Report
Dave Nicoski ...
  • Ross LaDuke
EUR 221.33 For Business Accounts Only

Vermilion Int'l Compass: Global Equity Strategy

EM Remains In Favor; Shanghai Comp Breaking Out

A weakening US dollar (DXY) continues to be a major tailwind for both EM equities and the commodity Sectors. Improving price and RS trends for these risk-on areas of the market are among the many characteristics consistent with historical bull markets. Therefore, we continue to label this a bull market and we believe global equities are still in the early innings of a broad-based advance.

• EM Equities. Price action has remained weak for the US dollar (DXY), which has been great news for EM equities. As outlined in our 12/19/19 Int'l Compass and 12/20/19 EM Strategy, we continue to believe these trends are just getting going and that it is an attractive time to shift exposure toward EM equities. Positive developments are evident in China (Shanghai, MSCI China), Hong Kong (Hang Seng - significant China exposure), Greece (ATHEX), Brazil (Bovespa), and Taiwan (TAIEX)... see chart below and page 2.

• Cyclicals vs. Staples. MSCI ACWI and MSCI EM Consumer Discretionary vs. Consumer Staples ratios are developing positively as the former continues to advance while the latter recently made a bullish inflection. Bullish inflections in these ratios are consistent with historical bull markets... see page 3.

• Actionable Theme: Materials & Energy. With commodity prices bottoming (Bloomberg Commodity Index, copper, crude oil, etc.) and the US dollar continuing to exhibit signs of topping we are keeping our focus on these late-cyclical Sectors which are displaying early signs of price and RS bottoms. Within Materials, Metals & Mining stocks (ETF: PICK-US) have significant representation in today's recommendations... see pages 4-5.
Underlyings
Anhui Conch Cement Co. Ltd.

Arc Resources

ARC Resources is engaged in the exploration for, development and production of crude oil, natural gas and natural gas liquids in western Canada. As of Dec 31 2011, net proven reserves for light and medium oil, heavy oil, natural gas and natural gas liquids were 87,905 thousand barrels, 1,801 thousand barrels, 1,197 billion cubit feet and 15,002 thousand barrels, respectively.

Bharat Forge Co. Ltd.

Bharat Forge Limited is engaged in the business of steel forgings, finished machined crankshafts, and front axles assembly and components. The Company's segments include Forgings and Projects (Capital goods). Forgings produces and sells steel forging products comprising forgings, finished machined crankshafts, front axle assembly and components, and ring rolling, among others. Projects (Capital goods) include engineering, procurement and commissioning business for power and infrastructure related projects. It manufactures a range of components for various sectors, including automobiles (across commercial and passenger vehicle), oil and gas, aerospace, locomotives, marine, energy (across renewable and non-renewable sources), construction, mining and general engineering. It has factories at Pune, Satara and Baramati. Its manufacturing facilities are spread across India, Germany, France and Sweden. It operates in Delhi, Noida, Hyderabad, Jamshedpur, Kolkata, Chennai and Mumbai.

CGG
CGG

CGG is a global participant in the geophysical seismic industry. Co. manufactures geophysical equipment and provides marine, land, and airborne data acquisition services. Co. also provides geosciences services, including data imaging, seismic data characterization, geosciences and petroleum engineering consulting services, and collecting, developing and licensing geological data. Co.'s clients are in oil and gas exploration and production industies. Co. divides its activities into four segments: Equipment, Contractual Data Acquisition, Geology, Geophysics and Reservoir (GGR), and Non-Operated Resources, including eight business lines, six Corporate functions, and four Group Departments.

China National Building Materials (H)

China National Building Material is an investment holding company based in the People's Republic of China. Co. is engaged in producing and selling cement, lightweight building materials, glass fiber, composite materials and fiberglass reinforced plastics; and providing engineering services to glass and cement manufacturers and equipment procurement. Through its subsidiaries, Co. is also engaged in producing and selling PVC tiles, glass fiber mats and gypsum board. Co. operates four business segments: lightweight building materials; cement; engineering services; and glass fiber and Fiberglass Reinforced Plastic (FRP) products.

