Report
Dave Nicoski ...
  • Ross LaDuke
EUR 46.93 For Business Accounts Only

Vermilion Compass: Weekly Equity Strategy

Bullish Outlook Intact

Our outlook remains bullish as market dynamics continue to suggest the path of least resistance remains higher for US and foreign equities. Continue to buy dips.

· S&P 500. The S&P 500 continues to consolidate/back-and-fill, something we suggested in our 11/10/20 Compass as likely to happen following the ~9% gains in the week surrounding the election which resulted in a bullish reversal. We view recent consolidation following the bullish reversal as healthy as the market collects itself before a likely upside continuation. Short-term support we are watching is at 3510-3520 and there is little reason for concern if the S&P 500 is above this level... see chart below.

· Small-Caps. The small-cap Russell 2000 is not consolidating. Rather, it is trending higher as small-caps continue to show leadership characteristics. We reiterate our recommendation to overweight small-caps relative to large-caps. This is a classic risk-on signal that is consistent with historical bull markets... see chart below.

· Sector Relative Strength Rankings & Weighting Recommendations. We made several upgrades last week in our Macro Vision, including upgrading Manufacturing and Transportation to overweight, and upgrading Energy to market weight... see page 2.

· Big Picture Trends. Value continues to gain on growth and we continue to monitor for a longer-term shift in favor of value. The US dollar (DXY) remains weak as it tests key support at 92; a breakdown would be a bullish sign for global equities. This weaker dollar and shift toward value has allowed foreign equities to improve relative to US equities. We are upgrading foreign equities to neutral with the ACWI ex-US vs. S&P 500 ratio bullishly inflecting; shift exposure to stocks with foreign exposure where possible. Commodities are strengthening as WTI crude oil breaks above $41.50 short-term resistance and copper hits multi-year highs. Additionally, the gold vs. S&P 500 ratio is breaking major support, a risk-on signal for the broad equity market. Avoid the yellow metal... see pages 3-4.
Underlyings
Alcoa Corporation

Alcoa is a vertically integrated aluminum company comprised of bauxite mining, alumina refining, aluminum production (smelting, casting, and rolling), and energy generation. Through direct and indirect ownership, the company has 30 operating locations in nine countries around the world, situated primarily in Australia, Brazil, Canada, Iceland, Norway, Spain, and United States.

Alumina Ltd ADS

Aluminum Corp. of China Ltd.

Ballard Power Systems Inc.

Ballard Power Systems is engaged in the design, development, manufacture, sale and service of proton exchange membrane fuel cell products for a variety of applications, focusing on the power product markets of Heavy-Duty Motive (consisting of bus, truck, rail and marine applications), Portable Power, Material Handling and Backup Power, as well as the delivery of Technology Solutions, including engineering services, technology transfer and the license and sale of Co.'s intellectual property portfolio and fundamental knowledge for a variety of fuel cell applications. A fuel cell is an electrochemical device that combines hydrogen fuel with oxygen (from the air) to produce electricity.

Bloom Energy

Bloom Energy designs, manufactures, and sells solid-oxide fuel cell systems, or Energy Servers, for on-site power generation. The company's Energy Servers utilize a fuel cell technology. The company's solution, the Bloom Energy Server, is a stationary power generation platform. The Bloom Energy Server converts standard low-pressure natural gas or biogas into electricity through an electrochemical process without combustion.

Century Aluminum Company

Century Aluminum is a holding company. Through its subsidiaries, the company produces primary aluminum and operates aluminum reduction facilities in the U.S. and Iceland. The company's principal subsidiaries are: Century Kentucky, Inc., which operates a primary aluminum reduction facility in Hawesville, KY; Nordural ehf, which operates a primary aluminum reduction facility in Grundartangi, Iceland; Century Aluminum Sebree LLC, which operates a primary aluminum reduction facility in Robards, KY; Century Aluminum of South Carolina, which operates a primary aluminum reduction facility in Goose Creek, SC; and Nordural Helguvik ehf, which owns a greenfield primary aluminum project in Helguvik, Iceland.

CF Industries Holdings Inc.

CF Industries Holdings is a global fertilizer and chemical company. The company's principal nitrogen fertilizer products are anhydrous ammonia, granular urea, urea ammonium nitrate solution and ammonium nitrate. The company's other nitrogen products include diesel exhaust fluid, urea liquor, nitric acid and aqua ammonia, which are sold primarily to its industrial customers, and compound fertilizer products, which are solid granular fertilizer products for which the nutrient content is a combination of nitrogen, phosphorus, and potassium. The company serves its customers in North America through its production, storage, transportation and distribution network.

