes the Firetail and Kings Valley mines. Co. owns and operates an integrated supply chain including its Herb Elliott Port in Port Hedland and a heavy haul railway with over 620km of track. As of June 30 2016, Co.'s total hematite ore proved and probable reserves were 2.17 billion tonnes. Also, as of June 30 2016, Co.'s total magnetite ore proved and probable reserves were 705.0 million tonnes.

GALP Energia SGPS SA Class B

Galp Energia is a holding company. Through its subsidiaries, Co. operates in the following segments: exploration and production, with activities relating to exploration, development and production of hydrocarbons, particularly in Angola, Brazil and Mozambique; refining and marketing, which owns refineries in Portugal and also includes activities relating to the retail and wholesale commercialization of oil products; and gas and power, which covers the purchasing, commercialization, distribution and storage of natural gas and electric and thermal power production. As of Dec 31 2014, Co. had proved and probable reserves of 638.0 million barrels of oil equivalent.

Harmonic Drive Systems Inc.

Harmonic Drive Systems is mainly engaged in the manufacture and sale of precision actuators and controllers of precision speed reducer equipment that combine motors and sensors, precision positioning devices and systems, as well as precision speed reducer equipment, and the sale of precision planet speed reducer equipment. Through its affiliates, Co. is also engaged in the development, manufacture and sale of harmonic drive products, mechatronics products, cast iron products, electronic devices for marine, industry, as well as information system equipment and hydraulic equipment. Co. provides products under the brand names "HarmonicDrive®," "AccuDrive®" and "Harmonicsyn®."

HI-LEX

Hi-Lex and its affiliates are mainly engaged in the manufacture and sale of control cables and window regulators for automobiles, industrial equipment, housing equipment and marine vessels. Co.'s principal products include pull cables, transmission control cables, manual transmission cables, seat cables, window regulators, power sliding door systems, direct window openers and power lift gate systems for automobiles; control boxes, steering systems and control cables for marine vessels; accelerator actuators, push-pull actuators, accelerator levers and assist cables for industrial equipment; and medical equipment including guide wires and angiographic catheters.

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.

INPEX CORPORATION

INPEX is mainly engaged in the energy supply business on a global scale. Co.'s operations include acquisition of license blocks for oil and gas fields, exploration, development, production and sales of oil, natural gas and other mineral resources. Co. is involved in about 70 upstream projects located in 20 countries around the world such projects as "Sebuku Block Ruby Gas Field," "Abadi LNG Project," "Tangguh LNG Project," "Ichthys LNG Project," "Bayu-Undan Project," "Prelude FLNG Project" and other. Co. is engaged in the natural gas transportation, pipeline operation, maintenance and management; the refining domestic crude oil; and the storage and shipment of petroleum products.

Kawanishi Holdings Inc.

Kawanishi Holdings is a holding company engaged in the medical equipment business. Co. has four business segments. The Medical Equipment segment is engaged in the sale of medical equipment. The Supply, Processing and Distribution ("SPD") segment is engaged in the provision of products and information management services, as well as the purchasing management services. The Nursing Care Products segment is engaged in the sale and rental of nursing-care beds and other equipment. The import sales segment sells medical equipment.

Komax Holding AG

Komax Holding, through its subsidiaries, is active in the manufacturing of machines worldwide. Co.'s business activities are focused on the development, production and sale of high-quality capital goods for precision engineering, electronics and information technology in the areas of wire-processing and automated production and assembly. The focus is on highly automated production systems for the automotive, household appliances, electronics, telecommunication, solar energy and medical technology sectors. Co. operates in three business segments: machinery; photovoltaics field; and medical technology sector.

Leo Group Co. Ltd. Class A

Leo Group Co., Ltd. is a China-based company, principally engaged in the machinery manufacturing and the provision of Internet services. The Company operates its businesses through two segments. The Machinery Manufacturing segment is engaged in the research and development, manufacture and sales of pumps, garden machinery, cleaning and plant protection machinery. The Internet Services segment mainly provides digital marketing services, digital media agency services, data integration services and precision marketing services, among others. The Company conducts its businesses in domestic and overseas markets.

Miura Co. Ltd.