China Resources Cement Holdings Ltd

China Resources Cement Holdings is an investment holding company. Through its subsidiaries, Co. is principally engaged in the production and sale of cement, concrete and related products and services. Co.'s operations range from the excavation of limestone to the production, sale and distribution of cement, clinker and concrete. Co.'s products are primarily used in the construction of infrastructure projects such as hydroelectric power stations, dams, ports, bridges, airports and roads, as well as suburban development and high-rise buildings. Co.'s products are mainly sold in Guangdong, Guangxi, Fujian, Hainan, Shanxi, Yunnan and Guizhou provinces in China.

Chuo Gyorui Co. Ltd.

Chuo Gyorui is mainly engaged in the wholesale of marine and processed marine products. Along with its affiliates, Co. is engaged in four business segments. The Marine Products Wholesale segment is engaged in the wholesale of marine products mainly in the fish markets of Tokyo and Chiba prefecture in Japan. The Refrigerated Warehouse segment is engaged in the provision of refrigerated warehouse services. The Real Estate segment is engaged in the leasing of real estate. The Cargo Handling segment is engaged in the cargo handling of marine products in the central market of Tokyo, Japan.

Companhia Vale do Rio Doce CEDEAR

Cosmo Energy Holdings

Cosmo Energy Holdings is an integrated oil business group based in Japan. Co.'s operations are organized along four operating divisions: Oil Exploration and Production segment is engaged in exploration and production of oil through three oil fields located in Abu Dhabi and Qatar; Petroleum segment operates three refineries and production of petroleum based products; Petrochemical segment is involved in development and production of petrochemical products such as para-xylene (PX) and mixed xylene (MX) for polyester fiber and polyethylene terephthalate (PET) bottles; and Other Businesses segment is predominately engaged in wind power generation and wind power generation facilities.

Dowa Holdings

Dowa Holdings is a holding company. Co., through its affiliates, is engaged in the provision of environmental services and recycling; the nonferrous metal smelting and refining, and the metal production and fabrication; the manufacture and sale of electrical and electronic materials; and the management of heat treatment. Co.'s principal products include gold, silver, copper, zinc, lead, zinc alloys, platinum, compound semiconductor wafers and others. In addition, Co. is also engaged in the leasing of real estate, the construction of plants, as well as the provision of civil engineering services, office administrative services and technical development support services.

Elementis PLC

Elementis is an investment and holding company. Through its subsidiaries, Co. operates as a specialty chemicals company. Co. has four segments: Personal Care, which supplies rheology modifiers based on organoclay, synthetic and natural ingredients to personal care manufacturers; Coatings, which supplies rheology modifiers and additives to manufacturers of decorative and industrial coatings; Chromium, which supplies a range of chromium chemicals for customers across a range of sectors and applications to make their products corrosion resistant and durable; and Energy, which supplies rheological modifiers and additives primarily for oil and gas drilling and stimulation activities.

First Majestic Silver

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.

Fortescue Metals Group Ltd.

Fortescue Metals Group is an iron ore producer. As of June 30 2016, Co.'s operations had four mine sites in the Pilbara. The Chichester Hub, which includes the Cloudbreak and Christmas Creek mines, is located in the Chichester Ranges and the Solomon Hub, in the Hamersley Ranges, includes the Firetail and Kings Valley mines. Co. owns and operates an integrated supply chain including its Herb Elliott Port in Port Hedland and a heavy haul railway with over 620km of track. As of June 30 2016, Co.'s total hematite ore proved and probable reserves were 2.17 billion tonnes. Also, as of June 30 2016, Co.'s total magnetite ore proved and probable reserves were 705.0 million tonnes.

Fugro N.V.

Fugro collects and interprets data related to the earth's surface, soils, and rocks beneath. Co. provides advice to oil and gas, mining, and construction industries. Co. provides the people, equipment and technology that support the exploration, development, production and transportation of the world's natural resources. Co. also provides its clients with the technical data and information required to design, construct and maintain structures and infrastructure in a safe, reliable and efficient manner. Co. operates in three divisions: Geotechnical, Survey, and Geoscience.

