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

Vermilion Int'l Compass: Global Equity Strategy

The Pause that Refreshes?

We continue to believe the weight of the evidence points to a new leg higher for global equities, a viewpoint that is supported by the several international markets that are breaking out to new highs or making bullish inflections since our previous Int'l Compass (10/31/19). While developments continue to lean bullish, global equities have rallied substantially since the start of October, making it perfectly reasonable to expect some consolidation of recent gains which would allow for a more meaningful move higher.

• New Highs or Bullish Inflections. The number of international equity markets hitting new highs or making bullish inflections continues to grow. This type of price action within several developed (Denmark, Netherlands, Austria, Belgium, Portugal) and emerging (Taiwan, Korea, Russia) markets helps support our view that global equities are beginning a new leg higher... see pages 2-3.

• Japan. We have been pounding the table on Japan since mid-September, and both the TOPIX and TOPIX Small indexes are on the cusp of major long-term bullish price reversals. Additionally, Japan's JASDAQ is bullishly inflecting, suggesting the move higher in Japan may just be getting started... see page 4.

• Europe. The STOXX 600 is now approaching long-term resistance as it tests all-time highs, and the large-cap STOXX Europe 50 is breaking topside a 4-year base. Needless to say, there continues to be a plethora of attractive opportunities in Europe... see page 5.

• Actionable Themes: Materials and Energy. Materials and Energy are two Sectors we have largely passed on for most of the year, primarily due to underperformance and the absence of discernible bottoms. With early signs of bottoming for many Groups within these late-cyclical Sectors, it is time to show them some love... see pages 6-7.
Underlyings
Aichi Steel Corp.

Aichi Steel is mainly engaged in the production and sale of specialty steels, forged products, and electronic and magnetic parts. Along with its affiliates, Co. operates in four business segments. The Steel segment manufactures and sells hot-rolled steel and mold products. The Forged Products segment manufactures and sells forged products. The Electro-Magnetic Products segment is engaged in the manufacture and sale of electronic functional materials and parts, and advanced magnetic parts. The Other segment is engaged in the manufacture and sale of stainless steel structure parts and plant growth activators, the development of software, the sale of goods, and the afforestation business.

Air Water Inc.

Air Water is engaged in the manufacture and sale of industrial and medical gases, chemicals and other products. Industrial Gas Business segment supplies industrial gases, air separation systems and gas generators. Chemical Business segment manufactures basic chemicals, carbon materials, agrochemical/pharmaceutical intermediates and electronics materials. Medical Business segment offers medical gases including oxygen, nitrous oxide and liquid helium. Energy Business segment provides supply services of LP gas, kerosene and natural gas. Agriculture and Food Products Business is engaged in the production, wholesale and retail sale of ham, delicatessen products, frozen food and vegetables.

Asahi Kasei Corporation

Asahi Kasei is a holding company. Co., through its affiliates, operates in three principal business segments. Material segment manufactures and sells petrochemicals, synthetic rubber, performance materials, household products (plastic wrap and storage bags), cleaning agents, elastic polyurethane filament, and battery separators. Homes segment is engaged in the development, construction and sale of unit houses and apartment buildings; and the provision of construction materials. Health Care segment manufactures and sells pharmaceuticals, diagnostic reagents, and critical care devices. In addition, Co. is engaged in the electricity supply, engineering, and employment agency businesses.

Aurubis AG

Norddeutsche Steingut is a Germany-based manufacturer and distributor of tiles, concentrating on wall and floor tiles for the residential and commercial sector. As of December 31, 2011, Co. was operational through its two wholly owned subsidiaries Nord Ceram Fliesenproduktions und -vertriebs GmbH & Co. KG, which mass produces standard- and large-size floor tiles under the Pro brand for its own sale and for partners of the parent company; as well as Bremer Wandplatten GmbH, which produces floor and wall tiles under the BW brand. Co.concentrates on business activities in Germany

BASF SE

BASF is a chemical company based in Germany. Co. conducts its operations through five reportable segments: Chemicals, which comprises the Petrochemicals, Monomers and Intermediates divisions; Performance Products, which consists of the Dispersions & Pigments, Care Chemicals, Nutrition & Health and Performance Chemicals divisions; Functional Materials & Solutions, which comprises the Catalysts, Construction Chemicals, Coatings and Performance Materials divisions; Agricultural Solutions, which comprises the Crop Protection division; and Oil & Gas, which is composed of the Oil & Gas division.

Bluescope Steel Limited

BlueScope is a manufacturing technology company. Co.'s segments are Australian Steel Products, which produces coated and painted flat steel products for building and construction customers and commodity flat steel products; New Zealand & Pacific Steel, which consists of New Zealand Steel, Pacific Steel, New Zealand Minerals, and BlueScope Pacific Islands areas; BlueScope Buildings, which servicing the low-rise non-residential construction; Building Products ASEAN, North America and India, which producing metal coated and painted steel building products; and Hot Rolled Products North America, which includes a single site electric arc furnace producer of hot rolled coil in Ohio, the U.S.

