Report
Dave Nicoski ...
  • Ross LaDuke
EUR 235.55 For Business Accounts Only

Vermilion Compass: Weekly Equity Strategy

Remain overweight Tech-heavy Nasdaq; Large-cap Financials on the cusp of a breakout

The S&P 500's pattern of notching higher lows and higher highs since early April has continued, with the index managing to stay above 2,800 resistance for the last five trading sessions. As long as this uptrend remains intact the new resistance level to monitor is 2,873, the all-time high set in January.

• Nasdaq remains leadership; XLF on the cusp of a breakout. The tech and biotech-heavy Nasdaq continues to lead the market higher. Remain overweight. On the back of rising interest rates and a recently steepening yield curve, the XLF is on the cusp of a breakout from a descending triangle/falling wedge pattern. Given this move has been accompanied by improving relative strength, we view it as a bullish sign for both Financials and the broad market... see below.

• Sector Relative Strength Rankings (RSRs). Discretionary, Health Care, Energy, and Technology reside at the top of our RSR rankings. Remain overweight... see page 2.

• USD, Small vs. Large, Emerging Markets. The DXY remains below 95-95.50, an important resistance area that we continue to monitor. The USD's stall has coincided with a stall in the small- vs. large-cap ratio, and we are currently market-cap neutral. Recent EM weakness, partially due to the strong USD, is an area of concern. Thankfully, EM has found some support - both in terms of price and relative strength - as the dollar has topped out... see page 3.

• Treasury Yields; 10 vs. 2-yr Spread. Despite a jump in yields, the 30- and 10-year remain below resistance. Additionally, the 10-year vs. 2-year Treasury spread is showing signs of a short-term bottom, something we view as a welcome sign... see page 4.

• In today's report we highlight attractive Groups within Consumer Discretionary, Transportation, and Manufacturing: CD-18 Education Services, Large-Cap, CD-19 Education Services, Small-Cap, TR-10 Railroads, Large-Cap, and MF-15 Railroad Equipment & Products... see pages 9-20.
Underlyings
Adtalem Global Education Inc.

Adtalem Global Education provides educational services. The company's institutions and companies provide an array of programs across medical and healthcare, financial services and business and law. The company's segments include: Medical and Healthcare, which includes Chamberlain University and Medical and Veterinary Schools that provide educational programs in nursing and health professions, respectively; Financial Services, which includes Becker Professional Education that provides education serving the accounting and finance professions; and Business and Law, which includes Adtalem Education of Brazil institution that focuses in business, engineering, healthcare, law, management, medical and technology.

American Public Education

American Public Education is a provider of online and on-campus postsecondary education. The company provides online postsecondary education directed primarily at the needs of the military and public safety communities through American Public University System, Inc., an online university that includes American Military University and American Public University. The company provides on-campus nursing education to students in Ohio through National Education Seminars, Inc., which it refers to as Hondros College of Nursing (HCON). HCON provides nursing education to students in Ohio to serve the needs of the nursing and healthcare communities.

American Railcar Industries Inc.

American Railcar Industries designs and manufactures railcars and a range of components primarily for the North American railcar and industrial markets. The company also supports the railcar industry by providing a variety of railcar repair services, ranging from full to light repair, engineering and on-site repairs and maintenance through its various repair facilities, including mobile units and mini shops. The company has three segments: manufacturing, which manufactures two types of railcars, hopper and tank railcars; railcar leasing, in which customers may lease the company's hopper and tank railcars through various leasing options; and railcar services, which focus on repair, engineering and field services.

Bright Horizons Family Solutions Inc.

Bright Horizons Family Solutions is a provider of child care and early education, back-up care and educational advisory services. The company provides services under contracts with employers, who provide child care, as well as other dependent care solutions and educational advisory services. The company's service offerings include full-service center-based child care and early education, back-up care, and educational advisory services. The company operates child care and early education centers across a range of customer industries with the capacity to serve children and their families in the U.S., as well as in the U.K., the Netherlands, Canada and India.

