Report
Dave Nicoski ...
  • Ross LaDuke
EUR 232.75 For Business Accounts Only

Vermilion Compass: Weekly Equity Strategy

Semiconductors, Transportation improving

The S&P 500 continues to move higher on narrow leadership, which is not inspiring a bullish outlook. Currently leading the S&P 500 higher in terms of RS are Technology, Services, Facebook (FB), Amazon (AMZN), and Procter & Gamble (PG). If this were a bull market, (1) PG would likely NOT be listed here as leadership, and (2) we would expect to see participation broaden out to Discretionary (RCD), Transportation (IYT), banks (KBE), Industrials (XLI), and small-caps (IWM). All of these areas are still consolidating below meaningful resistance, and we continue to believe upside is likely to be muted as long as this rings true.

• Sector Relative Strength Rankings & Weighting Recommendations. Within Technology, semiconductors (SOXX, XSD) have broadly come back in favor and are approaching prior price and RS highs set in April. New price and RS highs would be a welcomed sight for the broad market, as semis often lead at turning points. Micron (MU) stands out as particularly actionable... see pages 2-3.

• Risk-on areas still below resistance. While Technology and Services remain leadership, it will take broadening participation for us to be convinced that the bull market is here to stay... see page 4. One encouraging sign is coming from our equal-weighted Transportation Sector which exhibits potential price and RS bottoms... see chart below.

• MSCI ACWI, EAFE, and EM equities. A recoupling of global economies and equity markets would be best for everyone, and breakouts from recent consolidation for the popular ACWI, EFA, and EEM ETFs would go a long way in confirming the move to new highs on the S&P 500... see page 5.

In today's report we highlight attractive Groups and stocks within Transportation, Materials, and Services: TR-08 Shipping, Dry-Bulk, TR-12 Trucking, Large-Cap, MA-30 Silver, Platinum, and SV-06 Research & Consulting Services... see pages 12-31.
Underlyings
Amazon.com Inc.

Amazon.com serves consumers through its online and physical stores. The company also manufactures and sells electronic devices, including Kindle, Fire tablet, Fire TV, Echo, and Ring, and the company develops and produces media content. The company operates customer service centers and provides programs that enable sellers to grow their businesses, sell their products in its stores, and fulfill orders through the company The company serves developers and enterprises of various sizes, including start-ups, government agencies, and academic institutions, through its Amazon Web Services segment, which provides a set of global compute, storage, database, and other service offerings. The company also provides services, such as advertising.

Ardmore Shipping

Atlas Corp.

Seaspan Corporation is an independent charter owner and manager of containerships. The Company charters pursuant to long-term, fixed-rate time charters with various container liner companies. As of February 20, 2017, it had operated a fleet of 88 containerships and had entered into contracts for the purchase of an additional eight new building containerships. Its operating vessels include YM Wish, YM Wellhead, YM Witness, COSCO Glory, COSCO Development, COSCO Harmony, COSCO Excellence, COSCO Hope, COSCO Fortune, Seaspan Yangtze, CSCL Zeebrugge, CSCL Long Beach, CSCL Oceania, COSCO Vietnam, MOL Emissary, Seaspan Chiwan, Seaspan Ningbo, Seaspan Felixstowe, CSCL Brisbane, Seaspan Santos, Seaspan Loncomilla, Seaspan Lingue, CSCL Montevideo, CSCL Callao, Guayaquil Bridge and Calicanto Bridge. The Company is engaged in the operation and management of vessel, including maintaining the vessel, periodic dry-docking, cleaning and painting and performing work required by regulations.

CBIZ Inc.

CBIZ provides business services, products and solutions to manage finances and employees. These services are provided to primarily small and midsized businesses, as well as individuals, governmental entities and not-for-profit enterprises. The company provides its services through three groups: Financial Services, which provides accounting and tax, government healthcare consulting, financial advisory, valuation and risk advisory services; Benefits and Insurance Services, which provides group health benefits consulting, payroll, property and casualty, and retirement plan services; and National Practices, which provides managed networking and hardware services, as well as healthcare consulting.