CGG
CGG

CGG is a global participant in the geophysical seismic industry. Co. manufactures geophysical equipment and provides marine, land, and airborne data acquisition services. Co. also provides geosciences services, including data imaging, seismic data characterization, geosciences and petroleum engineering consulting services, and collecting, developing and licensing geological data. Co.'s clients are in oil and gas exploration and production industies. Co. divides its activities into four segments: Equipment, Contractual Data Acquisition, Geology, Geophysics and Reservoir (GGR), and Non-Operated Resources, including eight business lines, six Corporate functions, and four Group Departments.

Daido Steel Co. Ltd.

Daido Steel is engaged in the manufacture and sale of specialty steel products. Co.'s principal business segments are specialty steel, high performance materials and magnetic materials, parts for automobile and industrial equipment, engineering, and trading and service. Co.'s principal products are hot-rolled steel, cold-finished steel, tertiary products, nickel-based alloys, die forging, precise hot forging, welded parts, environmental equipment, industrial furnaces and accessories, powder metal, titanium products and nickel-titanium alloys. Co. is also engaged in the provision of real estate, insurance, welfare, information systems, and golf courses management services; and others.

Denka Co. Ltd.

Denka is a chemical manufacturing company. Co. is mainly engaged in the production and distribution of chemical products such as inorganic and organic materials, electronic materials and processed resin products. Co.'s principal products include styrene monomer polystyrene, ABS resin, heat resistant resin, SBC resin; calcium cyanamide, silicate phosphate fertilizer, magnesium humate soil fertilizer, flame-resistant materials, various type of cement; circuit substrates/thermally conductive sheet, electron source, ceramics powder and materials; and food packaging materials, electric insulating tape, wrapping tape, synthetic wig fiber, vaccines, and bacteria and virus diagnostic reagents.

Dowa Holdings Co. Ltd.

Dowa Holdings is a holding company. Co., through its affiliates, is engaged in the provision of environmental services and recycling; the nonferrous metal smelting and refining, and the metal production and fabrication; the manufacture and sale of electrical and electronic materials; and the management of heat treatment. Co.'s principal products include gold, silver, copper, zinc, lead, zinc alloys, platinum, compound semiconductor wafers and others. In addition, Co. is also engaged in the leasing of real estate, the construction of plants, as well as the provision of civil engineering services, office administrative services and technical development support services.

Elementis plc

Elementis is an investment and holding company. Through its subsidiaries, Co. operates as a specialty chemicals company. Co. has four segments: Personal Care, which supplies rheology modifiers based on organoclay, synthetic and natural ingredients to personal care manufacturers; Coatings, which supplies rheology modifiers and additives to manufacturers of decorative and industrial coatings; Chromium, which supplies a range of chromium chemicals for customers across a range of sectors and applications to make their products corrosion resistant and durable; and Energy, which supplies rheological modifiers and additives primarily for oil and gas drilling and stimulation activities.

GALP Energia SGPS SA Class B

Galp Energia is a holding company. Through its subsidiaries, Co. operates in the following segments: exploration and production, with activities relating to exploration, development and production of hydrocarbons, particularly in Angola, Brazil and Mozambique; refining and marketing, which owns refineries in Portugal and also includes activities relating to the retail and wholesale commercialization of oil products; and gas and power, which covers the purchasing, commercialization, distribution and storage of natural gas and electric and thermal power production. As of Dec 31 2014, Co. had proved and probable reserves of 638.0 million barrels of oil equivalent.

International Forest Products Ltd. Cl A

Interfor Corporation is a Canada-based lumber provider. The Company and its subsidiaries produce wood products in British Columbia, the United States Northwest and the United States South for sale to markets around the world. The Company operates through solid wood segment. The Company offers a range of products, including Clear Cedar Finger Joint Bevel Siding, Clear Cedar Solid Bevel Siding, Clear Cedar V-Joint Paneling, Dimension Lumber, Elite Cedar 5/4 Radius Edge Decking, Elite Cedar V-Joint Paneling, Elite Knotty Cedar Decking, Fineline Paneling, Japan Zairai-Beams, Japan Zairai-Ground Sill, Japan Zairai-Posts, Japan Zairai-Roof Structure, Japan Zairai-Small Structural, Reserve Boards, Reserve End-Matched Paneling, Reserve Lodgepole Pine Paneling, Reserve V-Joint Decking, Special Appearance Grade Cedar Timbers, Reserve Ponderosa Pine Paneling and Studs. The Company has approximately 20 mills across North America with annual capacity of over three billion board feet.

