Report
Dave Nicoski ...
  • Ross LaDuke
EUR 46.93 For Business Accounts Only

Vermilion Int'l Compass: Global Equity Strategy

Uncertainty Hits Global Equities

MSCI ACWI (ACWI-US) recently broke below the $81.50 short-term support level we were watching, which tells us that the important $77 support level is likely to be tested. While a more cautious outlook is appropriate, as long as $77 holds (the September lows) we are constructive and would be buyers on a pullback. A move below $77 would start to get very concerning, and would leave $75 and the 200-day MA as last-ditch support.

· Market Dynamics Still Constructive. Most market dynamics point to this being a relatively contained pullback. The US dollar (DXY) remains in a downtrend and is below 94; it would take a break above 95 to provide a risk-off signal. Commodities are not breaking down. High yield spreads in the US and Europe remain benign; if this was the start of a major selloff we would expect to see high yield spreads widening substantially, and we are not seeing this. Emerging market equities continue to outperform relative to developed int'l markets, a clear risk-on signal considering EM is arguably the riskiest equity asset class around.

· Europe A Concern. We have been underweight Europe for quite some time, but now price is getting to be very concerning as well, with the EURO STOXX 50 index showing a topping pattern. Be very selective... see chart below.

· Attractive Countries. Small- and large-cap indexes in Japan continue to hold above short-term support, an impressive feat considering the global pullback. Additionally, within the global ex-US arena we have been overweight EM relative to EAFE since December 2019, and we believe this continues to be where most of the top opportunities are -- most notably China, India, Taiwan, and South Korea. The vast majority of today's individual stock recommendations hail from these aforementioned countries... see pages 2-3.

· Actionable Theme: Leadership Sectors. Considering the recent pullback we want to be sticking with areas that have continued to outperform in spite of recent broad market weakness. For that we look to the following leadership Sectors: Technology, Consumer Discretionary, Manufacturing, Materials, and Transportation... see pages 4-20.
Underlyings
ANTA Sports Products Ltd.

ANTA Sports Products is principally engaged in the manufacturing, trading and distribution of sporting goods, including footwear, apparel and accessories, in the People's Republic of China. As of Dec 31 2014, there were 7,662 ANTA Stores, 1,228 Kids sportswear series stores and 519 FILA stores in China, Hong Kong and Macao.

Baidu Inc Sponsored ADR Class A

Credicorp Ltd.

CrediCorp is a holding company. Through its subsidiaries, Co. is engaged in investing activities. Co. operates primarily through four operating segments: banking, investment banking, insurance, and pension funds. Banking - principally handling loans, credit facilities, deposits and current accounts. Insurance - principally comprising the issue of insurance policies to cover losses in commercial property, transportation, marine vessels, automobile, life, health and pension funds. Pension funds - providing services of private pension fund management to affiliated pensioners. Investment banking - provide investment brokerage and management to a broad and diverse clientele.

DENSO CORPORATION

Denso and its affiliates are mainly engaged in the manufacture and sale of automobile electronic, electrical parts, and other components. Co.'s principal business segments are powertrain control systems, electronic systems, thermal systems, information and safety systems, small motors, industrial systems and consumer products. Co.'s principal products include starters, alternators, engine management systems, components for gasoline, diesel and electric hybrid vehicles, engine ECUs, hybrid ICs, air conditioners, radiators, remote keyless entry controllers, car navigation systems, car-mounted ETC devices, motors, bar code handy scanners and industrial robots.

FAST RETAILING CO. LTD.

Fast Retailing is engaged in the control and management of overall group activities as a holding company. Co., through its subsidiaries, is mainly involved in the operation of chain stores, selling casual clothing and accessories at reasonable prices, called "UNIQLO" throughout Japan as well as in overseas. Co., through its subsidiaries, is also engaged in the planning, manufacture and sale of clothing under the brand names of "GU," "Theory," "COMPTOIR DES COTONNIERS," "PRINCESSE tam.tam" and "J Brand." In addition, Co. is engaged in the leasing of real estate.

Feng Tay Enterprise Co. Ltd.

Feng Tay Enterprise is engaged in the manufacture of footwear, sports shoes and related accessories; the sale, and import and export of shoes materials, and footwear machines and equipment; and the provision of technical information in shoes manufacturing. Through its subsidiaries, Co. is also engaged in investments; machinery and tools trading; the manufacture and maintenance of mold, stripper bar and metal parts; and the retail of household electrical, apparel, sports series products, food and beverage, hardware and general merchandise.

Frasers Group PLC

Sports Direct International is a sporting goods retailer operating in the U.K., Europe, the U.S. and Asia. Co. operates in four segments: U.K. Sports Retail, which includes the U.K. retail network of sports stores along with related websites; International Sports Retail, which includes the international retail network of sports stores; Brands, which includes Co.'s portfolio of brands such as Everlast, Lonsdale and Slazenger; and Premium Lifestyle, which includes the premium and lifestyle retail businesses such as USC, Cruise and Flannels. As of Apr 30 2017, Co.'s U.K. sports store portfolio had a total of 468 stores and its international sports store portfolio had a total of 289 stores.

GB Group PLC

GB Group is engaged in the provision of identity data intelligence services. Co. has two operating segments: Identity Proofing, which provides electronic ID Verification services for combating ID fraud, money laundering and under-age gambling, ID Employ & Comply services for employee authentication and screening, and ID Fraud & Risk Management services; as well as Identity Solutions, which provides ID Registration, ID Engage and ID Trace & Investigate software and services that provide consumer information and facilitate understanding, targeting and retention of profitable consumers. Between them, the segments have six complementary lines of business including ID Verification and ID Engage.