Coeur Mining Inc.

Coeur Mining is a gold and silver producer, as well as a zinc and lead producer, with mines located in the U.S., Canada, Mexico, and exploration projects in North America. The company operates the Palmarejo complex, and the Rochester, Kensington, Wharf and Silvertip mines. The company's dore, as well as the concentrate product produced by the Wharf mine, is refined into gold and silver bullion and then sells to multi-national banks, bullion trading houses, and refiners across the globe. The company's gold concentrate products from the Kensington mine and the zinc and lead concentrates from the Silvertip mine are sold under a variety of agreements with smelters and traders.

COSTAR GROUP INC

CoStar Group provides information, analytics and online marketplace services to the commercial real estate and related business community through its database of commercial real estate information covering the U.S., the U.K., and parts of Canada, Spain, Germany and France. The company provides online marketplaces for commercial real estate, apartment rentals, lands for sale and businesses for sale. The company operates within two operating segments, North America and International, and its services are distributed to its clients under subscription-based license agreements that renew automatically, a majority of which have a term of one year.

Eneti Inc.

Scorpio Bulkers is an international shipping company based in Monaco. Co.'s vessels transport a range of major and minor bulk commodities, including ores, coal, grains, and fertilizers, along worldwide shipping routes, and are, or are expected to be, employed primarily in the spot market or in spot market-oriented pools of similarly sized vessels. As of Dec. 31, 2017, Co.'s operating fleet of 56 vessels consists of 55 wholly-owned or finance leased drybulk vessels and one chartered-in drybulk vessel. Co. also has contracts for the construction of 1 newbuilding drybulk vessel.

EQUIFAX INC.

Equifax Inc. is a provider of information solutions and human resources business process outsourcing services for businesses, governments and consumers. The company's services are based on databases of consumer and business information. The company uses statistical techniques, machine learning and proprietary software tools to analyze all available data, creating insights, decision-making solutions and processing services for its clients. The company also provides information, technology and services to support debt collections and recovery management. Additionally, the company provides payroll-related and human resource management business process outsourcing services in the United States of America.

Exponent Inc.

Exponent is a science and engineering consulting firm. The company serves clients in chemical, construction, consumer products, energy, food, beverage and nutrition, government, life sciences, insurance, manufacturing, technology, industrial equipment, transportation and other sectors of the economy. The company's service offerings are provided on a project-by-project basis. The company has two segments: Engineering and Other Scientific, which is a service group providing technical consulting in different practices primarily in engineering; and Environmental and Health, which provides a range of consulting services relating to environmental hazards and risks and the effect on both human health and the environment.

Facebook Inc. Class A

Facebook is building and engaging products that enable people to connect and share with friends and family through mobile devices, personal computers, virtual reality headsets, and in-home devices. The company's products include: Facebook, which enables people to connect, share, discover, and communicate with each other on mobile devices and personal computers; Instagram, which is a place where people can express themselves through photos, videos, and private messaging, and explore their interests in businesses, creators and communities; Messenger and WhatsApp, which are messaging applications; and Oculus, which connects people through its Oculus virtual reality products.

FAIR ISAAC CORP

Fair Isaac is a provider of analytic, software and data management products and services. The company's segments are: Applications, which includes pre-configured decision management applications designed for business problem or process, such as marketing, account origination, customer management, fraud, collections and insurance claims management; Scores, which includes its business-to-business scoring solutions and services, its business-to-consumer scoring solutions and services including myFICO? solutions for consumers, and associated services; and Decision Management Software, which is composed of analytic and decision management software tools and the company's FICO? Decision Management Suite.

First Majestic Silver Corp.

First Majestic Silver is engaged in the business of silver production, development, exploration, and acquisition of mineral properties with a focus on silver production in Mexico.