Constellium SE Class A

Constellium N.V. designs and manufactures a range of innovative specialty rolled and extruded aluminum products, serving primarily the aerospace, packaging and automotive end-markets. Co. has a strategic footprint of manufacturing facilities located in the United States, Europe and China. Co.'s product portfolio commands higher margins as compared to less differentiated, more commoditized fabricated aluminum products, such as common alloy coils, paintstock, foilstock and soft alloys for construction and distribution. Co. organizes its business around three operating segments: Aerospace & Transportation, Packaging & Automotive Rolled Products, and Automotive Structures & Industry.

FuelCell Energy Inc.

FuelCell Energy is engaged in delivering distributed baseload power solutions. The company develops distributed power generation solutions and operates and provides service for the life of the power plant. The company's primary fuel cell products provide power generation for customers, including the sub-megawatt SureSource 250? and SureSource 400? in Europe, and the 1.4 megawatt (MW) SureSource 1500?, the 2.8 MW SureSource 3000?, and the 3.7 MW SureSource 4000? globally. The company's power plants utilize a variety of available fuels to produce electricity electrochemically, and produces none of the particulate pollutants associated with combustion-based power generation solutions.

Howmet Aerospace, Inc.

ICL Group Ltd.

Israel Chemicals, through its subsidiaries, extracts raw materials and utilizes processing and product formulation technologies to add value to customers in the areas of agriculture, electronics, food, fuel and gas exploration, water purification and desalination, detergents, cosmetics, medicines and vehicles. Co. operates two segments: Essential Minerals and Specialty Solutions. The Essential Minerals segment includes the ICL Potash & Magnesium, ICL Phosphate and ICL Specialty Fertilizers business lines. The Specialty Solutions segment includes four business lines: ICL Industrial Products; ICL Specialty Fertilizers; ICL Advanced Additives and ICL Food Specialties.

Intrepid Potash

Kaiser Aluminum Corporation

Kaiser Aluminum manufactures and sells semi-fabricated specialty aluminum mill products. The company's aerospace and high strength products include heat treat plate and sheet, hard alloy extruded shapes, cold finish rod and bar, drawn tube and billet used for a variety of end uses in the aerospace and defense industries. Automotive Extrusions consist of extruded aluminum products for several North American automotive applications. The company's general engineering products consists of 6000-series alloy plate, sheet, rod, bar, tube, wire and standard extruded shapes. Other products consist of extruded, drawn and cast billet aluminum products for a range of North American industrial end uses.

Mosaic Company

Mosaic is a producer and marketer of concentrated phosphate and potash crop nutrients. The company is organized into three reportable business segments: Phosphates, which owns and operates mines and production facilities in Florida that produce concentrated phosphate crop nutrients and phosphate-based animal feed ingredients, and processing plants in Louisiana that produce concentrated phosphate crop nutrients; Potash, which mines and processes potash in Canada and the United States and sells potash in North America and internationally; and Mosaic Fertilizantes, which produces and sells concentrated phosphates crop nutrients, phosphate-based animal feed ingredients and potash fertilizer.

Norsk Hydro ASA ADS

Nucor Corporation

Nucor manufactures steel and steel products. The company's operations include international trading and sales companies that buy and sell steel and steel products. The company's segments are: steel mills, which produces sheet steel, plate steel, structural steel, and bar steel; steel products, which produces hollow structural section steel tubing, electrical conduit, steel joists and joist girders, steel deck, cold finished steel, steel fasteners, metal building systems, and wire and wire mesh; and raw materials, which produces direct reduced iron (DRI), brokers ferrous and nonferrous metals, pig iron, hot briquetted iron and DRI, supplies ferro-alloys, and processes ferrous and nonferrous scrap metal.

Olympic Steel Inc.

Olympic Steel is a metals service center that operates in three segments; carbon flat products, specialty metals flat products, and tubular and pipe products. The company's carbon flat products segment's focus is on the direct sale and distribution of large volumes of processed carbon and coated flat-rolled sheet, coil and plate products and fabricated parts. The company's specialty metals flat products segment's focus is on the direct sale and distribution of processed aluminum and stainless flat-rolled sheet and coil products, flat bar products and fabricated parts. The company distributes metal tubing, pipe, bar, valves and fittings and fabricate pressure parts through its tubular and pipe products segment.

Plug Power Inc.

Plug Power is a provider of alternative energy technology focused on the design, development, commercialization and manufacture of hydrogen and fuel cell systems used for the material handling and stationary power markets. The company's products and services include: GenDrive, which is a hydrogen fueled proton exchange membrane fuel cell system providing power to material handling electric vehicles, electric forklifts and ground support equipment; GenFuel, which is a hydrogen fueling delivery, generation, storage and dispensing systems; and ProGen, which is a fuel cell stack and engine technology that used in mobility and stationary fuel cell systems, and as engines in electric delivery vans.

Reliance Steel & Aluminum Co.