Lintec Corporation

Lintec is mainly engaged in the manufacture and sale of adhesive and paper products. Along with its subsidiaries and associated companies, Co. operates in three business segments: printing and industrial materials products, electronic and optical products, and paper and converted products. Co.'s principal products include adhesive products, label printing machines, photovoltaic ("PV") backsheets, semiconductor-related tapes and equipment, coated films for multilayer ceramic capacitor ("MLCC") production, touch panel related products, color papers for envelopes, colored construction papers, special function papers, high-grade printing papers, high-grade papers for paper products, and others.

Mitsubishi Chemical Holdings Corporation

Mitsubishi Chemical Holdings is a holding company. Co., through its subsidiaries and associated companies are engaged in the manufacture and sale of chemical products, plastic products, and pharmaceuticals. Performance Products segment provides optical films, acetyl, high performance films, aqua solutions, high performance engineering plastics, fibers & textile, advanced polymers, high performance chemicals, and lithium-ion battery materials. Chemicals segment offers methyl methacrylate (MMA), petrochemicals, and carbon products. Industrial Gases segment supplies industrial gasses to a wide range of industries. Health Care segment manufactures and sells ethical pharmaceuticals.

Mitsubishi Gas Chemical Company Inc.

Mitsubishi Gas Chemical is engaged in the manufacture and sale of organic and inorganic chemicals and advanced materials. Natural Gas Chemicals segment offers methanol, formalin, methanol synthesis catalyst, ammonia, amine and dimethyl ether. Aromatic Chemicals segment offers metaxylene, metaxylenediamini, aromatic aldehydes and plasticizers. Specialty Chemicals segment offers inorganic chemicals, organic titanates, water treatment agents, monomers and adamantane derivatives, as well as engineering plastics including polycarbonate lupilon, polyacetal lupital and high-performance polyamide. Information & Advance Materials segment offers electronic materials and oxygen absorbers.

Mitsui Chemicals Inc.

Mitsui Chemical is the parent company of a group engaged in the manufacture and sale of petrochemicals, basic chemicals, urethane, functional polymeric materials, functional chemicals and engineered materials. Co.'s principal products include optical lens materials, medical materials, catalysts, chemical products, agricultural products such as agricultural insecticide, fungicide, soil fumigation disinfectant, ant-repellent and disease prevention agents for use in living environments, as well as petrochemical raw materials, phenols, synthetic fiber raw materials, PET resin, industrial chemicals, polyethylene and polypropylene.

Nine Dragons Paper Holdings Ltd.

Nine Dragons Paper (Holdings) is principally engaged in the manufacture and sales of packaging paper, recycled printing and writing paper and specialty paper products in the People's Republic of China. Co.'s main products include: linerboard, corrugating medium and coated duplex board, as well as recycled printing and writing paper. Co.'s linerboard category consists of kraftlinerboard, testlinerboard, white top linerboard and coated linerboard). Co.'s printing and writing paper category includes uncoated woodfree paper and office paper.

OMV AG

OMV is an international energy company with activities in Exploration and Production (E&P), Refining and Marketing including petrochemicals (R&M), and Gas and Power (G&P). Co. explores and develops oil and gas resources and supply energy to over 100 million people. OMV has three operating segments: Exploration and Production (E&P), Refining and Marketing, including petrochemicals (R&M), and Gas and Power (G&P), as well as the segment Corporate and Other (Co&O).

Petronet Lng Limited

Petronet LNG develops, designs, constructs, owns and operates Liquefied Natural Gas (LNG) import and regasification terminals in India. Co. operates through the natural gas business segment. Co.'s terminals include Dahej LNG terminal, Kochi LNG terminal and Solid cargo port. Co. owns and operates a LNG regasification terminal with name plate capacity of 10 MMTPA at Dahej, in the State of Gujarat. Co. also has commissioned another LNG terminal with name plate capacity of 5 MMTPA at Kochi, in the State of Kerala. Solid Cargo Port Terminal has facilities to import/export bulk products, such as coal, steel and fertilizer.

Repsol SA

Repsol is an oil and gas company. Co. is engaged in all the activities relating to the oil and gas industry, including exploration, development and production of crude oil and natural gas, transportation of oil products, liquefied petroleum gas (LPG) and natural gas, refining, the production of a wide range of oil products and the retailing of oil products, oil derivatives, petrochemicals, LPG and natural gas, as well as the generation, transportation, distribution and supply of electricity. Co. operates in more than 40 countries. Co.'s operations are divided into four segments: Upstream, Downstream, LNG and Gas Natural Fenosa.

San-Ai Oil Co. Ltd.

