Report
Dave Nicoski ...
  • Ross LaDuke
EUR 46.93 For Business Accounts Only

Vermilion Compass: Weekly Equity Strategy

Breakaway Gaps In Place

Last week we noted some deterioration in market dynamics, all while reiterating our overall constructive outlook looking weeks and months ahead. The fact is, “perfectly bullish” conditions rarely exist, and a weight of the evidence approach is necessary. To that end, the positives continue to outweigh the negatives and our outlook remains constructive.

· S&P 500 Breakaway Gap. The S&P 500 broke out to all-time highs this past Thursday, and yesterday displayed some upside follow through, starting the week off with a bullish breakaway gap. Short-term gap support is at 4047 and goes down to 4020; if this gap from 4020-4047 stays unfilled, it would be a very bullish sign. Below 4020, we see important support in the 3984-4000 range. We continue to believe the SPX is likely headed toward the red dashed trendline resistance on the megaphone pattern... see chart below.

· Large-Cap Technology & Russell 1000 Growth. In addition to the S&P 500's breakout to new highs, another notable development is that large-cap Technology (XLK) and Russell 1000 Growth (IWF) broke above their short-term resistance levels at $135 and $246, respectively. These levels are now support to watch. Much like the S&P 500, these also appear to be breakaway gaps -- for now... see page 2.

· Value vs. Growth. Value vs. growth ratios have been battling it out for the past month across all market caps. Growth has the upper hand in the very short-term, but it is possible that growth's recent outperformance is a countertrend move before value reasserts as leadership... see page 3.

· Sector Relative Strength Rankings & Weighting Recommendations. Defensive Sectors underperformed last week as the S&P 500 surged higher, a positive sign for the broad market. Energy has pulled back and remains in consolidation mode, mirroring what is happening in WTI crude oil. $57.25 is key support on WTI... see page 4.
Underlyings
AECOM

AECOM designs, builds, finances and operates infrastructure assets for governments, businesses and organizations. The company provides: planning, consulting, architectural and engineering design services to commercial and government clients in transportation, facilities, environmental, energy, water and government markets; construction services, including building construction and energy, infrastructure and industrial construction; as well as program and facilities management and maintenance, training, logistics, consulting, technical assistance, and systems integration and information technology services, for agencies of the United States government and for other national governments.

American Vanguard

American Vanguard is a holding company. Through its subsidiary, AMVAC Chemical Corporation (AMVAC), the company is primarily a specialty chemical manufacturer that develops and markets products for agricultural, commercial and consumer uses. The company manufactures and formulates chemicals for crops, turf and ornamental plants, and human and animal health protection. These chemicals, which include insecticides, fungicides, herbicides, molluscicides, growth regulators, and soil fumigants, are marketed in liquid, powder, and granular forms. AMVAC primarily synthesizes, formulates, and distributes its own proprietary products or custom manufactures or formulates for others.

ArcBest Corporation

ArcBest is a holding company. Through its subsidiaries, the company provides a suite of freight transportation services and integrated logistics solutions. The company's operations are conducted through three reportable operating segments: Asset-Based, ArcBest, and FleetNet. The company's Asset-Based segment provides less-than-truckload services through its subsidiary, ABF Freight System, Inc., and certain other subsidiaries' motor carrier operations. The ArcBest and FleetNet reportable segments, combined, represent the company's Asset-Light operations, which provide customers end-to-end logistics solutions, designed to satisfy the supply chain and shipping requirements they encounter.

Barclays PLC ADS

BWX Technologies Inc.

BWX Technologies is a manufacturer of nuclear components, a developer of nuclear technologies and a service provider. The company operates three segments: Nuclear Operations Group, which engineers, designs and manufactures precision naval nuclear components, reactors and nuclear fuel for the U.S. Department of Energy/National Nuclear Security Administration's Naval Nuclear Propulsion Program; Nuclear Services Group, which provides services including nuclear materials processing and management and operating services; and Nuclear Power Group, which designs and manufactures commercial nuclear steam generators, heat exchangers, pressure vessels, reactor components and other auxiliary equipment.

CF Industries Holdings Inc.

CF Industries Holdings is a global fertilizer and chemical company. The company's principal nitrogen fertilizer products are anhydrous ammonia, granular urea, urea ammonium nitrate solution and ammonium nitrate. The company's other nitrogen products include diesel exhaust fluid, urea liquor, nitric acid and aqua ammonia, which are sold primarily to its industrial customers, and compound fertilizer products, which are solid granular fertilizer products for which the nutrient content is a combination of nitrogen, phosphorus, and potassium. The company serves its customers in North America through its production, storage, transportation and distribution network.