INPEX CORPORATION

INPEX is mainly engaged in the energy supply business on a global scale. Co.'s operations include acquisition of license blocks for oil and gas fields, exploration, development, production and sales of oil, natural gas and other mineral resources. Co. is involved in about 70 upstream projects located in 20 countries around the world such projects as "Sebuku Block Ruby Gas Field," "Abadi LNG Project," "Tangguh LNG Project," "Ichthys LNG Project," "Bayu-Undan Project," "Prelude FLNG Project" and other. Co. is engaged in the natural gas transportation, pipeline operation, maintenance and management; the refining domestic crude oil; and the storage and shipment of petroleum products.

Jindal Steel & Power Ltd.

Jindal Steel & Power is engaged in the manufacture of rails, parallel flange beams and columns, plates and coils, angles and columns, rebars, wire rods, fabricated secions, speedfloor, semi-finished products, power, minerals and sponge iron.

Kloeckner & Co

Klockner & Co is a holding company. Co. is engaged in the mill-independent distributor of steel and metal products and steel service center in the combined European and American market. Co.'s core business is the distribution of steel and non-ferrous metals as well as the operation of steel service centers. Co. concentrated mainly in the construction industry as well as the machinery and mechanical engineering industries. Co. also supplies intermediate products for the automotive, shipbuilding, and consumer goods industries, and provides customers solution from procurement through logistics to prefabrication, including individual deliveries and 24-hour service.

KOC Holding A.S.

Koc Holdings is an investment holding company. Through its subsidiaries, Co. is engaged in the business of natural gas, marketing, petroleum shipping, liquefied petroleum gas, power generation, production and trading of petroleum products and mining in the energy sector, production, trading, insurance and car rental in the automotive sector, production and sales, procurement, research and developement in the consumer durables sector, consumer finance, banking, custody, financial consulting, leasing, brokerage, real estate and portfolio management and brokerage banking in the finance sector, and tourism, trading, technology, ship construction and foreign trade in the other sectors.

Kolon Industries

Kolon Industries is engaged in the five business segments: industry materials segment, which provides tire cords, airbags, technical yarns, artificial leathers, polyester spunbonds and aramid products; chemical segment, which provides hydrocarbon resins, phenolic resins, epoxy resins, and glass fiber reinforced pipe products; fashion segment, which provides men's and women's clothing, as well as bags; textile segment, which provides fabric yarns and fibers, and film and electronic materials segment, which provides polyester films, nylon films, coated films, light diffuser films, and prism films.

Lucky Cement Ltd.

Lucky Cement is a cement manufacturing and distribution company which is based in Pakistan. Co. is engaged in the manufacture and sale of Ordinary Portland, Sulphate Resistant, and Slag Cement. Co.'s brand names included Lucky Cement, Lucky Star, Lucky Gold, Chairman, and Lucky Sulphate Resistant Cement. Co. maintains production facilities in Pezu (Production capacity: 13,000 tons per day) as well as in Karachi (Production capacity: 8,000 tons per day). In addition, Co. is engaged in developing export markets for bulk loose cement from Pakistan to the Gulf Countries, African Markets, and Far East Region including Nepal & Sri Lanka.

Lukoil-Holding

PJSC Lukoil is a vertically-integrated oil company engaged in the exploration and production of crude oil and natural gas. Co. is engaged in all main sectors of the modern oil business including supplies, refining, marketing, transportation, petrochemicals and oil-related activities. Co.'s operations are divided into five business segments: Exploration and Production; Refining, Marketing and Distribution; Chemicals; Power Generation and Other Business Segments. Co. owns and operates refineries in Bulgaria (LUKOIL Neftochim Bourgas AD) and Romania (Petrotel-LUKOIL).

MEG Energy

MEG Energy is engaged in a steam assisted gravity drainage oil sands development at its 80 section Christina Lake Regional Project. As of Dec 31 2010, Co. had total proved bitumen reserves of 605.9 gross thousand barrels (470.5 net thousand barrels).

