Report
Dave Nicoski ...
  • Ross LaDuke
EUR 46.72 For Business Accounts Only

Vermilion Compass: Weekly Equity Strategy

Upgrading Staples and Health Care to Market Weight

As the saying goes, "sector rotation is the lifeblood of a bull market." That appears to be exactly what is going on as we kick off 2024. Leadership areas that have significantly outperformed since the October 2023 lows are starting to pull back rather hard -- and on above average volume. This includes areas such as Technology (XLK), semiconductors (SMH), software (IGV), and the ARKK, IPO, and BITQ ETFs. This tells us a pause/pullback is likely for these high-octane areas, where technicals are short-term bearish, but still bullish longer-term. With that said, we are seeing other Sectors pick up the slack, namely Health Care (XLV), Staples (XLP), Utilities (XLU), Energy (XLE), Financials (XLF), and Real Estate (XLRE). As a result, we recommend shifting exposure toward value and defensives.

Upgrading Consumer Staples and Health Care to Market Weight. RS on the cap- and equal-weighted Consumer Staples Sector ETFs (XLP and RSPS) display bullish 2-month and 7-month downtrend reversals, respectively. Additionally, RS on cap-weighted Health Care (XLV) is reversing its 1-year downtrend, while the equal-weighted Sector (RSPH) already reversed topside its 7.5-month RS downtrend. Add exposure to these defensive Sectors... see charts below and page 2.
S&P 500, Nasdaq Composite, and Russell 2000 Remain Bullish. As long as the S&P 500, Nasdaq Composite, and Russell 2000 (IWM) remain above their respective supports at 4600, 14,400, and $196, we remain bullish. We would need to see breaks below these support levels in order to get more cautious. With that said, the S&P 500 is testing logical resistance at its all-time high set two years ago at 4800-4820; some consolidation between 4600 and 4800-4820 would be healthy, particularly when taking into account the historic move off of the October 2023 lows... see page 3.
Shift to Value; U.S. Dollar (DXY) Testing Support; Failed Breakouts for ARKK and IPO. The Russell 1000 Value vs. Growth ratio is reversing a 4.5-month downtrend after testing 3+ year support -- shift to value. The DXY hit our $101 target from our 11/7/23 Compass; will it bottom here? High-octane ETFs including ARKK and IPO display failed breakouts at 1.5+ year resistance; these are bearish short-term developments... see pages 4-5.
In today's report we highlight attractive Groups and stocks within Health Care and Consumer Staples: HC-05 Pharmaceuticals, Generic, HC-07 Biotech, Mid-Cap, CS-01 Food, Diversified, Large-Cap, and CS-02 Food, Diversified, Mid/Small-Cap... see pages 14-27.
Underlyings
Amneal Pharmaceuticals Inc. Class A

Amneal Pharmaceuticals is a holding companies. Through its subsidiaries, the company is a pharmaceutical company enganged in developing, manufacturing, marketing and distributing pharmaceutical products in a variety of dosage forms and therapeutic categories. The company's pharmaceutical research includes analytical and formulation development and stability. The company has two business segments: Generics, which products are sold either as branded or generic products; and Specialty, which is engaged in the development, promotion, sale and distribution of proprietary branded pharmaceutical products, with a focus on products addressing central nervous system disorders, including migraine and Parkinson's disease.

Ascendant Resources Inc

Ascendant Resources is a resource company engaged in the exploration of gold and copper in the Popondetta Area of the Owen Stanley Range Papua New Guinea.

Campbell Soup Company

Campbell Soup is a manufacturer and marketer of food and beverage products. The company's reportable segments are: Meals and Beverages, which includes the retail and foodservice businesses in the United States and Canada, and the meals and shelf-stable beverages business in Latin America; Snacks, which consists of Pepperidge Farm cookies, crackers, fresh bakery and frozen products in United States retail, including Milano cookies and Goldfish crackers, and Snyder's of Hanover pretzels, Lance sandwich crackers, Cape Cod and Kettle Brand potato chips, Late July snacks, Snack Factory Pretzel Crisps, Pop Secret popcorn, Emerald nuts, and other snacking products in the United States and Canada.