Fortuna Silver Mines Inc.

Fortuna Silver Mines is engaged in the mining, exploration, extraction and processing of silver, gold and zinc mine properties in southern Peru and Mexico.

FTI Consulting Inc.

FTI Consulting is a business advisory firm. The company's business segments are: Corporate Finance and Restructuring, providing interim management services; Forensic and Litigation Consulting, which provides business intelligence and risk mitigation services; Economic Consulting, providing law firms, companies, government entities and other parties with analysis of economic issues for use in legal, regulatory and international arbitration proceedings, strategic decision making and public policy debates; Technology, providing information governance, and e-discovery and data analytics software; and Strategic Communications, which designs and executes communications strategies for management teams.

Genco Shipping & Trading Ltd.

Global Ship Lease Inc. Class A

Global Ship Lease is a holding company. Through its subsidiaries, the company is engaged in the business of owning and chartering out containerships under fixed rate charters to container liner companies.

Huron Consulting Group Inc.

Huron Consulting Group is a consulting firm. The company partners with clients to develop strategies and implement solutions that enable the transformative change its clients need. The company's segments are: Healthcare, which provides care transformation, financial and operational, technology and analytics, and leadership development; Business Advisory, which provides services to large and middle market organizations, not-for-profit organizations, lending institutions, law firms, investment banks and private equity firms; and Education, which provides consulting and technology solutions to higher education institutions and academic medical centers.

ICF International Inc.

ICF International is a holding company. Through its subsidiaries, the company engages in services including: Advisory Services, which research policy, industry, and stakeholder issues, trends, and behavior and provide planning and advice; Program Implementation Services, which provide policies, plans, programs, and business tools to match its clients' business context; Analytics Services, which conduct survey research and collect and analyze data to understand issues and options for its clients; Digital Services, which provide technology systems and business tools; and Engagement Services, which inform and engage its clients' constituents, customers, and employees to drive behavior and outcomes.

iShares PHLX Semiconductor ETF

iShares Russell 2000 Index Fund

iShares Transportation Average

J.B. Hunt Transport Services Inc.

J.B. Hunt Transport Services is a holding company. Through its subsidiaries, the company is a surface transportation, delivery, and logistics company. The company's service offerings include transportation of full-truckload containerized freight, which it directly transports utilizing its equipment and company drivers or independent contractors. The company also provides customized freight movement, revenue equipment, labor, systems, and delivery services. The company's local and home delivery services typically are provided through a network of cross-dock service centers throughout the continental United States. The company's segments include Intermodal, Dedicated Contract Services?, Integrated Capacity Solutions, and Truckload.

Knight-Swift Transportation Holdings Inc. Class A

Knight-Swift Transportation Holdings is a truckload carrier and a provider of transportation solutions. The company provides multiple truckload transportation, intermodal, and logistics services using a nationwide network of business units and terminals in the United States and Mexico. In addition to its truckload services, the company contracts with third-party capacity providers to provide a range of truckload services to its customers. The company operates company tractors, independent contractor tractors, and trailers within its Knight Trucking, Swift Truckload, Swift Dedicated, and Swift Refrigerated segments. Additionally, the company operates tractors and intermodal containers within its Swift Intermodal segment.

Landstar System Inc.

Landstar System is an asset-light provider of integrated transportation management solutions. The company provides services to its customers across transportation modes, throughout the U.S. and to a lesser extent in Canada and Mexico, and between the U.S. and Canada, Mexico and other countries around the world. The company has two segments: transportation logistics, which provides truck services, rail intermodal services, as well as air and ocean services; and insurance, which is comprised of Signature Insurance Company, an offshore insurance subsidiary, and Risk Management Claim Services, Inc. The company's insurance segment provides risk and claim management services to certain of its operating subsidiaries.

MAG Silver Corp.

