Report
Dave Nicoski ...
  • Ross LaDuke
EUR 226.70 For Business Accounts Only

Vermilion Compass: Weekly Equity Strategy

Taking A Breather

As the broad market takes a breather, the weight of the evidence continues to support our belief that we are in the early stages of a broad-based advance. As long as there are no significant negative market developments, a buy-the-dip mentality is warranted. Of course, the potential for a US-China tariff escalation remains a risk for the market, though that is likely to be the case for the foreseeable future.

• Sector Relative Strength Rankings (RSR) & Weighting Recommendations. Health Care, Technology, and Manufacturing round out our top three cap-weighted Sectors in terms of RSRs -- remain overweight... see page 2.

• Semiconductors and Small-Caps. Semiconductors have led the market to both the upside and downside all year, and while the SOX index is taking a breather, it is by no means breaking down. Price and RS breakdowns for the SOX index would give us reason for pause, but that is not what we are seeing at this point in time. The Russell 2000 index has broken topside 1,600-1,605 resistance, a positive development in favor of the bull camp. 1,600-1,605 is a logical support area moving forward. Additionally, the Russell 2000 A/D Line recently hit YTD highs, a sign of healthy breadth which is confirming the advance in small-caps... see charts below.

• High Yield Spreads; Interest Rates; US Dollar (DXY). High yield spreads continue to move sideways to slightly lower, a signal that a recession is becoming less and less likely. The same can be gleaned from interest rates which continue to show signs of bottoming. $98.50 is resistance to watch on the DXY... see page 3.

• More Key Levels To Monitor. Emerging market equities (EEM) and Industrials (XLI) are both testing logical support. Equal-weighted Consumer Discretionary (RCD) and global equities (ACWI) are testing logical resistance... see pages 4-5.

In today's report we highlight attractive Groups and stocks within Consumer Discretionary, Health Care, and Transportation: CD-20 Hotels & Resorts, Large/Mid-Cap, HC-29 Hospitals, and TR-14 Vehicle Rentals/Leasing... see pages 13-22.
Underlyings
AerCap Holdings N.V.

Aercap Holdings is an integrated global aviation company engaged in aircraft leasing. Co. acquires aviation assets at attractive prices, lease the assets to suitable lessees, and manage the funding and other lease related costs efficiently. Co. also provides aircraft management services. Co. operates its business on a global basis, providing aircraft to customers in every major geographical region. As of Dec 31 2017, Co. owned 980 aircraft and managed 113 aircraft.

Air Lease

Air Lease is an aircraft leasing company. The company is mainly engaged in purchasing new commercial jet transport aircraft directly from aircraft manufacturers, such as The Boeing Company and Airbus S.A.S., and leasing those aircraft to airlines. In addition to its leasing activities, the company sells aircraft from its operating lease portfolio to third parties, including other leasing companies, financial services companies, and airlines. The company also provides fleet management services to investors and owners of aircraft portfolios. The company provides aircraft to airline customers in various geographical regions, such as Asia, the Pacific Rim, Latin America, the Middle East, Europe, Africa, and North America.

CARA THERAPEUTICS

Cara Therapeutics is a clinical-stage biopharmaceutical company focused on developing and commercializing new chemical entities with a primary focus on pruritus as well as pain by selectively targeting peripheral kappa opioid receptors. The company is developing a proprietary class of product candidates, led by KORSUVA (CR845/difelikefalin), a kappa opioid receptor agonist that targets the body's peripheral nervous system, as well as certain immune cells. The company's primary product candidate, CR845/difelikefalin, is a chemical entity, which is designed to selectively stimulate kappa, rather than mu, and delta opioid receptors outside of the CNS.

Choice Hotels International Inc.

Choice Hotels International is a hotel franchisor. The company franchises lodging properties under the following proprietary brand names: Comfort Inn?, Comfort Suites?, Quality?, Clarion?, Clarion Pointe?, Sleep Inn?, Econo Lodge?, Rodeway Inn?, MainStay Suites?, Suburban Extended Stay Hotel?, WoodSpring Suites?, Cambria? Hotels, and Ascend Hotel Collection?. The company's primary segment is the hotel franchising business. The company's domestic franchising operations are conducted through direct franchising relationships while its international franchise operations are conducted through a combination of direct franchising and master franchising relationships.

Fortress Transportation and Infrastructure Investors LLC

HCA Healthcare Inc

HCA Healthcare is a holding company. Through its subsidiaries, partnerships and joint ventures (collectively, its affiliates), the company owns and operates hospitals and related health care entities. These affiliates owned and operated hospitals, freestanding surgery centers and provided outpatient and ancillary services. The company also operates outpatient health care facilities, which include freestanding ambulatory surgery centers freestanding emergency care facilities, urgent care facilities, walk-in clinics, diagnostic and imaging centers, rehabilitation and physical therapy centers, radiation and oncology therapy centers, physician practices and various other facilities.

Hilton Worldwide

Hilton is a holding company. Through its subsidiaries, the company was a hospitality company. The company's brand portfolio includes its luxury and lifestyle hotel brands, Waldorf Astoria Hotels & Resorts, LXR Hotels & Resorts, Conrad Hotels & Resorts and Canopy by Hilton; its full service hotel brands, Hilton Hotels & Resorts, Curio Collection by Hilton, DoubleTree by Hilton, Tapestry Collection by Hilton and Embassy Suites by Hilton; its service hotel brands, Motto by Hilton, Hilton Garden Inn, Hampton by Hilton, Tru by Hilton, Homewood Suites by Hilton and Home2 Suites by Hilton; and its timeshare brand, Hilton Grand Vacations.