Metalurgica Gerdau S/A Ord

Mitsubishi Gas Chemical

Mitsubishi Gas Chemical is engaged in the manufacture and sale of organic and inorganic chemicals and advanced materials. Natural Gas Chemicals segment offers methanol, formalin, methanol synthesis catalyst, ammonia, amine and dimethyl ether. Aromatic Chemicals segment offers metaxylene, metaxylenediamini, aromatic aldehydes and plasticizers. Specialty Chemicals segment offers inorganic chemicals, organic titanates, water treatment agents, monomers and adamantane derivatives, as well as engineering plastics including polycarbonate lupilon, polyacetal lupital and high-performance polyamide. Information & Advance Materials segment offers electronic materials and oxygen absorbers.

Nanjing Hanrui Cobalt (A)

Nanjing Hanrui Cobalt Co Ltd. Nanjing Hanrui Cobalt Co., Ltd. is principally engaged in research and development, manufacture and sales of metal cobalt powder and other cobalt products. The Company's main products include cobalt powder, electrolytic copper, cobalt concentrate and cobalt salt, among others. The Company distributes its products within the domestic market and to overseas market.

NuVista Energy Ltd.

Nuvista Energy is engaged in the exploration of, and the acquisition, development and production of oil and natural gas reserves and assets related thereto in the Provinces of Alberta, British Columbia and Saskatchewan.

Offshore Oil Engineering (A) (SC SH)

Offshore Oil Engineering is engaged in the design and construction of offshore oil and gas E&P projects and onshore terminals; construction and installation of wharf steel structures; laying of submarine pipeline and cables; loading, transportation, installation and commissioning of jacket platforms; testing and maintenance of offshore and onshore facilities; manufacture of pressure vessels; contracting of overseas offshore oil engineering and domestic international tender projects; survey, consultation, and design of overseas project; and processing of raw materials and assembly parts for clients.

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.

San-Ai Oil Co. Ltd.

San-Ai Oil is engaged in the wholesale distribution of petroleum products. Co.'s principal business segments are petroleum related, gas related and aviation related. Co. is engaged in the sale of gasoline, kerosene, fuel oil, gas oil, light oil and heavy oil; the manufacture and sale of automobile waxes for car wash machines, water-shedding coating and antiseptic agent; the provision of transportation and management of petroleum products; the sale, transportation and filling works of LP gas; the sale of gas appliances; the production and supply of city gas; the storage and supply service of aircraft fuel; the design and construction of construction works; and others.

Shikoku Chemicals Corp.

Shikoku Chemicals is a chemical company. Co. operates in three business segments: chemical, construction materials, and others. The Chemical segment is engaged in the manufacture and sale of organic chemicals, inorganic chemicals and fine chemicals including carbon disulfide, insoluble sulfur, anhydrous sodium, cyanuric acid derivatives and imidazole. The Construction Materials segment offers wall materials and exterior products including gates, fences, garages and shelters. The Others segment is engaged in the provision of casualty insurance agency and fast food sales businesses.

Southern Copper Corp.

Southern Copper is a copper producer. The company's mining, smelting and refining facilities are located in Peru and Mexico and the company conducts exploration activities in those countries and in Argentina, Chile and Ecuador. The company's Peruvian copper operations involve mining, milling and flotation of copper ore to produce copper concentrates and molybdenum concentrates, the smelting of copper concentrates to produce blister and anode copper, and the refining of anode copper to produce copper cathodes. The company's Mexican operations are conducted through its subsidiary, Minera Mexico, S.A. de C.V., which engages primarily in the mining and processing of copper, molybdenum, zinc, silver, gold and lead.

SSAB AB A

SSAB is a supplier of high strength steels with products comprising various qualities and dimensions within wear steels and structural steels. Co.'s solutions also include services, from concept to finished delivery. SSAB Wear Services also provides advice, repairs, and sales of spare parts to the aftermarket. The business is organized into three business areas; SSAB Americas, SSAB EMEA and SSAB APAC as well as the subsidiary, Tibnor, which is a steel distributor in the Nordic region. SSAB EMEA consist of Europe, the Middle East and Africa; SSAB Americas of North and Latin America; SSAB APAC of Asia, Australia and New Zealand and Tibnor of steel and metal distribution in northern Europe.

SSR Mining

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.

