Vermilion Compass: Weekly Equity Strategy
THEMES:Bullish Big Picture. Technical tops and breakdowns remain on the endangered species list. The weight-of-the-evidence remains decidedly bullish, with leadership Groups and Sectors relieving “overextended†trends via orderly pullbacks and sideways consolidations. Further, as we highlight below, even despised segments like fertilizer stocks and, from a country perspective, China are bottoming. Our positive outlook remains intact... see page 2
• Sector Leadership. Maintain overweights in: Energy, Financials, Materials, Manufacturing, Tech, and Transports. Stay underweight defensive Sectors like Consumer Staples, Health Care, and Utilities... see page 2
• Confirming technicals overseas. Europe and Japan, both which broke out from their 2016 bottoming patterns, are now trading in confirmed uptrends. And once “problematic†markets, at least in a headline sense, like China are bottoming... see page 3
• Theme 1: Fertilizer. To reiterate our Jan. 20 Insights report, global fertilizer stocks are bottoming. This theme still falls under the “contrarian†banner, as the Street is far from bullish on names like MOS and POT. Supporting our bullish outlook, grain commodities are stabilizing, with soybeans breaking out to 6-month highs. Increase exposure... see page 3
• Theme 2: Semis. Though value is in favor, Tech continues to perform well. Within the Sector, Semis are leadership. This is not a new theme, but one that continues to progress with no signs of stalling. The second-half of today's report is dedicated to attractive charts within our five Semi Groups. ... see pages 7-20
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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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