Hyatt Hotels

Hyatt Hotels is a hospitality company engaged in the development, ownership, operation, management, franchising, licensing or provision of services to a portfolio of properties, consisting of full service hotels, select service hotels, resorts, and other properties, including spas and fitness studios, timeshare, fractional, and other forms of residential and vacation properties. The company also manages, provides services to, or licenses its trademarks with respect to residential ownership units that are often adjacent to a Hyatt-branded hotel. Additionally, for condominium ownership units, the company provides services and/or manage the rental programs or homeowner associations associated with such units.

Marriott International Inc. Cl A

Marriott International is an operator, franchisor, and licensor of hotels, residential and timeshare properties. The company's Luxury hotel brands include JW Marriott, The Ritz-Carlton, St. Regis, W Hotels, The Luxury Collection, EDITION, and Bulgari. The company's Premium hotel brands include Marriott Hotels, Sheraton, Delta Hotels, Marriott Executive Apartments, and Marriott Vacation Club, Westin, Renaissance, Le Meridien, Autograph Collection, Gaylord Hotels, Tribute Portfolio, and Design Hotels. The company's Select hotel brands include Courtyard, Residence Inn, Fairfield by Marriott, SpringHill Suites, Four Points, TownePlace Suites, Protea Hotels, Aloft, AC Hotels by Marriott, Element, and Moxy.

Marriott Vacations Worldwide

Marriott Vacations Worldwide is a vacation company that provides vacation ownership, exchange, rental and resort and property management, along with related businesses, products and services. The company's reportable segments are; Vacation Ownership, which develops, markets, sells, rents and manages vacation ownership and related products under its licensed brands; and Exchange and Third-Party Management, which includes exchange networks and membership programs comprised of exchange, getaways, interval gold and interval platinum, club interval, sales and marketing support for interval international network resorts, and operational support for interval international network resorts.

Select Medical Holdings

Select Medical Holdings is managed through four business segments: critical illness recovery hospital, which operates as an hospital within a hospital leases space from a general acute care hospital, or host hospital, and operates as a separately licensed hospital within the host hospital; rehabilitation hospital, which provides physical medicine, as well as rehabilitation programs and services; outpatient rehabilitation, which provides physical, occupational, and speech rehabilitation programs and services; and the company's subsidiary, Concentra Inc. segment, which provides a range of occupational and consumer health services through its occupational health centers and onsite clinics.

Surgery Partners

Surgery Partners is a holding company. Through its subsidiaries, the company is a healthcare services company. The company operates in three reporting segments : Surgical Facility Services, which consists of the operation of ambulatory surgery centers (ASCs) and surgical hospitals; Ancillary Services, which consists of a diagnostic laboratory and multi-specialty physician practices; and Optical Services, which consists of an optical laboratory and an optical products group purchasing organization. As of Dec 31 2017, the company owned or operated primarily in partnership with physicians, a portfolio of 124 surgical facilities comprised of 106 ASCs and 18 surgical hospitals across 32 states.

Tenet Healthcare Corp.

Tenet Healthcare is a healthcare services company. Through its subsidiaries, partnerships and joint ventures, including USPI Holding Company, Inc., the company operates hospitals, surgical hospitals and outpatient centers. In addition, the company's Conifer Holdings, Inc. (Conifer) subsidiary provides healthcare business process services in the areas of hospital and physician revenue cycle management and care solutions to healthcare systems, as well as individual hospitals, physician practices, self-insured organizations, health plans and other entities. The company has three reportable segments: Hospital Operations and other; Ambulatory Care; and Conifer.

Universal Health Services Inc. Cl B

Universal Health Services owns and operates, through its subsidiaries, acute care hospitals and outpatient facilities and behavioral health care facilities. The company owned and/or operated inpatient facilities and outpatient and other facilities located in several states including, Washington, D.C., the U.K., and Puerto Rico. Services provided by the company's hospitals include general and specialty surgery, internal medicine, obstetrics, emergency room care, radiology, oncology, diagnostic care, coronary care, pediatric services, pharmacy services and/or behavioral health services. The company's reportable operating segments consist of acute care hospital services and behavioral health care services.

Willis Lease Finance Corp.

Willis Lease Finance is a provider of aviation services whose primary focus is providing operating leases of commercial aircraft, aircraft engines and other aircraft-related equipment to air carriers, manufacturers and overhaul/repair facilities worldwide. The company separates its business into two reportable segments: Leasing and Related Operations, which leases aircraft engines and aircraft and provides related services to a group of commercial aircraft operators and maintenance, repair and overhaul organizations; and Spare Parts Sales, which primarily engages in the sale of aircraft engine parts and materials through the acquisition or consignment of engines from third parties.

Wyndham Hotels & Resorts

Wyndham Hotels & Resorts owns and operates hotels and resorts. Through its subsidiaries, the company is the world's large hotel franchisor, with more than 8,400 affiliated hotels located in over 80 countries. The company licenses its hotel brands, including Super 8, Days Inn, Ramada, Microtel Inn & Suites, La Quinta, Wingate, AmericInn, Hawthorn Suites, The Trademark Collection, and Wyndham to hotel owners in approximately 80 countries. The company's Hotel Franchising segments licenses its lodging brands and provides related services to third-party hotel owners and others. The company's Hotel Management segment provides hotel management services for full-service and limited service hotels.

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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