Report
Dave Nicoski ...
  • Ross LaDuke
EUR 46.92 For Business Accounts Only

Vermilion Compass: Weekly Equity Strategy

Bulls Back In Control

In last week's Compass we highlighted our belief that the lows of this recent correction were likely in place -- something we continue to believe. This was due in large part to the S&P 500 and Nasdaq 100 breaking out from their respective bullish falling wedge patterns as they gapped-up last Monday. Despite a bumpy week that included the first presidential debate and President Trump testing positive for COVID-19, both the S&P 500 and Nasdaq 100 held above their respective gaps from Monday. This is a sign of underlying strength and as long as the gaps hold, it tells us the bulls are firmly in control.

· Key Levels. We see short-term support at 3325 on the S&P 500 and 11,225 on the Nasdaq 100; both levels correspond to the unfilled gaps from last week. If these support levels hold it is hard to be anything but bullish. Resistance levels to watch include 3425 on the S&P 500 and 11,606 on the Nasdaq 100; breakouts above these levels would create a clear path to all-time highs for both indexes... see chart below.

· Sector Relative Strength Rankings & Weighting Recommendations. Equal-weighted Financials was our best-performing Sector last week on the back of strength in banking and insurance industries. We continue to watch the banks closely due to their key role in business activity. A closer look at the bank ETFs (KBE, KRE) and the KBW Bank Index (BKX) shows all are on the cusp of major bullish price and RS inflections -- something that would be very bullish for the broad market... see pages 2-3.

· Big Picture Trends. A significant reason for recent outperformance from Financials is that the 10-year Treasury yield hit 3.5-month highs yesterday. We view this as a positive sign for the economy and if yields continue to rise we are likely to see outperformance from value and small-caps. Speaking of small-caps, the Russell 2000 is within striking distance of its August highs. Additionally, the Bloomberg Commodity index held above key support at 69-70, and high yield spreads have narrowed and remain below 555 bps; it is hard to be bearish in light of all these developments..
Underlyings
Atlas Corp. (British Columbia)

Big 5 Sporting Goods Corp.

Big 5 Sporting Goods is a holding company. The company is a sporting goods retailer. The company's product mix includes athletic shoes, apparel and accessories, as well as a range of outdoor and athletic equipment for team sports, fitness, camping, hunting, fishing, tennis, golf, winter and summer recreation and roller sports. The company's stores carry a range of products from brand name manufacturers, including adidas, Coleman, Columbia, Everlast, New Balance, Nike, Rawlings, Skechers, Spalding, Under Armour and Wilson. The company also provides brand name merchandise produced for it, private label merchandise and items the company purchases through opportunistic buys of vendor over-stock and close-out merchandise.

Cleveland-Cliffs Inc

Cleveland-Cliffs is an iron ore mining company. The company is a supplier of iron ore pellets to the North American steel industry from its mines and pellet plants located in Michigan and Minnesota. The company is organized according to its differentiated products. The company has two segments: Mining and Pelletizing, which the company is a main producer of iron ore pellets, primarily selling production from its Mining and Pelletizing segment to integrated steel companies in the U.S. and Canada; and Metallics, which constructing a Hot Briquetted Iron (HBI) production plant, whereby HBI is an iron alternative to scrap that, when used as a feedstock, allows an Electric Arc Furnace to produces valuable grades of steel.

Costamare Inc.

Costamare is an international owner of containerships. Co. is engaged in chartering vessels to many of the world's liner companies. As of Feb 23 2018, Co. has a fleet of 71 containerships with a total capacity in excess of 466,000 twenty foot equivalent units (TEUs). Co.'s strategy is to time charter its containerships to a geographically diverse, financially strong and loyal group of liner companies. Co.'s containerships operate primarily under multi-year charters and therefore are not subject to the effect of seasonal variations in demand. Some of Co.'s customers are A.P. Moller-Maersk, MSC, Evergreen, Hapag Lloyd and COSCO.

Dick's Sporting Goods Inc.

Dick's Sporting Goods is an omni-channel sporting goods retailer offering sports equipment, apparel, footwear and accessories. The company also owns and operates Golf Galaxy, Field & Stream and other specialty concept stores, and Dick's Team Sports HQ, an all-in-one youth sports digital platform offering scheduling, communications and live scorekeeping through its GameChanger mobile apps, free league management services, custom uniforms and fan wear, and access to donations and sponsorships. The company provides products to its customers through its retail stores and online. The company is also involved in local communities, sponsoring teams in various sports.

Genco Shipping & Trading Ltd.

Global Ship Lease Inc. Class A

Global Ship Lease is a holding company. Through its subsidiaries, the company is engaged in the business of owning and chartering out containerships under fixed rate charters to container liner companies.

H&E Equipment Services Inc.

H&E Equipment Services is an equipment services company focused on heavy construction and industrial equipment. The company rents, sells and provides parts and services support for four main categories of equipment: hi-lift or aerial work platform equipment; cranes; earthmoving equipment; and industrial lift trucks. The company engages in five principal business activities in these equipment categories which include equipment rentals; new equipment sales; used equipment sales; parts sales; and repair and maintenance services. In addition to its principal business activities, the company provides ancillary equipment support activities including transportation, hauling, parts shipping and loss damage waivers.