Covenant Logistics Group Inc

Covenant Transportation Group is a holding company. Through its subsidiaries, the company provides truckload transportation and brokerage services through truckload services (Truckload) and Managed Freight segments. The Truckload segment consists of: Expedited, which involves high service freight with delivery standards; Dedicated, which involves longer-term contracts that allocate a specified number of tractors and trailers to a customer; Refrigerated, which includes fresh and frozen foods, pharmaceuticals, cosmetics, and other freight; and over-the-road. In addition, the company's Managed Freight segment includes freight brokerage, transportation management services, and shuttle and switching services.

CVR Partners LP

CVR Partners owns, operates, and grows its nitrogen fertilizer business. The company produces and distributes nitrogen fertilizer products, which are used by farmers to improve the yield and quality of their crops. The company's main products are ammonia and urea ammonium nitrate (UAN), an aqueous solution of urea and ammonium nitrate used as a fertilizer. The company's products are sold on a wholesale basis. The company produces nitrogen fertilizer products at two manufacturing facilities, which are located in Coffeyville, KS and East Dubuque, IL. The company primarily markets UAN products to agricultural customers and ammonia products to agricultural and industrial customers.

Dycom Industries Inc.

Dycom Industries is a provider of specialty contracting services. The company supplies telecommunications providers with a portfolio of specialty services, including program management; planning; engineering and design; aerial, underground, and wireless construction; maintenance; and fulfillment services for telecommunications providers. Additionally, the company provides underground facility locating services for various utilities, including telecommunications providers, and other construction and maintenance services for electric and gas utilities. The company supplies the labor, tools, and equipment necessary to provide these services to its customers.

EMCOR GROUP

EMCOR Group is an electrical and mechanical construction and facilities services firm. In addition, the company provides building services and industrial services. The company's services are provided to its customers through its operating subsidiaries and joint venture entities. The company engages in providing construction services relating to electrical and mechanical systems in various types of facilities and in providing various services relating to the operation, maintenance and management of facilities. The company also provides its construction services indirectly by acting as a subcontractor to general contractors, systems suppliers, construction managers, developers, property managers and other subcontractors.

Fluor Corporation

Fluor is a holding company. Through its subsidiaries, the company provides engineering, procurement, construction, fabrication and modularization, operations, maintenance and asset integrity, as well as project management services. The company serves a set of industries including oil and gas, chemicals and petrochemicals, mining and metals, transportation, power, life sciences and manufacturing. The company is also a service provider to the U.S. federal government and governments abroad; and it performs operations, maintenance and asset integrity activities for industrial clients. The company has four segments: Energy & Chemicals; Mining, Industrial, Infrastructure & Power; Diversified Services; and Government.

ICL Group Ltd.

Israel Chemicals, through its subsidiaries, extracts raw materials and utilizes processing and product formulation technologies to add value to customers in the areas of agriculture, electronics, food, fuel and gas exploration, water purification and desalination, detergents, cosmetics, medicines and vehicles. Co. operates two segments: Essential Minerals and Specialty Solutions. The Essential Minerals segment includes the ICL Potash & Magnesium, ICL Phosphate and ICL Specialty Fertilizers business lines. The Specialty Solutions segment includes four business lines: ICL Industrial Products; ICL Specialty Fertilizers; ICL Advanced Additives and ICL Food Specialties.

Intrepid Potash

Lloyds Banking Group PLC ADS

Mosaic Company

Mosaic is a producer and marketer of concentrated phosphate and potash crop nutrients. The company is organized into three reportable business segments: Phosphates, which owns and operates mines and production facilities in Florida that produce concentrated phosphate crop nutrients and phosphate-based animal feed ingredients, and processing plants in Louisiana that produce concentrated phosphate crop nutrients; Potash, which mines and processes potash in Canada and the United States and sells potash in North America and internationally; and Mosaic Fertilizantes, which produces and sells concentrated phosphates crop nutrients, phosphate-based animal feed ingredients and potash fertilizer.

P.A.M. Transportation Services Inc.

