Dave Nicoski ...
  • Ross LaDuke
EUR 42.23 For Business Accounts Only

Vermilion Int'l Compass: Global Equity Strategy

US Dollar Breakdown Bullish For Risk Sentiment

Global indexes including the MSCI ACWI and ACWI ex-US are following in the MSCI EM index's footsteps by breaking to new highs. This is bullish and signals a new leg higher is underway. Additionally, the US dollar is showing signs of a breakdown, something we view as a positive for global risk sentiment as long as the decline continues to be orderly. Overall our outlook remains bullish and we suggest buying any dips.

· US Dollar (DXY) Breaking Below 96. As we stated after the DXY broke below 98.50, the door remains open for non-US equities (especially EM equities) to outperform relative to the US. Shorter-term resistance to watch on the DXY is at 96 followed by 97.80. Assuming the DXY is below 96 at the end of this week, it will be bullish for global risk sentiment and we believe EM/non-US outperformance is likely to continue. Overall, a weaker dollar should not raise concerns as long as declines in the DXY are orderly (i.e., not violent)... see chart below.

· Index Overviews. As expected, broad global indexes including MSCI ACWI and ACWI ex-US are following MSCI EM to new highs. That leaves the laggard, MSCI EAFE, as the last index to break out... see page 2.

· Actionable Theme: Cyclical Value/”Reopening” Sectors. Cyclical value and “reopening” themes continue to have some bright spots where we want to be invested, especially in the following Sectors: Transportation, Manufacturing, Materials, and Consumer Discretionary. We also specifically want to draw your attention to two Canadian railroad stocks (Group TR-16) that are each breaking out and should be bought at current levels: Canadian National Railway (CNR-CA) and Canadian Pacific Railway (CP-CA)... see page 3 and pages 5-12.

· Actionable Theme: Growth Sectors. Growth remains long-term leadership -- remain overweight. Attractive growth Sectors highlighted in today's report include: Health Care, Services, Technology, and Communications..
Azbil Corp.

Azbil is mainly engaged in building automation business. Co. offers building automation systems, wide area management systems, air conditioning management systems, actuators, control valves for air conditioning, various wireless sensors, building and energy management, maintenance and consultation services; distributed control systems, solution packages, equipment diagnosis equipment, converters, sensors and switches, maintenance and consultation services; gas and water work meters, healthy and medical emergency notification services, caring services, residential whole building air-conditioning systems; precise machine tools, special assembly machines, processing machines and others.

BNY Mellon Strategic Municipal Bond Fund, Inc.

Canadian National Railway Co.

Canadian National Railway, together with its wholly-owned subsidiaries, is engaged in the rail and related transportation business. Co.'s network of approximately 20,000 route miles of track spans Canada and mid-America, from the Atlantic and Pacific oceans to the Gulf of Mexico. Co.'s network and connections to all Class I railroads provide access to all three North American Free Trade Agreement nations. Co. handles and carries cargo, serving exporters, importers, retailers, farmers and manufacturers. Co. is engaged in the movement of a portfolio of goods, including petroleum and chemicals, grain and fertilizers, coal, metals and minerals, forest products, intermodal and automotive.

Canadian Pacific Railway Ltd.

Canadian Pacific Railway operates a transcontinental railway in Canada and the U.S. Co.'s business mix includes bulk commodities, merchandise freight and intermodal traffic, serving the principal business centers of Canada from Montreal, Quebec, to Vancouver, British Columbia, and the U.S. Northeast and Midwest regions. As of Dec 31 2016, Co. operated on a network of approximately 12,400 miles of track, of which CP owns 10,800 miles and has access to 1,600 miles under trackage rights and lease agreements. Of the total mileage operated, about 5,600 miles were located in western Canada, 2,000 miles in eastern Canada, 4,400 miles in the U.S. Midwest and 400 miles in the U.S. Northeast.

China Lesso Group Holdings Ltd.


CKD is mainly engaged in the manufacture and sale of automatic machinery products and other component products. Co.'s principal business segments are automatic machinery and components. Co.'s principal products are lamp and bulb making machines, automatic packaging machines, secondary battery making machines, capacitor making machines, labor-saving components, pneumatic control components, pneumatic actuators, pneumatic auxiliary components, fine system components and fluid control components. In addition, Co., through its subsidiaries, is engaged in the provision of insurance agency services and factoring services.

Croda International PLC

Croda International creates, makes, and sells specialty chemicals. Co.'s sales, marketing and research activities are organized into four global market sectors: Personal Care, which focuses on ingredients for skin, hair, sun protection and color cosmetic products; Life Sciences, which comprises of three complementary businesses: Health Care, Crop Protection, and Seed Enhancement; Performance Technologies, which targets technologies in Smart Materials and Energy Technologies and continues to develop its presence in Home Care and Water Treatment; and Industrial Chemicals, which is a sector based on selling co-streams, developing niche industrial applications and undertaking toll processing.