MAG Silver is an exploration company conducting work on mineral properties it has staked or acquired by way of option agreement, principally in Mexico. Co. has not yet determined whether the properties on which it is conducting exploration contain any ore reserves that are economically recoverable. The recoverability of these amounts is dependent upon the existence of economically recoverable reserves, Co.'s ability to obtain the necessary financing to complete the development of the interests, and future profitable production, or alternatively, upon Co.’s ability to dispose of its interests on a profitable basis.

Matson Inc.

Matson is a holding company engaged in the provision of ocean transportation and logistics services. The company's Ocean transportation segment business is conducted through Matson Navigation Company, Inc., which provides a lifeline of ocean freight transportation services to the domestic non-contiguous economies of Hawaii, Alaska and Guam, and to other island economies in Micronesia and operates an expedited service from China to Long Beach, CA, and provides services to Okinawa, Japan and various islands in the South Pacific. The company's Logistics business is conducted through Matson Logistics, Inc., an asset-light business that provides a variety of logistics services to its customers.

Micron Technology Inc.

Micron Technology provides memory and storage solutions. The company's portfolio of memory and storage technologies include Dynamic Random Access Memory, Not And, 3D XPoint? memory, and Not Or. The company's segments are: Compute and Networking Business, which includes memory products sold into client, cloud server, enterprise, graphics, and networking markets; Mobile Business, which includes memory products sold into smartphone and other mobile-device markets; Storage Business, which includes Solid-State Drives and component-level solutions sold into enterprise and cloud, client, and consumer storage markets; and Embedded Business, which includes memory and storage products.

Navios Maritime Holdings Inc.

Navios Maritime Holdings is a holding company. Through its subsidiaries, Co. is engaged in global, seaborne shipping and logistics with focus on the transport and transshipment of drybulk commodities including iron ore, coal and grain. Co.'s core fleet (excluding the Navios Logistics fleet), the average age of which is approximately 7.4 years, consists of a total of 61 vessels, aggregating approximately 6.3 million dwt. Navios Holdings owns 13 Capesize vessels (169,000-182,000 dwt), 14 modern Ultra Handymax vessels (50,000-59,000 dwt), 12 Panamax vessels (74,000-85,000 dwt) and one Handysize vessel.

Navios Maritime Partners

Navios Maritime Partners L.P. is an international owner and operator of dry cargo and container vessels. The Company is engaged in the seaborne transportation services of a range of dry cargo commodities, including iron ore, coal, grain and fertilizer, and also containers, chartering its vessels under medium to long-term charters. It focuses on providing seaborne shipping services under long-term time charters. As of December 31, 2016, it controlled 12 Panamax vessels, nine Capesize vessels, three Ultra-Handymax vessels and seven container vessels. Panamax vessels are vessels capable of carrying a range of dry cargo commodities, including iron ore, coal, grain and fertilizer and being accommodated in various discharge ports. Capesize vessels are dedicated to the carriage of iron ore and coal. Ultra-Handymax vessels are similar to Panamax vessels although with less carrying capacity, and have self-loading and discharging gear on board to accommodate undeveloped ports.

Old Dominion Freight Line Inc.

Old Dominion Freight Line is a less-than-truckload (LTL) motor carrier providing regional, inter-regional and national LTL services, which include expedited transportation. In addition to the company's primary LTL services, the company provides a range of services including container drayage, truckload brokerage and supply chain consulting. The company also provides access to its systems through multiple gateways that provide its customers and employees flexibility and access to information. The company employs vehicle safety systems, on-board and hand-held computer systems, freight handling systems and logistics technology to reduce costs and transit times.

Pan American Silver Corp.

Pan American Silver is engaged in the production and sale of silver, gold and other base metals including copper, lead and zinc as well as other related activities, including exploration, extraction, processing, refining and reclamation. Co.'s primary product (silver) is produced in Peru, Mexico, Argentina and Bolivia. Additionally, Co. has project development activities in Peru, Mexico and Argentina, and exploration activities throughout South America and Mexico.