P.A.M. Transportation Services is a holding company. Through its subsidiaries, the company is a truckload dry van carrier transporting general commodities throughout the continental U.S., as well as in certain Canadian provinces. The company also provides transportation services in Mexico under agreements with Mexican carriers. The company's operations are classified into: truckload services, which generally utilize the company-owned trucks, long-term contractors, or single-trip contractors to transport loads of freight for customers; or brokerage and logistics services, which coordinate or facilitate the transport of loads of freight for customers and generally involve the utilization of single-trip contractors.

Quanta Services Inc.

Quanta Services is a provider of contracting services, delivering infrastructure solutions for the electric power, energy and communications industries in the United States, Canada, Australia, Latin America and select other international markets. The company has two segments: Electric Power Infrastructure Services, which provides network solutions to customers in the electric power industry and services that support the development of renewable energy generation; and Pipeline and Industrial Infrastructure Services, which provides infrastructure solutions to customers involved in the development, transportation, distribution, storage and processing of natural gas, oil and other products.

Roadrunner Transportation Systems

Roadrunner Transportation Systems is an asset-right transportation and asset-light logistics service provider providing a suite of solutions under the Roadrunner, Active On-Demand and Ascent Global Logistics brands. The company has three segments: Truckload and Express Services, which provides air and ground expedite services, scheduled truckload services, intermodal services, temperature-controlled truckload services, and other truckload and logistics services; Less-than-Truckload (LTL), which involves the pickup, consolidation, linehaul, deconsolidation, and delivery of LTL shipments; and Ascent Global Logistics, which provides domestic freight management solutions.

Saia Inc.

Saia is a transportation company. The company provides regional and interregional less-than-truckload (LTL) services through a single integrated organization. The company also provides customers a range of other services, including non-asset truckload, expedited and logistics services across North America. The company's subsidiary, Saia Motor Freight Line, LLC (Saia LTL Freight) is an LTL carrier that serves several states. Saia LTL Freight is engaged in providing its customers a range of regional and interregional LTL services including time-definite and expedited options. Saia LTL Freight primarily provides its customers with solutions for shipments between 100 and 10,000 pounds.

Scotts Miracle-Gro Company Class A

Scotts Miracle-Gro is a manufacturer and marketer of consumer lawn and garden products in North America. The company's segments are: United States Consumer, which consists of the company's consumer lawn and garden business located in United States; Hawthorne, which consists of the company's indoor, urban and hydroponic gardening business; and Other, which consists of the company's consumer lawn and garden business in geographies other than the United States and the company's product sales to nurseries, greenhouses and other customers. The company manufactures, markets and sells lawn and garden products in the following categories: lawn care, gardening and landscape, hydroponics, and controls.

Sociedad Quimica y Minera de Chile S.A. Series B ADS

U.S. Xpress Enterprises

U.S. Xpress Entreprises provides truckload carrier services primarily throughout the U.S. and Mexico, with a focus in the densely populated and economically diverse eastern half of the U.S. The company provides its customers a portfolio of services using its own asset-based truckload fleet and third-party carriers through its non-asset-based truck brokerage network. The company has two reportable segments, Truckload and Brokerage. The company's Truckload segment provides asset-based truckload services, including over-the-road trucking and dedicated contract services. The company's Brokerage segment is principally engaged in non-asset-based freight brokerage services, where loads are contracted to third-party carriers.

Universal Logistics Holdings Inc.

Universal Logistics Holdings is an asset-light provider of customized transportation and logistics solutions throughout the U.S., and in Mexico, Canada and Colombia. The company has five service categories: Truckload, which includes dry van, flatbed, heavy-haul and refrigerated operations;Brokerage, which provides customers freight brokerage services, domestic and international freight forwarding, and customs brokerage; Intermodal, which includes steamship-truck, rail-truck, and support services; Dedicated, which is primarily provided in support of automotive and retail customers using van equipment; and Value-Added, which are typically dedicated to individual customer requirements.

Werner Enterprises Inc.

Werner Enterprises is a transportation and logistics company engaged primarily in transporting truckload shipments of general commodities in both interstate and intrastate commerce. The company has two reportable segments: Truckload Transportation Services, which includes the medium-to-long-haul van fleet that transports a variety of consumer nondurable products and other commodities in truckload quantities over irregular routes using dry van trailers, the expedited fleet that provides truckload services, and the regional short-haul fleet that provides truckload van service across the U.S; and Werner Logistics, which is a non-asset-based transportation and logistics provider.

Yellow Corporation

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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