Reliance Steel & Aluminum is a metals service center company. The company provides metals processing services and distributes a line of metal products, including alloy, aluminum, brass, copper, carbon steel, stainless steel, titanium and specialty steel products, to its customers in a range of industries, including general manufacturing, non-residential construction (including infrastructure), transportation (rail, truck trailer and shipbuilding), aerospace and defense, energy (oil and gas), electronics and semiconductor fabrication, and heavy industry (agricultural, construction and mining equipment). The company also services the auto industry, primarily through its toll processing operations.

Rio Tinto PLC ADS (Mexico)

Ryerson Holding Corporation

Ryerson Holding is a metals service center, a processor and distributor of industrial metals. The company provides flat and long metals products. The company also provides processing and fabrication services such as bending, beveling, blanking, blasting, burning, cutting-to-length, drilling, embossing, flattening, forming, grinding, laser cutting, machining, notching, painting, perforating, polishing, punching, rolling, sawing, scribing, shearing, slitting, stamping, tapping, threading, welding, or other techniques to process materials to a specified thickness, length, width, shape, and surface quality pursuant to specific customer orders. The company operates across North America and in China.

Schnitzer Steel Industries Inc. Class A

Schnitzer Steel Industries is engaged as a recycler of ferrous and nonferrous scrap metal, including end-of-life vehicles, and a manufacturer of finished steel products. The company has two segments: Auto and Metals Recycling, which acquires and recycles ferrous and nonferrous scrap metal for sale to foreign and domestic metal producers, processors and brokers, and procures salvaged vehicles and sells serviceable used auto parts from these vehicles through a network of self-service auto parts stores; and Cascade Steel and Scrap, which produces a range of finished steel long products using ferrous recycled scrap metal and other raw materials.

Scotts Miracle-Gro Company Class A

Scotts Miracle-Gro is a manufacturer and marketer of consumer lawn and garden products in North America. The company's segments are: United States Consumer, which consists of the company's consumer lawn and garden business located in United States; Hawthorne, which consists of the company's indoor, urban and hydroponic gardening business; and Other, which consists of the company's consumer lawn and garden business in geographies other than the United States and the company's product sales to nurseries, greenhouses and other customers. The company manufactures, markets and sells lawn and garden products in the following categories: lawn care, gardening and landscape, hydroponics, and controls.

Sims Metal Management Ltd. ADS

Sociedad Quimica y Minera de Chile S.A. Series B ADS

Steel Dynamics Inc.

Steel Dynamics is a steel producer and metal recycler. The company manufactures and sells steel products, processes and sells recycled ferrous and nonferrous metals, and fabricates and sells steel joists and deck products. The company's segments are: Steel, which produces steel from ferrous scrap and scrap substitutes, utilizing casting, automated rolling mills and several downstream steel coating and bar processing lines, and Iron Dynamics; metals recycling, which involves the purchase, processing, and resale of ferrous and nonferrous scrap metals into reusable forms and grades; and steel fabrication, which produces steel building components, including steel joists, girders, trusses, and steel deck.

TimkenSteel Corp

TimkenSteel manufactures alloy steel, carbon and micro-alloy steel. The company's portfolio includes special bar quality (SBQ) bars, seamless mechanical tubing, solutions such as precision steel components, and billets. In addition, the company supplies machining and thermal treatment services, and the company manages raw material recycling programs. The company's products and services are used in the following market sectors: oil and gas; oil country tubular goods; automotive; industrial equipment; mining; construction; rail; aerospace and defense; heavy truck; agriculture; and power generation. The company's products include: SBQ Steel Bar, Seamless Mechanical Steel Tubes, and Billets; and Precision Products and Services.

United States Steel Corporation

United States Steel is a steel producer of flat-rolled and tubular products with production operations in the United States and Europe. The company is also engaged in railroad services and real estate operations. The company's segments are: North American Flat-Rolled, which produces slabs, strip mill plates, sheets and tin mill products; U. S. Steel Europe, which produces and sells slabs, strip mill plate, sheet, tin mill products and spiral welded pipe, as well as heating radiators and refractory ceramic materials; and Tubular Products, which produces and sells electric resistance welded steel casing and tubing (known as oil country tubular goods), and standard and line pipe and mechanical tubing.

Worthington Industries Inc.

Worthington Industries is a metals manufacturing company, focused on steel processing and manufactured metal products. The company operates three segments: Steel Processing, which buys coils of steel from integrated steel mills and mini-mills and processes them to customer specifications; Pressure Cylinders, which manufactures and sells filled and unfilled pressure cylinders, tanks, hand torches, well water and expansion tanks, and oil and gas equipment with accessories and related products for end-use market applications; and Engineered Cabs, which designs and manufactures custom-engineered open and enclosed cabs and operator stations and custom fabrications and packaging for mobile equipment.

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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