Discovery Metals

Discovery Metals is engaged in the sales, marketing, underwriting entity, focused on the origination and servicing of mortgages from various distribution channels.

Eldorado Gold Corp.

Eldorado Gold is engaged in the exploration, development, mining and production of gold and other mining resources in Brazil, China, Turkey and Greece.


Escorts is a holding company. Through its subsidiaries, Co. is engaged in the manufacture and sale of agricultural machines such as tractors, engines, round and flat tubes, double acting hydraulic shock absorbers for railway coaches, center buffer couplers, automobile shock absorbers, telescopic fronts and Mcpherson struts, brake blocks and all types of brakes used by railways. Co. also manufactures equipment for material handling and road construction. In addition, Co. is engaged in the provision of healthcare services and facilities, cellular telecommunications services, software development, provision of internet service, and other e-commerce, financial and investment services.

Fuso Chemical

Fuso Chemical is engaged in the manufacture and sale of organic acids, functional chemicals and electronic materials. Life Science segment is engaged in the manufacture and sale of fruit acids including malic acid, citric acid and gluconic acid for juice, other drinks and food products, maleic anhydride, L-tartaric acid, lactic acid, acid derivatives, ascorbic acid and amino acid. Electronic Materials & Functional Chemicals segment is engaged in the manufacture of electronic materials including ultra high purity colloidal silica and high purity organo silica sol, as well as functional chemicals including alkylation products, esterification products, nitrobenzoic acid and oxidation products.

GEA Group AG

GEA Group focuses on the development and production of process technology and components for production methods. Co. segments include: GEA Food Solutions, which manufactures machinery for preparing, marinating, processing, cutting, and packaging meat, poultry, and other foods; GEA Farm Technologies, which manufacturers product solutions for milk production and livestock farming; GEA Mechanical Equipment, which concentrates in separators, decanters, valves, pumps, and homogenizers; GEA Process Engineering, which designs and develops of process solutions for the pharmaceutical, and chemical industries; and GEA Refrigeration Technologies, which concentrates in refrigeration technology.

Gibraltar Industries Inc.

Gibraltar Industries is a manufacturer and distributor of building products for residential, industrial, infrastructure, renewable energy and conservation markets. The company has three segments: Residential Products, which services the residential repair and remodeling and the housing construction markets; Industrial and Infrastructure Products, which serves a variety of end markets such as industrial and commercial construction, highway and bridge construction, automotive, airports and energy and power generation; and Renewable Energy and Conservation, which is primarily a designer and manufacturer of solar mounting systems and greenhouse structures.

HolidayCheck Group AG

Tomorrow Focus is an Internet group with operations in Central, Western and Eastern Europe. Co.'s core activities are in the fields of travel, online advertising, online dating and physician searches and ratings. Co. operates within the following segments: Travel segment (all transaction-based travel portals), the Publishing segment (all advertising-based portals including the digital marketing provider TOMORROW FOCUS Media GmbH), the Subscription segment (all subscription-based portals) and the Other segment. Co. operates over fifty European and international Internet portals.


IAMGold is engaged in the exploration for, development and operation of gold mining properties, and the operation of a niobium mine.


IMCD Group is a specialty chemicals group based in the Netherlands. Co. is engaged in the sale, marketing and distribution of specialty chemicals and food ingredients globally. Co.'s business groups are Detergents, Pharma, Personal Care, Coatings, Food & Nutrition, Lubricants, Synthesis, Plastics and others. Co.'s product offering includes additives, antioxidants, extracts, preservatives, acids, lubricants, oils, softeners, wax, components for oral, topical and vaccine drug formulations, fragrances, pigments, solvents, resins, flavors, herbs and spices, surface active agents, and fillers, among others. Co. maintains offices and warehouses in Europe, Asia Pacific, Africa, the USA and Brazil.


Knorr Bremse AG is a Germany-based company that manufactures braking systems and other subsystems for rail and commercial vehicles. It operates through two segments: Rail Vehicle Systems and Commercial Vehicle Systems. The Rail Vehicle Systems segment equips mass transit vehicles, such as metro cars, and mainline freight and passenger trains with brake systems, as well as entrance systems, heating, ventilation and air conditioning (HVAC) systems, auxiliary power supply, driver assistance systems, electrical traction equipment and control technology, among others. The Commercial Vehicle Systems segment offers products for trucks, buses, trailers and agricultural machinery. Its product portfolio includes brake systems and vehicle dynamics solutions, such as driver assistance, energy supply and distribution systems, such as air compressors, and fuel efficiency products and transmission subsystems, such as vibration dampers, among others. The Company also offers aftermarket services.