Conagra Brands Inc.

Conagra Brands is a packaged goods food company. The company's segments are: Grocery and Snacks, which includes branded, shelf stable food products sold in various retail channels; Refrigerated and Frozen, which includes branded, temperature controlled food products sold in various retail channels; International, which includes branded food products sold in retail and foodservice channels outside of the U.S.; Foodservice, which includes customized food products for sale to restaurants and other foodservice establishments; Pinnacle Foods, which includes and private-label food products; and Commercial Foods, which included commercially branded and private label food and ingredients, among others.

CRISPR Therapeutics AG

Exelixis Inc.

Exelixis is an oncology-focused biotechnology company that involved in the discovery, development and commercialization of new medicines for cancers. The company's marketd products are: CABOMETYX? (cabozantinib) tablets for renal cell carcinoma and previously treated hepatocellular carcinoma; and COMETRIQ? (cabozantinib) capsules for progressive, metastatic medullary thyroid cancer. The company's products resulting from its discovery efforts are: COTELLIC? (cobimetinib), an inhibitor of MEK approved as part of a combination regimen to treat melanoma; and MINNEBRO? (esaxerenone), an oral, non-steroidal, selective blocker of the mineralocorticoid receptor approved for the treatment of hypertension in Japan.

Intra-Cellular Therapies Inc.

Intra-Cellular Therapies is a biopharmaceutical company focused on the discovery and clinical development of small molecule drugs that address medical needs in neuropsychiatric and neurological disorders by targeting intracellular signaling mechanisms within the central nervous system. The company's primary product candidate, Lumateperone is for the treatment of acute and residual schizophrenia, and for the treatment of bipolar disorder, including bipolar depression. The company's pipeline also includes preclinical programs that are focused on developing drugs for the treatment of schizophrenia, Parkinson's disease, Alzheimer's disease and other neuropsychiatric and neurodegenerative disorders.

Ionis Pharmaceuticals Inc.

Ionis Pharmaceuticals is engaged in discovering and developing RNA-targeted therapeutics. The company has two commercial medicines, SPINRAZA and TEGSEDI. SPINRAZA (nusinersen) injection for intrathecal use is a survival motor neuron-2, directed antisense oligonucleotide indicated for the treatment of spinal muscular atrophy in pediatric and adult patients. TEGSEDI (inotersen) injection is a Generation 2+ antisense medicine and an approved subcutaneous RNA-targeting medicine designed to treat people with polyneuropathy caused by hereditary transthyretin amyloidosis.

J.M. Smucker Company

Smucker (J.M.) manufactures and markets food and beverage products. The company's principal products are coffee, dog food, pet snacks, cat food, peanut butter, fruit spreads, frozen handheld products, shortening and oils, portion control products, juices and beverages, and flour and baking ingredients. The company has four reportable segments: U.S. Retail Coffee, U.S. Retail Consumer Foods, and U.S. Retail Pet Foods, and International and Away From Home. The U.S. retail market segments represent the sales of food and beverage products to consumers through retail outlets in North America. The International and Away From Home segment represents sales outside of the U.S. retail market segments.

Kellogg Company

Kellogg is engaged in the manufacture and marketing of ready-to-eat cereal and convenience foods. The company's principal products are snacks, such as crackers, savory snacks, toaster pastries, cereal bars, granola bars and bites; and convenience foods, such as, ready-to-eat cereals, frozen waffles, veggie foods and noodles. The company's snacks brands are marketed under brands such as Kellogg's, Cheez-It, Pringles, Austin, Parati, and RXBAR. The company's cereals and cereal bars are generally marketed under the Kellogg's name, with some under the Kashi and Bear Naked brands. The company's frozen foods are marketed under the Eggo and Morningstar Farms brands.

Kraft Heinz Company

Kraft Heinz is a food and beverage company. The company manufactures and markets food and beverage products, including condiments and sauces, cheese and dairy, meals, meats, refreshment beverages, coffee, and other grocery products throughout the world. The company has three reportable segments defined by geographic region: United States, Canada, and Europe, Middle East, and Africa. The company's remaining businesses are combined and disclosed as Rest of World. Rest of World comprises two operating segments: Latin America and Asia Pacific.