Procter & Gamble Company

Procter & Gamble provides consumer packaged goods. The company's products are sold primarily through mass merchandisers, e-commerce, grocery stores, membership club stores, drug stores, department stores, distributors, wholesalers, baby stores, beauty stores, other stores and pharmacies. The company has five reportable segments: Beauty, which includes hair care, and skin and personal care products; Grooming, which includes shave care products; Health Care, which includes oral care and personal health care products; Fabric and Home Care, which includes fabric care and home care products; and Baby, Feminine and Family Care, which includes baby care, feminine care and family care products.

Safe Bulkers Inc.

Safe Bulkers is an international provider of marine drybulk transportation services, transporting bulk cargoes, particularly coal, grain and iron ore, along worldwide shipping routes for consumers of marine drybulk transportation services. As of Feb. 9, 2018, Co. had a fleet of 39 drybulk vessels, with an aggregate carrying capacity of 3,513,800 dwt and an average age of 7.6 years. Co. deploys its vessels on both period time charters and spot time charters. The vessels on period time charters provide Co. with relatively stable cash flow and utilization rates, while the vessels in the spot market allow Co. to maintain its flexibility in low charter market conditions.

Select Sector SPDR-Industrial

Silvercorp Metals

Silvercorp Metals is engaged in the operation and development of and in the acquisition and exploration for high-grade silver-related mineral properties in the People's Republic of China. The Ying Mining District consists of four mines (SGX, HPG, TLP, and LM) and is Co.'s primary source of production.

SPDR KBW Bank ETF

SPDR S&P Semiconductor ETF

SSR Mining Inc

SSR Mining is engaged in the acquisition, exploration, development and operation of silver-dominant resource properties located in the Americas. Co.'s strategic focus is to optimize the production of silver from its Pirquitas mine in Argentina, and to advance other principal development and exploration projects including San Luis in Peru, Diablillos in Argentina, and Pitarrilla and San Agustin in Mexico. In addition to its principal projects, Co. holds a geologically-diverse portfolio of other predominantly silver projects in various stages of exploration.

Star Bulk Carriers Corp.

Star Bulk Carriers is an international company providing worldwide transportation solutions in the drybulk sector through its vessels-owning subsidiaries for a range of customers of major and minor bulk cargoes including iron ore, coal, grain, cement, fertilizer, along worldwide shipping routes. As of Dec 31 2016, Co. owned and operated a fleet of 73 vessels consisting primarily of Newcastlemax, Capesize as well as Kamsarmax, Ultramax and Supramax vessels with a carrying capacity between 52,055 dwt and 209,537 dwt. Co.'s vessels transport a range of major and minor bulk commodities, including ores, coal, grains and fertilizers, along worldwide shipping routes.

TransUnion

TransUnion is an information and insights company. The company provides consumer reports, actionable insights and analytics such as credit and other scores, and decisioning capabilities to businesses. The company has the following reportable segments: United States Markets, which provides consumer reports, actionable insights and analytics such as credit and other scores, and decisioning capabilities to businesses; International, which provides services similar to its United States Markets segment to businesses in select regions outside the United States; and Consumer Interactive, which provides solutions that help consumers manage their personal finances and take precautions against identity theft.

Verisk Analytics Inc

Verisk Analytics is a data analytics provider serving customers in insurance, energy and specialized markets, and financial services. The company has three segments: Insurance, which provides underwriting and ratings and claims insurance data for the United States property and casualty insurance industry; Energy and Specialized Markets, which provides research and consulting data analytics for the global energy, chemicals, and metals and mining industries; and Financial Services, which provides benchmarking, decisioning algorithms, business intelligence, and customized analytic services to financial institutions, payment networks and processors, alternative lenders, regulators and merchants.

Wheaton Precious Metals Corp

Wheaton Precious Metals is engaged in the silver mining business.

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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