Canadian National Railway Company

Canadian National Railway, together with its wholly-owned subsidiaries, is engaged in the rail and related transportation business. Co.'s network of approximately 20,000 route miles of track spans Canada and mid-America, from the Atlantic and Pacific oceans to the Gulf of Mexico. Co.'s network and connections to all Class I railroads provide access to all three North American Free Trade Agreement nations. Co. handles and carries cargo, serving exporters, importers, retailers, farmers and manufacturers. Co. is engaged in the movement of a portfolio of goods, including petroleum and chemicals, grain and fertilizers, coal, metals and minerals, forest products, intermodal and automotive.

Canadian Pacific Railway Limited

Canadian Pacific Railway operates a transcontinental railway in Canada and the U.S. Co.'s business mix includes bulk commodities, merchandise freight and intermodal traffic, serving the principal business centers of Canada from Montreal, Quebec, to Vancouver, British Columbia, and the U.S. Northeast and Midwest regions. As of Dec 31 2016, Co. operated on a network of approximately 12,400 miles of track, of which CP owns 10,800 miles and has access to 1,600 miles under trackage rights and lease agreements. Of the total mileage operated, about 5,600 miles were located in western Canada, 2,000 miles in eastern Canada, 4,400 miles in the U.S. Midwest and 400 miles in the U.S. Northeast.

Capella Education Company

Capella Education is an online postsecondary education services company. The company's wholly owned subsidiaries include the following: Capella University, Inc., which provides a variety of doctoral, master's and bachelor's programs, primarily for working adults; Sophia Learning, LLC, which is a learning company that utilizes technology to support self-paced learning; Capella Learning Solutions, LLC, which provides online non-degree, job-ready skills, training solutions and services to individuals and corporate partners; Hackbright Academy, Inc., which is a software engineering school for women; and DevMountain, LLC, which is a software development school providing software coding education.

Career Education Corp.

Career Education's academic institutions provide education to students in a variety of disciplines through online, campus-based and blended learning programs. The company's reporting segments are: Colorado Technical University, which provides industry-relevant degree programs and academic programs in the career-oriented disciplines of business studies, nursing, computer science, engineering, information systems and technology, cybersecurity and healthcare management; and American InterContinental University, which helps personnel get the degree and provides academic programs in the career-oriented disciplines of business studies, information technologies, education and criminal justice.

GATX Corporation

GATX is a global railcar lessor. The Rail North America segment provides railcars pursuant to full-service leases under which it maintains the railcars, pays ad valorem taxes and property insurance, and provides other ancillary services. The Rail International segment leases railcars pursuant to full-service leases under which it maintains the railcars and provides services according to customer requirements. The Portfolio Management segment leases aircraft spare engines, as well as five liquefied gas-carrying vessels. The American Steamship Company segment provides waterborne transportation of dry bulk commodities such as iron ore, coal, limestone aggregates, and metallurgical limestone.

Grand Canyon Education Inc.

Grand Canyon Education is an educational services company focused on providing support services to institutions in the post-secondary education sector. The company's services include: Technical and Academic Services, which provides services that relate to the ongoing maintenance of its client's educational infrastructure, including online course delivery and management, student records, assessment, customer relations management and other internal administrative systems; Counseling Services and Support, which includes team-based counseling and other support for prospective and existing students of its client as well as financial aid processing; Marketing and Communication; and Back Office Services.

Greenbrier Companies Inc.

Greenbrier Companies is a holding company. Through its subsidiaries, the company designs, manufactures and markets railroad freight car equipment in North America, Europe, the Gulf Cooperation Council and South America. The company has three segments: Manufacturing, which produces conventional railcars, tank cars, intermodal railcars, automotive and is involved in marine vessel fabrication; Wheels, Repair and Parts, which includes reconditioning of wheels and axles in addition to new axle machining and finishing and downsizing; and Leasing and Services, which includes railcar maintenance management, railcar accounting services, total fleet management, administration and railcar remarketing.

