Vermilion Int'l Compass: Global Equity Strategy
Value Sectors Take The Lead On Rising Global YieldsMarket dynamics remain largely constructive and critical supports are holding on the broad global indexes. Therefore, our global outlook remains neutral yet constructive, as we continue to expect more consolidation and mixed markets ahead.
Index Overview. Key support levels that we have been focusing on for months continue to hold. Important support levels we are watching include $54 on MSCI ACWI ex-US (ACWX-US), $76.50 on MSCI EAFE (EFA-US), and $99 on MSCI ACWI (ACWI-US). The MSCI ACWI ex-US and MSCI EAFE indexes continue to consolidate sideways and is the main reason why we remain neutral; we will stay neutral overall until there is a breakout or breakdown in these indexes, at which point our outlook will go with the direction of the break... see page 2.
Commodities, Global Sovereign Yields, US Dollar, Emerging Markets. Commodities (excluding precious metals) and global sovereign yields are on the rise as the US dollar (DXY) shows signs of breaking down. Additionally, emerging market equities (EEM-US) display a bullish RS reversal relative to MSCI ACWI. These are all important risk-on signals for global equities... see pages 3-4.
Buying Equities For Rising Rates: Energy & Financials. Two Sectors that stand to benefit most from rising rates include Energy and Financials. We recommend adding exposure to these Sectors as we see a shift in favor of value Sectors... see chart below and pages 5-15 for individual stock recommendations.
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.
Canadian Natural Resources is an independent crude oil and natural gas exploration, development and production company. Co.'s exploration and production operations are focused in North America, largely in Western Canada; the U.K. portion of the North Sea; and CA'te d'Ivoire, Gabon, and South Africa in Offshore Africa. Co. had total proved reserves of 5.71 billion barrels of oil equivalent. Co.'s gross proved crude oil, bitumen (thermal oil), synthetic crude oil and natural gas liquids reserves totaled 4.70 billion barrels and its gross proved natural gas reserves totaled 6,106.00 billion cubic feet.
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.
Encana is an energy producer that is focused on developing its multi-basin portfolio of oil, natural gas liquids (NGL) and natural gas producing plays. The company's reportable segments are: Canadian Operations, which includes the exploration for, development of, and production of oil, NGLs, natural gas and other related activities within Canada; USA Operations, which includes the exploration for, development of, and production of natural gas, oil and NGLs and other related activities within the U.S.; and Market Optimization activities are managed by the Midstream, Marketing & Fundamentals team, which is primarily responsible for the sale of the company's proprietary production to third party customers.
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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