Report
Dave Nicoski ...
  • Ross LaDuke
EUR 234.38 For Business Accounts Only

Vermilion Int'l Compass: Global Equity Strategy

Global equities consolidating

We remain constructive on global equities as the MSCI ACWI, ACWI ex-U.S., and EAFE indexes consolidate above their respective 200-day moving averages. On the other hand, the MSCI EM index is breaking below its 200-day moving average and is flirting with a breakdown below 56,000 support (local currency). Weakness within EM raises concerns that global equities may also succumb to weakness... see charts below.

• Global equities consolidating. We take a look at the big picture, providing overviews on broad MSCI indexes (ACWI, ACWI ex-U.S., and EAFE)... see page 2.

• RS for defensive areas near logical resistance. RS for defensive areas of the market within Europe - and globally - are approaching logical resistance. These areas include Utilities, Health Care (more specifically pharma), and Real Estate. A failure of RS to break out would be supportive of our view that recent weakness is a buying opportunity, whereas RS breakouts would result in a more cautious outlook... see page 3.

• Actionable Sectors: Manufacturing and Materials. European Manufacturing is improving in terms of RS, as are select areas within Materials (chemicals and construction/building products). Add exposure in light of bullish long-term RS reversals. Attractive opportunities are also popping up in these Sectors within Japan and EM (notably China, India, and Taiwan)... see pages 4-5.
Underlyings
Alimak Group AB

Alimak is engaged in the design, development, manufactue, distribution and servicing of vertical access solutions predominantly in rack-and-pinion, and also traction technologies. Co. supplies industrial elevators, hoists and work platforms based on rack-and-pinion technology. At the core of Co.'s products are the Alimak and Hek rack-and-pinion elevator, hoist and work platform brands as well as Heis-Tek traction elevator brand. Co. operates in the following operational segments: Construction Equipment; Industrial Equipment; Rental and After Sales.

Atlas Copco AB Class A

Atlas Copco provides industrial productivity products and services. Co.'s operations are divided into four business areas: Compressor Technique (provides compressors, vacuum solutions, gas and process compressors and expanders, air and gas treatment equipment and air management systems), Industrial Technique (provides power tools, assembly systems, quality assurance products, software and service through a global network), Mining and Rock Excavation Technique (provides equipment for drilling and rock excavation), and Construction Technique (provides construction and demolition tools, portable compressors, pumps and generators, lighting towers, and compaction and paving equipment).

ATS Automation Tooling Systems Inc.

ATS Automation Tooling Systems and its subsidiaries design and build custom engineered turnkey automated manufacturing and test systems and provide pre-automation and post-automation services to their customers.

Bharat Electronics Ltd.

Bharat Electronics Limited is engaged in design, manufacture and supply of electronics products/systems for the defense requirements, as well as for nondefense markets. The Company's principal products/services include weapon systems, radar and fire control systems, and communication. Its defense products include defense communication; radars; naval systems; command, control, communications, computers, and intelligence systems; weapon systems; telecom and broadcast systems; electronic warfare; electro optics, and solar photovoltaic systems. Its nondefense products include turnkey system solutions; civilian radars; e-governance systems, and homeland security. Its other range of products include electronic voting machines, communication equipment, radar warning receiver and casings. It offers electronic manufacturing services in areas of printed circuit board assembly and testing; precision machining and fabrication; opto electronics components and assemblies, and offsets, among others.

BHP Group Plc

BHP Billiton is a resources company. Co. extracts and processes minerals, oil and gas, primarily in Australia and the Americas. Co. operates four reportable segments: Petroleum, which is engaged in the exploration, development and production of oil and gas; Copper, which is engaged in the mining of copper, silver, lead, zinc, molybdenum, uranium and gold; Iron Ore, which is engaged in the mining of iron ore; and Coal, which is engaged in the mining of metallurgical coal and energy coal. Co.'s Petroleum unit comprises conventional and unconventional oil and gas assets, and includes exploration, development and production activities.