Kone Oyj B

KONE is an elevator and escalator industry group based in Finland. Co. is engaged in the provision of products and services for the installation, modernization and maintenance of elevators, escalators and automatic building doors. Co. provides its products and services throughout the entire lifecycle of the equipment, beginning from the installation of new equipment to the maintenance and modernization during their lifecycle and the full replacement of the equipment. Co.'s customers are active in industry segments such as residential, office, retail, public transportation, hotel, hospital, and marine.

Munters Group

Munters Group AB. Munters Group AB is a Sweden-based provider of energy efficient air treatment and and climate control solutions primarily within food, pharmaceutical and data center sectors. The Company is organized in four business areas: Air Treatment, Data Centers, AgHort and Mist Elimination, and supported by Global Operations and Global Services units. The product portfolio comprises air intakes/air inlets, temperature and humidity control air treatment systems, fans and light filters, heat exchangers, heaters, mist eliminators, pollution control and volatile organic compounds abatement technologies to remove liquid and solvents from the air. The Company's largest shareholder is Nordic Capital Fund VII.

North Industries Group Red Arrow (A)

Chengdu Galaxy Power is engaged in the manufacture and sale tractor spare parts, automobile spare parts, motorcycle spare parts, industrial and mining machinery spare parts, special purpose transfer machines; motorcycles and engineering trucks; sale of metal materials, household appliances, building materials and chemicals, and Chinese and Western medicines; real estate development; provision of entertainment and dining; manufacture and sale of communication equipments and new materials; development and results transfer of computer hardware and software; and provision of network products and engineering, electronic systems engineering services.

OZ Minerals Ltd

OZ Minerals is a mining company engaged in exploring for, developing and operating copper, gold and base metal projects. It owns the Prominent Hill copper-gold mine and Carrapateena copper-gold project, both located in South Australia. Co.'s operating segments are: Prominent Hill, which comprised of mining copper, gold and silver from the Prominent Hill Mine; Carrapateena, which comprised of exploration and evaluation associated with the Carrapateena project; Exploration and Development, which comprised of exploration and evaluation activities associated with the other projects and include interests and joint ventures with Minotaur and Toro Energy Ltd, and Corporate Development activities.

Pfeiffer Vacuum Technology AG

Pfeiffer Vacuum provides vacuum technology solutions. Co.'s products are divided into the areas of vacuum generation, vacuum measurement and analysis, installation elements, vacuum chambers and vacuum systems. It includes a range of hybrid and magnetically levitated turbopumps, oil-lubricated and drycompressing low and medium vacuum pumps, leak detectors, mass spectrometers and gauge heads. Co. manufactures vacuum chambers in cubical, cylindrical and bell-shaped designs. Co. also develops and manufactures vacuum systems for customer specific processes, such as testing components for the automotive and electronics industries, testing pressure vessels or packaging in the food industry.

Shandong Hualu-Hengsheng Chemical (A)

Shandong Hualu-Hengsheng Chemical is engaged in the production and sale of chemical fertilizers and chemical products permitted by the safety production license; the generation and supply of electricity; the supply of heat; and the promotion of technical services. Co.'s main products include urea, dimethylformamide, organic amine, formaldehyde, acetic acid, electric power and heating power.


VAT Group AG

VAT Group AG is a Switzerland-based company engaged in the manufacture of industrial valves. The Company focuses on designing and producing vacuum valves for semiconductor, display and solar panel manufacturing, as well as for a range of industry and research applications. Its activities are divided into three business areas: Valves, Global Services and Industry. The Valves division provides isolation, control and transfer valves used in vacuum-based manufacturing processes. The Global Services area offers advisory and after sales services, such as trainings, equipment repair and overhaul, valve upgrade and spare parts sale. The Industry segment manufactures and markets welded bellows, machine parts, mechanical components and assemblies. The Company operates worldwide.

Wacker Chemie

Wacker Chemie is active in chemical products. Co. operates in five divisions: Wacker Silicones, which provides products ranging from silicone fluids and emulsions, resins, elastomers and sealants, to silanes and pyrogenic silica grades; Wacker Polymers, which manufactures binders and polymeric additives (such as dispersible polymer powders and dispersions); Wacker Biosolutions, which supplies customized biotech and catalog products for the fine-chemical sector; Wacker Polysilicon, which produces hyperpure polysilicon for the semiconductor, electronics and above all, solar sectors; and Siltronic, which supplies semiconductor manufacturers with silicon wafers.

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.

Dave Nicoski

Ross LaDuke

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