Herc Holdings Inc.

Herc Holdings is an equipment rental supplier. The company conducts its operations through subsidiaries, including Herc Rentals Inc. Operations are conducted under the Herc Rentals brand in the U.S. and Canada and under the Hertz Equipment Rental brand in other international locations. The company sells used equipment and contractor supplies such as construction consumables, tools, small equipment and safety supplies; provides repair, maintenance and equipment management services and safety training to certain of its customers; provides equipment re-rental services and provides on-site support to its customers; and provides ancillary services such as equipment transport, cleaning, refueling and labor.

Hibbett Sports Inc.

Hibbett Sports is an athletic-inspired fashion retailer primarily located in small and mid-sized communities across the country primarily in the South, Southwest, Mid-Atlantic and the Midwest regions. The company's merchandise assortment features a primary selection of brand name merchandise focusing on athletic footwear, athletic and fashion apparel, team sports equipment and related accessories. The company's Hibbett Sports stores includes free-standing stores, and stores in enclosed malls. The company's City Gear stores are located primarily in strip centers. The company's Sports Additions stores provides athletic footwear with the remainder consisting of headwear and apparel.

MarineMax Inc.

MarineMax is a recreational boat and yacht retailer. Through its retail locations, the company sells new and used recreational boats, including pleasure and fishing boats. The company also sells related marine products, including engines, trailers, parts, and accessories. In addition, the company provides repair, maintenance, and slip and storage services; arranges related boat financing, insurance, and extended service contracts; provides boat and yacht brokerage sales; yacht charter services; and operates a yacht charter business in the British Virgin Islands. The company also owns Fraser Yachts Group S.R.L., a yacht brokerage and yacht services company with operations in various countries.

Matson Inc.

Matson is a holding company engaged in the provision of ocean transportation and logistics services. The company's Ocean transportation segment business is conducted through Matson Navigation Company, Inc., which provides a lifeline of ocean freight transportation services to the domestic non-contiguous economies of Hawaii, Alaska and Guam, and to other island economies in Micronesia and operates an expedited service from China to Long Beach, CA, and provides services to Okinawa, Japan and various islands in the South Pacific. The company's Logistics business is conducted through Matson Logistics, Inc., an asset-light business that provides a variety of logistics services to its customers.

Mesabi Trust

Mesabi Trust is a trust that holds all of the interests formerly owned by Mesabi Iron Company. The principal assets of the company consist of two different interests in certain properties in the Mesabi Iron Range: the company's interest as assignor in the Amended Assignment of Peters Lease and the Amended Assignment of Cloquet Lease in St. Louis County, MN (the Peters Lease Lands and the Cloquet Lease Lands, respectively); and the company's ownership of the entire beneficial interest in the Mesabi Land Trust, which has a 20% interest as fee owner in the Peters Lease Lands and a 100% fee ownership in certain non-mineral-bearing lands adjacent to the Peters and Cloquet Lease Lands.

Sportmans Warehouse Holdings

Sportsman's Warehouse Holdings is a holding company. Through its subsidiaries, the company is an outdoor sporting goods retailer that carries merchandise from manufacturers such as Browning, Carhartt and Coleman. The company also carries private label and make-up offerings under the Rustic Ridge?, Killik?, Lost Creek and Sportsman's Warehouse brands as well as make-up items through vendors such as Tikka, and Camp Chef. Further, the company provides its customers with various in-store, technical support services such as gunsmithing and firearm service plans. The company's stores are organized into six departments: Camping; Clothing; Fishing; Footwear; Hunting and Shooting; and Optics, Electronics, Accessories and Other.

Star Bulk Carriers Corp.

Star Bulk Carriers is an international company providing worldwide transportation solutions in the drybulk sector through its vessels-owning subsidiaries for a range of customers of major and minor bulk cargoes including iron ore, coal, grain, cement, fertilizer, along worldwide shipping routes. As of Dec 31 2016, Co. owned and operated a fleet of 73 vessels consisting primarily of Newcastlemax, Capesize as well as Kamsarmax, Ultramax and Supramax vessels with a carrying capacity between 52,055 dwt and 209,537 dwt. Co.'s vessels transport a range of major and minor bulk commodities, including ores, coal, grains and fertilizers, along worldwide shipping routes.

United Rentals Inc.

United Rentals is an equipment rental company that operates throughout the United States and Canada, and Europe. The company's general rentals segment includes the rental of construction, aerial and industrial equipment, general tools and light equipment, and related services and activities. This segment's customers include construction and industrial companies, manufacturers, utilities, municipalities and homeowners. The company's trench, power and fluid solutions segment includes the rental of construction products and related services. This segment consist of: Trench Safety region, Power and Heating, Ventilating and Air Conditioning region; and Fluid Solutions and Fluid Solutions Europe regions.

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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