San-Ai Oil is engaged in the wholesale distribution of petroleum products. Co.'s principal business segments are petroleum related, gas related and aviation related. Co. is engaged in the sale of gasoline, kerosene, fuel oil, gas oil, light oil and heavy oil; the manufacture and sale of automobile waxes for car wash machines, water-shedding coating and antiseptic agent; the provision of transportation and management of petroleum products; the sale, transportation and filling works of LP gas; the sale of gas appliances; the production and supply of city gas; the storage and supply service of aircraft fuel; the design and construction of construction works; and others.

Stora Enso Oyj Class R

Stora Enso is a provider of renewable solutions in packaging, biomaterials, wooden constructions and paper on global markets. Co.'s reporting segments are: Consumer Board, which develops and provides consumer packaging boards for printing and packaging applications; Packaging Solutions, which develops fibre-based packaging; Biomaterials, which provides a variety of pulp grades for paper, board, tissue, textile and hygiene product producers; Wood Products, which provides wood-based solutions for building and housing; Paper, which provides paper solutions for print media and office use; as well as Other, which includes Co.'s shareholding in the energy company, Pohjolan Voima.

Sumitomo Bakelite Co. Ltd.

Sumitomo Bakelite is mainly engaged in the manufacture and sale of semiconductor and display materials, high-performance plastics and quality of life products. Co.'s principal products include epoxy molding compound for encapsulating semiconductor devices "SUMIKON®ENE" and liquid epoxy resin for encapsulating semiconductor devices "SUMIRESIN EXCEL®CRP"; safety helmets for industrial use "SUMIHAT®" and plastic cutting boards "My Kitchen®"; and medical therapeutic devices and laboratory wares. In addition, Co. is involved in the provision of test and research services and property leasing services.

TATNEFT PJSC

Tatneft PJSC and its subsidiaries are engaged in crude oil exploration, development and production principally in the Republic of Tatarstan, Russia. Co. is a holding structure, which incorporates oil and gas production boards, crude oil and gas refining companies, as well as enterprises and servicing works selling the crude oil and also the products of crude oil and gas refining and petrochemical products. In addition to this, Co. is also participating in the banking and insurance activities. Co.'s operations are divided into the following main segments: Exploration and Production; Refining and Marketing; and Petrochemicals.

TGS-NOPEC Geophysical Company ASA

TGS Nopec Geophysical provides geoscience data to oil and gas exploration and production companies worldwide. In addition to global geophysical and geological data libraries that include seismic data, magnetic and gravity data, digital well logs, production data and directional surveys, Co. also provides advanced processing and imaging services, interpretation products, permanent reservoir monitoring and data integration solutions.

UBE Industries Ltd.

Ube Industries is engaged in the manufacture and sale of chemicals and cement products. Chemicals segment offers caprolactam, polyamide resins, polybutadiene, industrial chemicals, specialty products and fine chemicals. Pharmaceuticals segment offers active pharmaceutical ingredients and intermediates. Cement & Construction Materials segment offers cement, ready-mixed concrete, limestone and building materials. Machinery segment offers molding machines, industrial machinery and bridges and steel structures. Energy & Environment segment is engaged in the import and sales of coal and the supply of electric power. Co. is also engaged in the real estate business.

Victrex plc

Victrex is a non-trading investment holding company. Through its subsidiaries, Co. is engaged in polymer solutions, focused on the strategic markets of Automotive, Aerospace, Energy (including Manufacturing & Engineering), Electronics and Medical. Co. develops solutions in Polyether ether ketone (PEEK) and Polyaryletherketones (PAEK) based polymer, selected semi-finished and finished parts. Co.'s operating segments are: Industrial (Victrex Polymer Solutions), which focuses on its Automotive, Aerospace, Electronics and Energy markets; and Medical (Invibio Biomaterial Solutions), which focuses on providing solutions for medical device manufacturers.

Yodogawa Steel Works Ltd.

Yodogawa Steel Works is the parent company of a group mainly engaged in the manufacture, sale and processing of steel products. Co.'s products include steel sheet products, such as pre-painted steel sheets, galvalume steel sheets, cold rolled products, chromate-free treated steel sheets; rolls used for steel, paper, rubber and plastic manufacturing; and grating. Co. is also engaged in the leasing and sale of real estate. In addition, Co., through its subsidiaries, is involved in the provision of transportation and warehouse services, the manufacture and sale of machinery for paper manufacturer, as well as the operation of sports facilities.

Zeon Corporation

Zeon is the parent company of a group engaged in the manufacture and sale of chemical products. Along with its affiliates, Co. operates in three business segments: elastomer, specialty materials, and others. Co.'s principal products include synthetic rubbers; synthetic latices; chemicals, such as C5 petroleum resins and thermoplastic elastomers; specialty chemicals, such as synthetic aroma chemicals and industrial chemicals; information materials, such as elastromics materials and polymerized toners; specialty plastics, such as cyclo-olefin polymers; optical materials; medical products; RIM formulations; RIM products; paints; butadiene extraction technology; housing materials; and others.

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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