Miura is mainly engaged in the manufacture and sale of boilers and other related equipment. In Japan and overseas market, Co. provides once-through boilers, hot water boilers, hot water heaters, air compressors, filtration equipment, pure water generators, oxygen removers and chemicals for boilers; thermal oil heaters, marine auxiliary boilers, composite boilers, waste heat boilers, sterilizers, vacuum boiling washers, water coolers, water desalination unit and waste oil incinerators. Co. also provides maintenance contracts, technical support and maintenance lease services.

Mochida Pharmaceutical Co. Ltd.

Mochida Pharmaceutical is a pharmaceutical company. Pharmaceutical Business segment is engaged in the research, development, manufacture and sale of pharmaceutical products including cardiovascular agents, analgesic agents, anti-diabetes agents, hormone preparations, neurological agents, anti-infective agents, emergency drugs and diagnostic reagents under the name of "Epadel," "Lexapro," "Dinagest," "Tramcet," "Atelec" and other names. Health Care segment is engaged in the manufacture and sale of skin care products including face and body care, hair care and baby care products under the name of "Collage" and "Skina Babe."

Motherson Sumi Systems Limited

Motherson Sumi Systems is engaged in the manufacturing of rearview vision systems, interior and exterior modules and wiring harness. Co.'s business portfolio comprises electrical distribution systems (wiring harnesses), automotive rearview mirrors, polymer processing and tooling, elastomer processing, metal machining, and information technolgy, engineering & design. Co. also provides manufacturing support, including compressors, paint coating equipment, auxiliary equipment for injection moulding machines and automotive manufacturing engineering services.

Nichi-Iko Pharmaceutical Co. Ltd.

Nichi-Iko Pharmaceutical is mainly engaged in the manufacture, sale, distribution, import and export of pharmaceutical products, quasi drugs and other medical products. Co. provides its products to medical institutions, such as hospitals, medical clinics and dispensing pharmacies. Its medical products are divided into ethical pharmaceutical products which are formulated according to a prescription, as well as general pharmaceutical products which can be purchased at pharmacies and drugstores without a prescription needed. Co.'s principal products include drugs used for the treatment of circulatory, digestive, respiratory, as well as central and peripheral nervous systems.

Nidec Corporation

NIDEC and its subsidiaries are primarily engaged in the design, development, manufacture and marketing of small precision motors, mid-size motors, machinery, electronic and optical components, and other products. Co.'s principal products are spindle motors for hard disk drives, motors for optical disk drives, small precision fans and other small motors; mid-size motors; test systems, measuring equipment, power transmission equipment, factory automation systems, card readers and industrial robots; camera shutters, camera lens units, switches, trimmer potentiometers, motor driven actuator units, processing and precision plastic mold products; and auto parts and pivot assemblies.

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.

Oil company LUKOIL PJSC

PJSC Lukoil is a vertically-integrated oil company engaged in the exploration and production of crude oil and natural gas. Co. is engaged in all main sectors of the modern oil business including supplies, refining, marketing, transportation, petrochemicals and oil-related activities. Co.'s operations are divided into five business segments: Exploration and Production; Refining, Marketing and Distribution; Chemicals; Power Generation and Other Business Segments. Co. owns and operates refineries in Bulgaria (LUKOIL Neftochim Bourgas AD) and Romania (Petrotel-LUKOIL).

Otsuka Holdings Co. Ltd.

Otsuka Holdings is a pharmaceutical holding company. Co. operates in four business segments. Pharmaceutical segment is engaged in the sale of ethical pharmaceutical; the manufacture, sale and export of curative medicine; as well as the research and development of pharmaceutical products. Nutraceuticals segment manufactures, purchases and sells functional beverages and foods. Consumer Products segment manufactures and sells consumer products and mineral water. Others segment is involved in the manufacture and sale of chemical products; the manufacture, import and sale of measurement instrument; and the provision of transportation and warehousing services.

Pakistan Oilfields Ltd.

Co. and its subsidiaries are principally engaged in the exploration, drilling, production and sale of crude oil and gas and other products.