Mondelez International Inc. Class A

Mondelez International sells food and beverage products. The company makes and sells primarily snacks, including biscuits (cookies, crackers and salted snacks), chocolate, gum and candy, as well as various cheese and grocery and powdered beverage products. The company's portfolio includes snack brands such as Cadbury, Milka and Toblerone chocolate; Oreo, belVita and LU biscuits; Halls candy; Trident gum and Tang powdered beverages. The company's operations and management structure are organized into four operating segments: Latin America; Asia, Middle East and Africa; Europe; and North America. The company sells its products to supermarket chains, wholesalers, supercenters, value stores and other retail food outlets.

Neurocrine Biosciences Inc.

Neurocrine Biosciences is a commercial-stage biopharmaceutical company focused on discovering and developing treatments for patients with neurological, endocrine and psychiatric disorders. The company is primarily focused on the commercialization of INGREZZA? (valbenazine) in the United States. The company's late-stage pipeline includes opicapone as an adjunctive therapy to levodopa/DOPA decarboxylase inhibitors in adult Parkinson's disease patients, elagolix for the treatment of heavy menstrual bleeding associated with uterine fibroids in women, valbenazine for the treatment of chorea in adult patients with Huntington's disease and NBIb-1817 (VY-AADC) for the treatment of Parkinson's disease patients.

Nomad Foods Ltd.

Post Holdings Inc.

Post Holdings is a consumer packaged goods holding company. The company's segments are: Post Consumer Brands, which manufactures, markets and sells branded and private label ready-to-eat (RTE) cereal and hot cereal products; Weetabix, which markets and distributes branded and private label RTE cereal products; Foodservice, which produces and distributes egg and potato products; Refrigerated Retail, which produces and distributes side dishes, eggs and egg, cheese, sausage and other refrigerated products; and BellRing Brands, which markets and distributes ready-to-drink protein shakes, other RTD beverages, powders, nutrition bars and supplements in the nutrition category.

Repligen Corporation

Repligen is a life sciences company that develops and commercializes bioprocessing technologies and systems used in the process of manufacturing biological drugs. The company's bioprocessing business is comprised of: Chromatography, which includes products used in downstream purification, development, manufacturing and quality control of biological drugs; Filtration, which includes XCell Alternating Tangential Flow systems that are used in upstream perfusion cell culture processing; Process Analytics, which complements and supports its Filtration, Chromatography and Proteins franchises; and OEM products, which are represented by its Protein A affinity ligands and cell culture growth factor products

Taro Pharmaceutical Industries Ltd.

Taro Pharmaceutical Industries is engaged as a multinational, science-based pharmaceutical company. Co. develops, manufactures and markets prescription and OTC pharmaceutical products primarily in the United States, Canada and Israel. Co.'s primary areas of focus include semi-solids formulations such as creams and ointments and other dosage forms such as liquids, capsules and tablets, mainly in the dermatological and topical, cardiovascular, neuropsychiatric and anti-inflammatory therapeutic categories. Co. operates principally through three entities: Taro Pharmaceutical Industries Ltd. ("Taro Israel"), and two of its subsidiaries (including indirect), Taro Canada and Taro U.S.A.

Teva Pharmaceutical Industries Limited Sponsored ADR

TreeHouse Foods Inc.

TreeHouse Foods is a consumer packaged food and beverage manufacturer operating across the United States, Canada, and Italy. The company's reportable segments are: Baked Goods, which sells bars, candy, cookies, crackers; in-store bakery products, pita chips, pretzels, refrigerated dough, and retail griddle waffles, pancakes, and French toast; Beverages, which sells broths, liquid non-dairy creamer, non-dairy powdered creamers, powdered drinks, ready-to-drink coffee, single serve hot beverages, teas, and sweeteners; and Meal Solutions, which sells aseptic cheese and pudding products, baking and mix powders, hot cereals, pasta, and skillet dinners, among others.

Viatris Inc.

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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