Norfolk Southern Corporation

Norfolk Southern is a holding company. Through its subsidiaries, the company is engaged in the rail transportation of raw materials, intermediate products, and finished goods primarily in the Southeast, East, and Midwest and, via interchange with rail carriers, to and from the rest of the United States. The company also transports overseas freight through several Atlantic and Gulf Coast ports. The company provides intermodal network in the eastern half of the United States. The company's railroad operates in several states and the District of Columbia. The company's system reaches manufacturing plants, electric generating facilities, mines, distribution centers, transload facilities, and other businesses in its service area.

Strayer Education Inc.

Strayer Education is an education services holding company. The company provides a range of post-secondary education and other academic programs through two wholly-owned subsidiaries: Strayer University and the New York Code and Design Academy (NYCDA). The company's subsidiary, Strayer University, provides undergraduate and graduate degree programs in business administration, accounting, information technology, education, health services administration, nursing, public administration, criminal justice, and Master of Business Administration online through its Jack Welch Management Institute. Also, through its subsidiary, NYCDA, the company provides non-degree courses in web and application software development.

TPI Composites Inc.

TPI Composites is a holding company that conducts all of its business operations through its direct and indirect subsidiaries. The company is engaged as an independent manufacturer of composite wind blades for the wind energy market. The company is a supplier to its original equipment manufacturers customers in the manufacture of wind blades and related molding and assembly systems. The company uses its composite technology to supply composite products to the transportation market. The company's tooling solutions include wind blade patterns, molding and assembly systems, including modular tooling techniques. The company's geographic segments are: the United States, Asia, Mexico, Europe, the Middle East, Africa and India.

Trinity Industries Inc.

Trinity Industries is a provider of railcar products and services in North America. The company has the following reportable segments: Railcar Leasing and Management Services Group, which provides operating leases for freight and tank railcars, as well as originates and manages railcar leases for third-party investors and provides fleet maintenance and management services to industrial shippers; Rail Products Group, which manufactures freight and tank railcars in North America used for transporting a variety of liquids, gases, and dry cargo, and also provides a range of maintenance services and solutions; and All Other, which includes the company's highway products business.

Union Pacific Corporation

Union Pacific, through its operating subsidiary, Union Pacific Railroad Company, is a Class I railroad operating in the United States. The company's network included route miles, linking Pacific Coast and Gulf Coast ports with the Midwest and eastern United States. gateways and providing several corridors to key Mexican gateways. The company serves the western two-thirds of the country and maintains coordinated schedules with other rail carriers for the handling of freight to and from the Atlantic Coast, the Pacific Coast, the Southeast, the Southwest, Canada, and Mexico. The company's business mix includes agricultural products, energy, industrial, and premium.

Westinghouse Air Brake Technologies Corporation

Wabtec primarily serves the global freight rail and passenger transit industries. The company provides its products and services through two segments: Freight, which primarily manufactures and provides aftermarket parts and services for new locomotives; provides components for new and existing locomotives and freight cars; builds new commuter locomotives; and supplies rail control and infrastructure products, among others: and Transit, which primarily manufactures and services components for new and existing passenger transit vehicles, mainly regional trains, high speed trains, subway cars, light-rail vehicles and buses; and supplies rail control and infrastructure products, among others.

Zovio

Bridgepoint Educations is a provider of postsecondary education services through its academic institutions. Ashford University? offers associate's, bachelor's and master's degree programs online and is comprised of four colleges: the Forbes School of Business and Technology?, the College of Education, the College of Health, Human Services and Science and the College of Liberal Arts. University of the Rockiessm provides master's and doctoral degree programs in the social and behavioral sciences. Classes are presented in an online format, and students at University of the Rockies attend via the institution's accessible online platform, which is also available through its mobile applications.

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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