Buzzi Unicem S.p.A.

Buzzi Unicem and its subsidiaries (together, the group) manufacture, distribute and sell cement, ready-mix concrete and aggregates. The group has manufacturing plants in several countries. The operations are located mainly in Italy, the U.S., Germany, Luxembourg, the Netherlands, Poland, the Czech Republic and Slovakia, Ukraine, Russia and Mexico.

China Zhenhua (Group) Science & Technology Co. Ltd. A

China Zhenhua Group Science and Technology is engaged in the research, development, manufacture and sale of electronic and information technology products; provision for related product services; and provision of consultation and business trade of electronic and mechanical products. Through its subsidiaries, Co. is also engaged in the development, manufacture and sale of thick and thin film integrated circuits and network blocks, electrical intelligence control devices, computer and its parts, telecommunication products; information integration systems; and provision of transportation, storage services; development, manufacture, sale and services of GSM communication products.

Compagnie de Saint-Gobain SA

Compagnie de Saint-Gobain manufactures, produces, and distributes industrial materials. Co.'s activities are divided into four sectors: Innovative Materials (Co. makes, processes and sells glass and glazing products for the building, the automotive and solar energy industries; Co. also manufactures Ceramics and Plastics, Abrasives, and Textiles), Construction Products (Co. offers products for the Insulation, Gypsum, Exterior Products, Pipe and Industrial Mortars), Building Distribution (Co. distributes building materials (plumbing, heating and sanitaryware products) and ceramic tiles), and Packaging - Verallia (Co. manufactures glass containers and jars for foodstuffs and beverages).

Dialight

Dialight is a holding company. Through its subsidiaries, Co. is engaged in the provision of LED industrial technology with LED fixtures installed worldwide. Co. operates in two segments: lighting, which develops, manufactures and supplies LED lighting solutions for hazardous and industrial applications in which lighting performance is critical and includes anti-collision obstruction lighting; and signals and components, which develops, manufactures and supplies status indication components for electronics original equipment manufacturers, together with niche industrial and automotive electronic components and LED signalling solutions for the traffic and signals markets.

EMS-CHEMIE HOLDING AG

EMS-Chemie Holding is a holding company. Through its subsidiaries, Co. engages in the engineering, production and marketing of polymers, fine chemicals and chemical intermediates. Co. also builds industrial plants for chemical processing, develops products for military and civil applications, and operates electric power stations.

Eternal Chemical Co. Ltd.

Eternal Materials is engaged in the manufacture of synthetic resins, electronic components, coatings and oil paint, industry accessory ingredients, plastic raw materials, other plastic products, other chemical materials, and petrochemical industry materials; the manufacturing, processing and selling of photoresist materials, electronic chemical products, polyhydric alcohol, methacrylate and acrylic ester.

Fraport AG

Fraport AG Frankfurt Airport Services Worldwide is an airport operator. Co. is divided into four segments: aviation, which includes airside and terminal management as well as corporate safety and security at the Frankfurt site; retail and real estate, which consists of retailing activities, parking facility and real estate management at Frankfurt Airport; ground handling, which comprises services dealing with passengers, aircraft and cargo; and external activities and services, which comprises Co.'s companies outside the Frankfurt site and auxiliary services in Frankfurt, including information technology and facility management in particular.

Grafton Group Plc

Grafton Group is primarily a distributor of building materials in the U.K., Ireland and Belgium. Co. is also engaged in DIY retailing in Ireland and manufacturer of dry mortar in Britain. Co. segments include: Merchanting, which is engaged in the distribution of building and plumbing materials; Retailing, which operates DIY and home improvement business, supplying mainly retail customers with a range of products for the home and garden, and a kitchen retail business; and Manufacturing, which comprises EuroMix, the manufacturer of silo-based mortar for use in new build residential and commercial construction projects, and MFP, a manufacturer of plastic pipe systems.