Groupe Parot SA

Groupe Parot SA is a France-based company engaged in the auto vehicles, parts and service retailers industry. The Company is a new car dealer. It offers passenger's cars and trucks. The Company operates through Societe Behra Holding SAS, a Puteaux-based new car dealer and Brienne Auto.

Gungho Online Entertainment Inc.

GungHo Online Entertainment is mainly engaged in the planning, development, and operation of online games. Along with its subsidiaries and associated companies, Co. is engaged in the planning, development, operation and distribution of smart phone applications and online computer games, and the sale of console games. Co. is also engaged in the sale of game contents through download service as well as the licensing of self-developed games. Co.'s principal smart phone applications are "Puzzle & Dragons," "Summons Board," "Divine Gate," and "Princess Punt Sweets," and its principal online computer games are "Ragnarok Online" and "Emil Chronicle Online."

Hermes International SCA

Hermes International is engaged in the manufacture, sale, and distribution of luxury goods primarily in France, rest of Europe, Japan, Asia-Pacific, and Americas. Co.'s activities can be divided into two segments: the distribution via Co.'s exclusive network and the distribution via specialist outlets. The distribution via Co.'s exclusive network comprises silks and textiles, leather goods and saddlery, ready-to-wear and fashion accessories (men and women's clothing, belts, jewellery accessories, gloves, hats and shoes), and other goods (jewellery and products of the art of living department). The distribution via specialist outlets comprise perfumes, tableware and watches.

KIA Motors Corporation

KIA MOTORS CORPORATION is a Korea-based company principally engaged in the manufacture and distribution of automobiles. The Company's products include passenger vehicles, recreational vehicles (RVs), taxi, bus, commercial vehicles as well as hybrid vehicles under the brand names of K3, K5, K7, K9, Soul, Sedona, Sorento, Sportage and others. The Company also engaged in the manufacture of automobile components, as well as prevision of rental and maintenance services. The Company distributes its products within domestic market and to overseas markets, such as North America, Europe and other Asian countries, among others.

Li Ning Company Limited

Li Ning Company Limited is principally engaged in brand development, design, manufacture and sale of sport-related footwear, apparel, equipment and accessories in the People's Republic of China (the PRC). The Company is also engaged in the manufacture, development, marketing, distribution and sales of sports products under several other brands, including Double Happiness (table tennis), AIGLE (outdoor sports) and Lotto (sports fashion). Through its subsidiaries, the Company is also engaged in the provision of information technology service.

Nitto Denko Corp.

Nitto Denko and its subsidiaries are mainly engaged in the manufacture and sale of industrial materials, electronic materials and functional materials. Co.'s principal products include junction materials, surface protective materials, sealing materials, packing materials, and machinery; liquid crystal display ("LCD")-related materials, semiconductor-related materials, printed circuits materials and electronic processing materials; and medical-related materials, macro-molecular separation membranes used in seawater desalination and engineering plastic materials.

Nokian Renkaat Oyj

Nokian Tyres is a tyre manufacturer. Co. mainly sells its products in the aftermarket. Co. and its subsidiaries include the Vianor tyre retail chain, which provides wholesale and retail services in Co.'s primary markets. The core business units in Co. and its subsidiaries are Passenger Car Tyres, which develops, manufactures, and markets summer and winter tyres for passenger cars and delivery trucks as well as SUVs; Heavy Tyres, which focuses on special tyres; as well as Vianor, which provides tyres for all vehicles: passenger cars, vans, trucks, and heavy machinery. In addition to Nokian-branded tyres, the Vianor tyre retail chain sells other tyre brands and a variety of motoring products.

Sushiro Global Holdings Ltd.

Tencent Holdings Ltd.

Tencent Holdings Limited is an investment holding company principally involved in the provision of value-added services (VAS) and online advertising services. The Company operates through three main segments. The VAS segment is mainly involved in provision of online/mobile games, community value-added services and applications across various Internet and mobile platforms. The Online Advertising segment is mainly engaged in display based and performance based advertisements. The Others segment is mainly involved in provision of payment related services, cloud services and other services.

Tokyo Ohka Kogyo Co. Ltd.

Tokyo Ohka Kogyo is mainly engaged in the manufacture and sale of materials for electronics. Along with its subsidiaries and associated companies, Co. operates in two business segments: material and equipment. Material segment is engaged in the manufacture and sale of electronics functional materials and high purity chemicals. Equipment segment is engaged in the manufacture, sale and maintenance of process equipment for liquid crystal display ("LCD") panels and semiconductor manufacturing equipment. As of Dec 31 2017, Co. maintains five plants in Fukushima, Shizuoka, Kumamoto, Tochigi and Saitama, Japan, as well as its logistics center in Kanagawa, Japan.

Weibo Corp Sponsored ADR Class A

Zhongsheng Group Holdings Ltd.

Zhongsheng Group Holdings is an investment holding company. Co. has dealership agreements to operate its 4S dealerships for a portfolio of automobile brands, consisting of luxury automobile brands, and mid-to-high end automobile brands. Through its one-stop automobile shop business structure, Co. provides a range of new automobiles and after-sales products and services in each of its 4S dealerships. Co.'s after-sales businesses provide spare parts, automobile accessories, repair and maintenance services, detailing services, and other automobile-related products and services. As of Dec 31 2014, Co. had 191 automobile dealerships across the People's Republic of China.

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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