Vermilion ETF Pathfinder: Actionable ETF research & Ideas
BIG PICTURE... see page 2-3• Bullish big picture. The path of least resistance remains higher, confirmed by: (1) major indices, led by the NASDAQ 100 (QQQ), inflecting towards new highs; (2) cyclical sectors continuing to outperform, with one exception: energy (XLE); and foreign markets continuing to strengthen, especially Europe (VGK).
• SMid > Large Caps. The small/large-cap ratio (IWM/SPY), which has corrected since January, is attempting to stabilize near trendline support. We favor small (and mid) caps so long as this support level remains intact.
• Growth > Value. Growth swiped the leadership baton from value in January and hasn't stopped for a breather since. With energy struggling to find a bottom, and with tech continuing to outperform, we side with growth.
• Equities > Treasuries & Commodities. Relative to Treasuries (TLT) and commodities (DBC), equities are breaking out to decade highs. We see no signs of these trends reversing soon.
SECTORS... see page 4-8
• Overweights: Financials (XLF), Industrials (XLI), and Tech (XLK).
• Underweights: Consumer Staples (XLP), Energy (XLE), REITs (XLRE), and Utilities (XLU).
INDUSTRIES... see page 9-10
• Cyber Security (HACK): Cyber security represents one of the few themes in tech that is not extended. Unlike semis (SOXX), this theme, represented by HACK, is just beginning to break out from a multi-month base. Buy.
• Healthcare Providers (IHF): The House's vote to repeal the Affordable Health Care Act is amplifying the already attractive technicals in HMO stocks. Most are breaking out from multi-year bases, the IHF ETF included. Buy.
INTERNATIONAL... see page 11
• Europe = Leadership. Europe is quickly eclipsing most regions, the U.S. included, as YTD leadership. Most countries are breaking out from multi-year bases, ranging from Germany (EWG) to Ireland (EIRL) to the Netherlands (EWN). Even laggard countries like Greece (GREK) and Portugal (PGAL) are bottoming. Take advantage of pullbacks.
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Aetna is a health care benefits company. The company conducts its operations in three business segments: Health Care, which provides medical, pharmacy benefit management services, dental, behavioral health and vision plans provided on both an insured basis and an employer-funded basis and businesses products and services that complement its medical products; Group Insurance, which primarily includes group life insurance and group disability products and long-term care products; and Large Case Pensions, which manages a variety of retirement products (including pension and annuity products) primarily for tax-qualified pension plans.
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.
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