Vermilion Int'l Compass: Global Equity Strategy
Still Bearish/Cautious; Stick With DefensivesSince late-February (2/25/25 Compass and 2/27/25 Int'l Compass) we had been expecting an 8-10% pullback to provide a buying opportunity. However, after getting the 10%+ pullback, we discussed in our 4/1/25 Compass and 4/3/25 Int'l Compass how we no longer saw it as a buying opportunity, and we downgraded our outlook to bearish/cautious, citing several concerning developments. A historic selloff ensued. We then discussed last week (4/8/25 Compass) how positive trade news or a dovish pivot from the Fed could provide short-term relief, and that a logical spot for a local bottom to develop was at then-current levels of 4800-4820 on SPX and $402-$412 on QQQ. Positive trade news and some accommodative comments from the Fed over the past week has sparked a rally. While it is possible that the lows are in, we now are looking for the ACWI-US rally to fizzle, either here at $113.50-$115 or the 200-day MA (~$118). We remain cautious and we continue to favor defensives as long as the ACWI-US and S&P 500 are below their 200-day MA. We would like to see market dynamics improve and more evidence of a sustainable bottom before getting more constructive.
Remain Overweight Germany/Europe and the U.S. We remain overweight Germany (DAX), broader Europe (EURO STOXX 50), and the U.S. (S&P 500). The EURO STOXX 50 remains just below crucial resistance at 5000; a break above it would be bullish, but we would expect some consolidation/pullback below it first, or an outright rejection.
Risk-Off Signals. MSCI EM, EAFE, and MSCI ACWI ex-US (local currency) remain in consolidation after breaking down, and have held above 1+ year supports for now. U.S. high yield spreads remain in a steep 3-month uptrend. Defensive Sectors including Staples (KXI-US) and Utilities (JXI-US) remain in 3-month RS uptrends. We need to see these RS uptrends break down and for the uptrend in high yield spreads break in order to believe the market has established a reliable bottom... see pages 2 and 4-5.
Emerging Markets. While we favor MSCI EAFE over EM, there are still quite a few attractive opportunities within EM, both from a country-specific (e.g., Chile, Greece, Poland, India) and Sector-specific (notably Staples, Utilities, and Financials) perspective. This is a focus in terms of today's individual stock recommendations... see pages 2-5.
Actionable Themes: Communications, Utilities, Staples, and EM Financials. We continue to favor defensive-leaning areas, though we continue to see opportunity within Financials as well (with EM Financials in focus today)... see pages 4-21.
Airtel Africa PLC Formerly known as Airtel Africa Ltd. Airtel Africa PLC is a United Kingdom-based provider of telecommunications and mobile money services. The Company offers an integrated suite of telecommunications solutions, including mobile voice and data services as well as mobile money services both nationally and internationally. It offers traditional mobile voice services, with a primary focus on data and non-voice services through its third generation (3G) and fourth generation (4G) networks. It also offers mobile money services under its Airtel Money brand to customers in all of the Company's 14 countries of operation in Africa, primarily in East Africa and Central and West Africa. The mobile voice business line comprises pre- and post-paid wireless voice services, international roaming and fixed-line telephone services. The mobile data business line comprises data communications services, including second generation (2G), 3G and, increasingly, 4G data services, and other value added services (VAS).
Bharti Airtel provides telecommunication systems and services to individuals and businesses in India with operations in 20 countries across Asia and Africa. In India, Co.'s product offerings include 2G, 3G and 4G wireless services, mobile commerce, fixed line services, high speed DSL broadband, IPTV, DTH, enterprise services including national & international long distance services to carriers. In the rest of the geographies, it offers 2G, 3G wireless services and mobile commerce. Co. had nearly 287 million customers across its operations at the end of Dec 2013.
Etihad Etisalat Co SJSC (Mobily) is a Saudi Arabia-based telecommunications operator. The Company's main activity is: the establishment and operation of a mobile wireless telecommunications network, fiber optics networks and any extension thereof; the management, installation and operation of telephone networks, terminals and communication unit systems, as well as the sale and maintenance of mobile phones and communication unit systems. It offers a communication infrastructure covering mobile and broadband, as well as satellite-based services and solutions. The Company provides Second Generation (2G), Third Generation (3G), Fourth Generation Frequency Division Duplex (4G FDD) and Fourth Generation Environment Time Division Duplex (4GE TDD) services to subscribers. Its customers are segmented according to the following categories: prepaid (mobile), postpaid (mobile), mobile operators, businesses, small-to-medium businesses (SMBs) and households (FTTH).
Vodacom is an investment holding company. Through its subsidiaries, Co. is engaged in the provision of a range of communications products and services including but not limited to voice, messaging, converged services, broadband and data connectivity. Co.'s segments comprised of: Corporate, which include the holding companies of Co. which do not relate to specific operating segment; South Africa, which include information relating to the South African-based cellular network, service provider and other business segments; and International, which include information relating to the non-South African-based cellular networks in Tanzania, Mozambique, Lesotho and the Democratic Republic of Congo.
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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