PT Adaro Energy Tbk

PT Adaro Energy is an integrated coal mining and energy company based in Indonesia. Co. is a thermal coal producer from its single coal mine in Indonesia. Co. is a supplier to the global seaborne thermal coal market. Co. has approximately 4.4 billion tonnes of coal reserves and resources and is integrated from exploration through to marketing. Besides coal mining activities, Co. maintains bulk terminal and contract mining operations and has trading activities which handle both internal production and third party tonnage. Other subsidiaries are involved in infrastructure developments in support of coal production expansion.

Santen Pharmaceutical Co. Ltd.

Santen Pharmaceutical is a pharmaceutical company engaged in the research and development, production and marketing of pharmaceuticals and medical devices. Co. operations in Japan, U.S., Europe and Asia, and sells products in over 50 countries. Co. offcer prescription ophthalmic pharmaceutical products, such as treatments for corneal and conjunctival epithelial disorders, glaucoma, anti-infective ophthalmics and anti-allergy ophthalmics. Co. also officers Over-the-Counter (OTC) Pharmaceuticals including eye drops. Additionally, Co. provides ophthalmic medical devices used in cataract surgery, and cleaning services for sterilized clothes.

SSAB AB Class A

SSAB is a supplier of high strength steels with products comprising various qualities and dimensions within wear steels and structural steels. Co.'s solutions also include services, from concept to finished delivery. SSAB Wear Services also provides advice, repairs, and sales of spare parts to the aftermarket. The business is organized into three business areas; SSAB Americas, SSAB EMEA and SSAB APAC as well as the subsidiary, Tibnor, which is a steel distributor in the Nordic region. SSAB EMEA consist of Europe, the Middle East and Africa; SSAB Americas of North and Latin America; SSAB APAC of Asia, Australia and New Zealand and Tibnor of steel and metal distribution in northern Europe.

Taisho Pharmaceutical Holdings Co. Ltd.

Taisho Pharmaceutical Holdings is a pharmaceutical company based in Japan. Co.'s operations are organized along two business segments: the Self-Medication Operation group and the Prescription Pharmaceutical Operation Group. The Self-Medication segment conducts research & development, manufacturing and sales of OTC drugs, foods for specified health use and general medical and hygiene supplies. The Prescription Drug Operation segment conducts research & development, manufacturing and sales of ethical drugs. Co. is also involved in the provision of insurance services, logistics services, printing services, hotel management operations, as well as real estate leasing and management services.

Tencent Holdings Ltd.

Tencent Holdings Limited is an investment holding company principally involved in the provision of value-added services (VAS) and online advertising services. The Company operates through three main segments. The VAS segment is mainly involved in provision of online/mobile games, community value-added services and applications across various Internet and mobile platforms. The Online Advertising segment is mainly engaged in display based and performance based advertisements. The Others segment is mainly involved in provision of payment related services, cloud services and other services.

TGS-NOPEC Geophysical Company ASA

TGS Nopec Geophysical provides geoscience data to oil and gas exploration and production companies worldwide. In addition to global geophysical and geological data libraries that include seismic data, magnetic and gravity data, digital well logs, production data and directional surveys, Co. also provides advanced processing and imaging services, interpretation products, permanent reservoir monitoring and data integration solutions.

TPR
TPR

TPR is mainly engaged in the manufacture and sale of automotive components. The TPR Group segment provides powertrain parts including piston rings, cylinder liners, valve seats, valve guides, seal rings and carbon scraper rings; interior panel parts and door parts; and suspension parts including aluminum wheels, aluminum brake drums and shock absorber parts. This group also manufactures machinery related parts including control valves, rubber seal parts and infrared radiation parts. The FALTEC Group segment provides automotive exterior parts including radiator grilles, aero parts, window moldings, roof rails and floor mats, as well as automobile inspection and maintenance equipment.

Yantai Jereh Oilfield Services Group Co. Ltd. Class A

Yantai Jereh Oilfield Services Group Co., Ltd. is a China-based company, principally engaged in the manufacture of oil field equipment and the provision of oil field services. The Company is principally engaged in drilling equipment and oil & gas field engineering equipment manufacturing, equipment maintenance and accessories sales, oil field engineering technology services, as well as oil & gas field construction services. The Company conducts its businesses within domestic and overseas 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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