Hangzhou Weiguang Electronic (A)

HANGZHOU WEIGUANG ELECTRONIC CO.,LTD. is a China-based company principally engaged in the development, manufacture and sales of micro-motors and draught fans. The main products of the Company include cooler motors, outer-rotor blowers and Electronically Commutated Motors (ECMs). The Company's products are mainly applied in Heating, Ventilation and Air Conditioning (HVAC), freezers, industrial cooling machines, industrial air conditioners, cold driers, fresh air systems and air purifiers, among others. The Company distributes its products in domestic market and to overseas markets.

Harbin Boshi Automation (A)

Harbin Boshi Automation Co Ltd. HARBIN BOSHI AUTOMATION CO., LTD. is a China-based company principally engaged in the research, development, manufacture and distribution of petrochemical post-processing equipment sets. The Company's main products include automatic packaging and piling equipment sets for granule materials and post-processing equipment sets of synthetic rubber, which are applied in petrochemical industry. The Company is also involved in the provision of related integrated services, including spare parts supply services, related equipment inspection and maintenance services, transportation security services and production operation and management. The Company operates mainly in domestic market, with East China and northwest area of China as its main markets.

Hitachi Ltd.

Hitachi and its subsidiaries are engaged in the development, manufacture and sale of diversified product mix ranging from electricity generation systems to consumer products and electronic devices. Co.'s businesses are diverse, and include information and telecommunication systems, social infrastructure and industrial systems, electronic systems and equipment, construction machinery, high functional materials and components, automotive systems, life & eco systems, financial services, and others including logistics services, optical disk drive, as well as real estate business.

INFICON Holding AG

INFICON Holding provides world-class instruments for gas analysis, measurement and control and its products are essential for gas leak detection in air conditioning, refrigeration, and automotive manufacturing. They are vital to equipment manufacturer and end-users in the complex fabrication of semiconductors and thin film coatings for optics, flat panel displays, solar cells and industrial vacuum coating applications. Co. also leverages its expertise in vacuum technology to provide unique, toxic chemical analysis products for emergency response, security, and environmental monitoring.

Kone Oyj Class B

KONE is an elevator and escalator industry group based in Finland. Co. is engaged in the provision of products and services for the installation, modernization and maintenance of elevators, escalators and automatic building doors. Co. provides its products and services throughout the entire lifecycle of the equipment, beginning from the installation of new equipment to the maintenance and modernization during their lifecycle and the full replacement of the equipment. Co.'s customers are active in industry segments such as residential, office, retail, public transportation, hotel, hospital, and marine.

LafargeHolcim Ltd.

LafargeHolcim is a producer of cement and aggregates. Co. also supplies ready-mix concrete, concrete products, asphalt and a range of services. Co. operates through three segments: cement, aggregates, and other construction materials and services. Co.'s cement segment provides a range of cementitious materials and also develops customized blends for special applications. Through its aggregates segment, Co. produces aggregates which include crushed stone, gravel and sand mainly used in the manufacture of ready-mix concrete, concrete products and asphalt, as well as for road building and railway tracks, with production centered on quarrying, preparing and sorting the raw material.

Maithan Alloys Ltd

Maithan Alloys Limited is a holding company. The Company is engaged in the business of manufacturing and exporting of all three bulk Ferro alloys, including Ferro Silicon, Ferro Manganese and Silico Manganese, and has a captive power plant. It operates through two segments: Ferro Alloys and Wind Mill. It is also engaged in the generation and supply of wind power. Ferro manganese is alloy of manganese and iron, which is used primarily in stainless steel and flat products. Silico manganese is an alloy of manganese, silicon and iron, which is used in all steel products, with higher quantities in 200 series stainless steel, alloy steel and manganese steel. Ferro silicon is an alloy of silicon and iron, which is used in special steels and in small quantities in mid steel. Its subsidiaries include Anjaney Minerals Limited and AXL Exploration Private Limited, which are engaged in export, import, production, processing, sale, purchase, distribution and dealing in metals and minerals.