Stora Enso Oyj R

Stora Enso is a provider of renewable solutions in packaging, biomaterials, wooden constructions and paper on global markets. Co.'s reporting segments are: Consumer Board, which develops and provides consumer packaging boards for printing and packaging applications; Packaging Solutions, which develops fibre-based packaging; Biomaterials, which provides a variety of pulp grades for paper, board, tissue, textile and hygiene product producers; Wood Products, which provides wood-based solutions for building and housing; Paper, which provides paper solutions for print media and office use; as well as Other, which includes Co.'s shareholding in the energy company, Pohjolan Voima.

Toyobo Co. Ltd.

TOYOBO is engaged in the manufacture and sale of films, functional polymers, industrial materials and textiles. Films & Functional Polymers segment offers industrial films and food packaging films; functional polymers including engineering plastics, industrial adhesives, coatings, photo-sensitive printing plates, acrylate polymers and electronic materials. Industrial Materials segment offers functional fibers, filters and non-woven fabrics. Healthcare segment offers bioproducts including enzymes and agents for diagnostics and diagnostic systems; and pharmaceuticals and medical/water treatment membranes. Textiles and Trading segment offers textiles, synthetic filaments and acrylic fibers.

UBE Industries Ltd.

Ube Industries is engaged in the manufacture and sale of chemicals and cement products. Chemicals segment offers caprolactam, polyamide resins, polybutadiene, industrial chemicals, specialty products and fine chemicals. Pharmaceuticals segment offers active pharmaceutical ingredients and intermediates. Cement & Construction Materials segment offers cement, ready-mixed concrete, limestone and building materials. Machinery segment offers molding machines, industrial machinery and bridges and steel structures. Energy & Environment segment is engaged in the import and sales of coal and the supply of electric power. Co. is also engaged in the real estate business.

Victrex PLC

Victrex is a non-trading investment holding company. Through its subsidiaries, Co. is engaged in polymer solutions, focused on the strategic markets of Automotive, Aerospace, Energy (including Manufacturing & Engineering), Electronics and Medical. Co. develops solutions in Polyether ether ketone (PEEK) and Polyaryletherketones (PAEK) based polymer, selected semi-finished and finished parts. Co.'s operating segments are: Industrial (Victrex Polymer Solutions), which focuses on its Automotive, Aerospace, Electronics and Energy markets; and Medical (Invibio Biomaterial Solutions), which focuses on providing solutions for medical device manufacturers.

Yamana Gold

Yamana Gold is engaged in the exploration, development, extraction, processing and reclamation of gold and other precious metals mining throughout the Americas including Brazil, Argentina, Chile, Mexico and Colombia. As of Dec 31 2011, total proven reserves for gold, silver, cooper, zinc and molybdenum was 618,709,000 tonnes, 27,316,000 tonnes, 387,660,000 tonnes, 5,004,000 tonnes and 32,000,000 tonnes, respectively.

Zhejiang Huayou Cobalt (A)

Zhejiang Huayou Cobalt Co Ltd. ZHEJIANG HUAYOU COBALT CO., LTD. is a China-based company principally engaged in nonferrous metal related businesses. The Company's principal business includes the manufacture of lithium-ion new energy materials, the deep processing of cobalt new materials, and the mining, beneficiation and smelting of cobalt and copper. The Company's main products include tricobalt tetroxide, cobalt hydroxide, cobalt sulfate, lithium anode material ternary precursor and others. The Company is also engaged in the manufacture and sales of electro-deposited copper, blister copper and electrolytic nickel. The Company mainly distributes its products in domestic and overseas markets.

Zhejiang Jiuli Hi-Tech Metals (A)

Zhejiang JIULI Hi-tech Metals Co Ltd. Zhejiang JIULI Hi-tech Metals Co. , Ltd. is a China-based company principally engaged in the research, development, production and distribution of industrial stainless steel seamless pipes and special alloy pipes and fittings. The Company's main products include nuclear power pipes, supercritical boiler tubes, nickel-based alloy oil well pipes, precision tubes, bimetallic composite pipes, duplex phase stainless steel tubes and instrumentation pipes, among others. The Company's products are mainly applied in petroleum, chemical, natural gas, electric equipment manufacturing and other industries. The Company distributes its products in domestic market and to overseas markets.

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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