Report
Dave Nicoski ...
  • Ross LaDuke
EUR 228.35 For Business Accounts Only

Vermilion Compass: Weekly Equity Strategy

S&P 500 bullish but currently extended; Downgrading Financials

The S&P 500's 5-month uptrend remains intact, and as long as it continues we are in the bull camp. With that said, we are near the top end of the uptrend channel and could fall 2.75%-3.25% before we get to uptrend support... see chart below. Overall we believe the positives outweigh the concerns as highlighted below:

• Positives: (1) Tech, Discretionary, Health Care/biotech, and the Nasdaq are reasserting leadership and are at new price highs; (2) Large-caps (S&P 500) and small-caps (S&P 600) are also at new highs with uptrends intact; (3) Credit spreads are unalarming and are trading in a horizontal range; (4) Defensives (pharma, utilities, telecom, staples) performing with the market or underperforming in recent weeks and months; (5) Market breadth remains healthy; and (6) Growth leadership remains intact.

• Concerns: (1) While not required for U.S. strength to continue, foreign markets remain weak which dampens sentiment; (2) Potential for rising interest rates and (3) a rising USD; (4) 10's minus 2's Treasury spread still in a downtrend; and (5) The potential for inflation.

• Sector Relative Strength Rankings (RSRs) and weighting recommendations. We are downgrading Financials to market weight amid weakness from regional banks and small-caps... see pages 2-3.

• In today's report we highlight attractive Groups within Discretionary, Health Care, and Manufacturing: CD-37 Retailers, Footwear, HC-41 Optical, and MF-04 Aero Defense, Small-Cap... see pages 11-19.
Underlyings
Aerojet Rocketdyne Holdings Inc.

Aerojet Rocketdyne Holdings' operations are organized into two segments: Aerospace and Defense, which includes the company's wholly-owned subsidiary Aerojet Rocketdyne, Inc., a technology-based engineering and manufacturing company that develops and produces propulsion systems, as well as armament systems, where the company develops and manufactures several propulsion types (liquid, solid, air-breathing, and electric) for space, defense, civil and commercial applications; and Real Estate, which includes the activities of the company's wholly-owned subsidiary Easton Development Company, LLC related to the re-zoning, entitlement, sale, and leasing of its excess real estate assets.

AeroVironment Inc.

AeroVironment designs, develops, produces, supports and operates a portfolio of products and services for government agencies and businesses. The company supplies unmanned aircraft systems (UAS) and related services primarily to organizations within the U.S. Department of Defense and to international allied governments, and tactical missile systems and related services. The company's UAS business focuses primarily on the design, development, production, marketing, support and operation of UAS and tactical missile systems and the delivery of UAS-related services that provide situational awareness, remote sensing, multi-band communications, force protection and other information and mission effects.

Cooper Companies Inc.

Cooper Companies is a global medical device company. The company operates through CooperVision and CooperSurgical business units. CooperVision is a manufacturer providing products for contact lens wearers. CooperVision designs its products for astigmatism, presbyopia, myopia, ocular dryness and eye fatigues with a collection of spherical, toric and multifocal contact lenses. CooperVision is engaged in myopia management and specialty eye care markets with products, such as orthokeratology and scleral lenses. CooperSurgical focuses on improving the health of women, babies and families through a portfolio of products and services including medical devices, fertility, diagnostics and contraception.

Designer Brands Inc. Class A

DSW is a footwear and accessories retailer. The company provides an assortment of brand name dress, casual and athletic footwear and accessories for women, men and kids. The DSW segment, which includes DSW stores and dsw.com, is the company's only reportable segment. For the DSW segment, the company separates its merchandise into three primary categories: women's footwear; men's footwear; and accessories and other (which includes kids' footwear).

Genesco Inc.

Genesco is a retailer and wholesaler of branded footwear, apparel and accessories. The company's segments include: Journeys Group, which includes Journeys, Journeys Kidz and Little Burgundy retail stores, e-commerce and catalog operations and sells footwear and accessories for young men, women and children; Schuh Group, which includes e-commerce operations and sells a range of branded casual and athletic footwear along with a private label offering; Johnston & Murphy Group, which includes retail stores, e-commerce and catalog operations and wholesale distribution; and Licensed Brands, which includes include the sale of footwear marketed under the Dockers? brand.

Glaukos Corp

Glaukos is an ophthalmic medical technology and pharmaceutical company focused on surgical devices and sustained pharmaceutical therapies designed to treat glaucoma. The company developed Micro-Invasive Glaucoma Surgery (MIGS) to serve as an alternative to the glaucoma treatment and management paradigm. MIGS procedures involve the insertion of a micro-scale device or drug delivery system from within the eye's anterior chamber through a small corneal incision. The company's MIGS devices are designed to reduce intraocular pressure by restoring the natural outflow pathways for aqueous humor. The company's products include iStent trabecular micro-bypass stent, and iStent Inject trabecular micro-bypass stent.

II-VI Incorporated

II-VI develops, manufactures, and markets engineered materials, optoelectronic components, and devices for a range of applications. The company has three segments: II-VI Laser Solutions, which designs, manufactures, and markets optical and electro-optical components and materials sold under the II-VI Infrared brand name; II-VI Photonics, which manufactures crystal materials, optics, microchip lasers, and optoelectronic modules for use in optical communication networks and other consumer applications; and II-VI Performance Products, which designs, manufactures, and markets infrared optical components and optical assemblies for aerospace and defense, medical and commercial laser imaging applications.

Rocket Pharmaceuticals

Rocket Pharmaceuticals is a clinical-stage, multi-platform biotechnology company focused on the development of gene therapies for rare and devastating pediatric diseases. The company has the following inical-stage ex vivo lentiviral vector programs enrolling patients in the U.S. and European Union for Fanconi Anemia, a genetic defect in the bone marrow that reduces production of blood cells or promotes the production of faulty blood cells, Leukocyte Adhesion Deficiency-I, a genetic disorder that causes the immune system to malfunction and Pyruvate Kinase Deficiency, a rare red blood cell autosomal recessive disorder that results in chronic non-spherocytic hemolytic anemia.

Shoe Carnival Inc.

Shoe Carnival is a family footwear retailers. The company provides customers a a range of dress, casual and athletic footwear for men, women and children with an emphasis on national name brands. The company operates stores in the states and Puerto Rico and provides online shopping at www.shoecarnival.com. The company's stores carry complementary accessories such as socks, belts, shoe care items, handbags, sport bags, backpacks, scarves and wallets, while its e-commerce site provides certain handbags, sport bags and backpacks. Women's, men's and children's non-athletic footwear categories are further divided into dress, casual, sport, sandals and boots.

Staar Surgical Co.

STAAR Surgical designs, develops, manufactures, and sells implantable lenses for the eye and delivery systems used to deliver the lenses into the eye. The company is a manufacturer of lenses used worldwide in corrective or refractive surgery. The company's principal products are implantable Collamer lenses (ICLs) used in refractive surgery and intraocular lenses (IOLs) used in cataract surgery. ICLs, consisting of the company's ICL family of products, including the Toric implantable Collamer lenses and EVO+ Visian ICL, are intraocular lenses used to correct refractive conditions. IOLs are prosthetic intraocular lenses used to restore vision that has been affected by cataracts.

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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