Mersen SA

Mersen produces materials and electrical components intended for alternative energies, chemicals and pharmaceuticals, rail transportation, electronics and process industries. Co. divides its operations into two segments: Advanced Materials and Technologies (AMT - Materials), and Electrical Components and Technologies (ECT - Electrical). In addition, Co. produces four types of products: Electrical Applications, Electrical Protection, High-Temperature Applications, and Anticorrosion Equipment. Co. also caters to the process industries, supporting their transition towards greater energy efficiency and boasts an efficient manufacturing base with plants employing the very latest technologies.

Mitsubishi Heavy Industries Ltd.

Mitsubishi Heavy Industries is a manufacturer of heavy machinery. Along with its affiliates, Co. is engaged in the design, manufacture, installation, sale and after-sales services of boilers, turbines, diesel engines, power generation facilities, passenger ships, liquefied natural gas ("LNG") ships, liquefied petroleum gas ("LPG") ships, container ships, oil tankers, offshore structure, civil aircraft and aero engine, defense equipment, space equipment, waste treatment systems, traffic systems, cranes, forklifts, construction and agricultural machinery, and others. Co. is also engaged in the sale, purchase and leasing of properties and the printing business.

NOF Corporation

NOF and its affiliates are mainly engaged in the manufacture and sale of oil and chemical-related products. Co. operates in three business segments: functional chemicals, life science, and explosive & propulsion. Co.'s principal products include fatty acids, fatty acid derivatives, surfactants, ethylene oxide and propylene oxide derivatives, organic peroxides, functional polymers, functional films, materials for anti-corrosion, biocompatible materials, raw materials for delivery system ("DDS") drug formulation, edible oils, functional foods, industrial explosives, defense-related explosives, rocket propellant, automotive safety devices and metal manufactured products.

Nolato AB Class B

Nolato AB is a holding company. Through its subsidiaries, Co. develops and manufactures products in plastic, silicone and thermoplastic elastomers. Co. has three business areas: Nolato Medical, which develops and manufactures polymer products for customers in medical technology and pharmaceuticals, as well as plastic pharmaceuticals packaging; Nolato Telecom, which develops and manufactures components and subsystems for mobile phones, and products to attain electromagnetic compatibility; and Nolato Industrial, which develops and manufactures polymer products for customers in the automotive industry, hygiene, packaging, gardening/forestry, domestic appliances and other industrial segments.

Polypipe Group

Polypipe Group manufacturers piping systems, water management solutions and ventilation systems for residential, commercial, civils and infrastructure, and public non-housing sectors in the U.K. and other selected markets. Co.'s segments are: Residential systems, which cover among other, above-ground drainage, storm water drainage, sewer drain, and water supply; Commercial and infrastructure systems - U.K., which cover among other, above-ground drainage, surface water drainage, storm water drainage, and land drainage and irrigation; and Commercial and infrastructure systems - Mainland Europe, which cover electrical ducting and conduit, irrigation piping systems, and pressure systems.

Shandong Polymer Biochemicals (A)

SHANDONG POLYMER BIOCHEMICALS CO., LTD.. Shandong Polymer Bio-chemicals Co., Ltd. is a China-based company principally engaged in the businesses of energy and environmental protection. The Company operates through three main segments. The Chemical Products segment is mainly engaged in the production and sales of polyacrylamide and related chemicals for tertiary recovery and water treatment. The Oil and Gas Exploration and Development and Technical Services segment is mainly engaged in the exploration and development of oil and gas, as well as the provision of technical services, including comprehensive completed wells and oil and gas field production comprehensive management and others. The Environmental Water Treatment segment is mainly involved in the treatment of petroleum and petrochemical waste water, oil and sand, drilling fluid, fracturing fluid and others.

Shibaura Machine Co. Ltd.

Shibaura Machine Co Ltd Formerly known as Toshiba Machine Co Ltd. Shibaura Machine Co Ltd is a Japan-based company mainly engaged in the provision of molding machines and machine tools. It operates through two business segments. Molding Machine segment is engaged in the manufacture, sale, installation, and maintenance of injection molding machines, extrusion molding machines and die casting machines. Products include all-electric injection molding machine EC-SXIII, EC-SX and EC-S series, hybrid type Injection molding machine ED and IS series, special specification injection molding machine, fine foam molding and control system. Machine Tool segment is engaged in the manufacture, sale, installation and maintenance of machine tools. Products include high-speed shape machines MPJ-M and MPJ series, horizontal boring machines BTD-100R12 and BTD-110H.R13/R16, grinding machines KWA-D and KT-C series. It is also engaged in manufacture and sale of industrial robots, servo motors, computer numerical control (CNC) devices, sewerage-related measuring equipment.

Shibusawa Warehouse Co. Ltd.

Shibusawa Warehouse and its affiliates are mainly engaged in the provision of warehousing, international logistics, logistics support, transportation, custom clearance and import/export cargo forwarding services. Co.'s principal business segments are logistics and real estate. Co.'s principal services include warehousing, packing services, rental trunk room services, moving services, container terminal operation services, truckload transportation services, international/domestic maritime transportation services, air cargo transportation, intermodal transportation and clearance services. In addition, Co. is engaged in the lease and management of real estate.

SWCC Showa Holdings

SWCC Showa Holdings is a holding company. Electrical Wire & Wire Rod segment is engaged in the manufacture and sale of bare wires, rubbers/polyethylene insulated wires, power distribution equipment, bus cables and overhead cables. Energy System segment manufactures electric power cables and equipment and provides power cable construction works. Magnet Wire segment manufactures flat magnet wires. Communication System segment manufactures optical fiber cables, communication cables, optical peripheral devices and connector assemblies and provides communication system construction works. Device segment manufactures wire harnesses, devices for seismic isolation and vibration dampers/isolators.

Teco Electric & Machinery Co. Ltd.

Teco Electric & Machinery is engaged in the manufacture, marketing, installation, wholesale, and retail of various types of electrical and mechanical equipment, transportation equipment, industrial machinery, electronic equipment, refrigerator and air-conditioning units, telecommunication equipment, office machinery, home appliances and its accessories.

Tekken Corp.

Tekken is mainly engaged in the research, design, and management of civil engineering and construction services, as well as the provision of management and consulting services. Along with its subsidiaries and associated companies, Co. operates three business segments. Civil Engineering segment is engaged in the provision of civil engineering works. Construction segment is engaged in the general construction, special construction, as well as the procurement of construction materials and equipment. Real Estate segment is involved in the housing and land development business. In addition, Co. is engaged in the sale of construction equipment and materials and the operation of sports facilities.

Tung Ho Steel Enterprises Co.

Tung Ho Steel Enterprise is engaged in the manufacture, processing and selling of deformed bars, flat iron, angle iron, channel iron, bundled bar, other steel products, profiled bar, alloy steel, tool steel, high-carbon steel, and other specialty steel; the manufacture, processing, sale and purchase of steel and iron industrial materials, light metal, steel metal, bar steel, and rail; the development, design, manufacture and selling of steel and iron-industry used equipment and fittings; the manufacture of wired and wireless communication equipment, electronic components, and environmental protection equipment and products; and involved in fallow agriculture and amusement park industries.

VBG Group AB Series B

VBG Group is an engineering Group, based in Sweden, with manufacturing and sales companies in Europe, India and the U.S.A. Co. is engaged in supplying equipment to customers in the truck and machine industries. Co.'s operations are divided into two business areas: VBG Group Truck Equipment and RingFeder Power Transmission. VBG Truck Equipment segment has products including coupling equipment and fifthwheels. RingFeder Power Transmission manufactures mechanical power transmissions and industrial dampings. Customers include truck manufacturers and the machine industry worldwide.

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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