Vermilion Int'l Compass: Global Equity Strategy
Upgrading Europe to OverweightConsidering the fact that several 5% pullbacks and roughly one 10% pullback are to be expected in any given year, we continue to view the latest pullback as healthy and normal within the ongoing bull market -- MSCI ACWI (ACWI-US) has had a 5.5% pullback from its 2024 highs, while the EURO STOXX 50 pulled back 4.5%. We discussed last Thursday (4/18/24 Int'l Compass) how further downside may be limited with these two indexes already 4-5% off their highs, combined with ACWI-US testing important gap support at $105 and the EURO STOXX 50 testing 6-month uptrend support. So far, these supports have held strong, and Japan's TOPIX has also held strong above 2615 support -- with all producing strong bounces far this week. If $104-$105 was to break on ACWI-US, next major supports are $102 and $99. A pullback to $102 would be 7-8% off the highs, while a test of $99 would be 10% off the highs. As long as $99 holds on ACWI-US, we continue to treat pullbacks as buying opportunities.
Upgrading Europe to Overweight. We are upgrading Europe to overweight; price on Europe's EURO STOXX 50 remains in a 6-month uptrend, and RS is breaking above 10-month resistance -- add exposure. Within Europe, we have been overweight Poland (which we continue to like), while other attractive countries include Netherlands, Ireland, and Belgium. Our other country overweights remain unchanged, and include Japan, Taiwan, and Poland... see chart below.
Global Index Overview. MSCI EM (local currency) has pulled back to major multi-year base support, while all the other broad global MSCI indexes (ACWI, ACWI ex-US, EAFE, and EM, all in USD) have simply pulled back to test important supports. This is where we want to be increasing exposure. Israel's TA-125 index holding above base support at 1910-1915 (discussed last week) is also a risk-on signal... see page 2.
U.S. Dollar (DXY). The DXY remains below its October 2023 highs of $107.40, and also appears to be falling back below the important $105.70-$106 level; as long as the DXY remains below $107.40, we view it as a risk-on signal for global equities.
Actionable Themes: Technology, Industrials/Services, Consumer Discretionary, and Financials. In today's report we highlight our favorite ideas across several cyclical Sectors. It is worth noting that we are covering a significantly larger number of stocks today, as we want to take full advantage of this pullback opportunity
Banco Bilbao Vizcaya Argentaria is an international financial group, engaged primarily on providing banking services and consumer finance to private individuals and businesses in Spain and Portugal; providing real estate activity in Spain; providing services to international companies and investment banking, capital markets and treasury management services to clients; and providing the banking, insurance and pension businesses in Mexico and the U.S., as well as in South America.
DBS Group Holdings is an investment holding, treasury and funding vehicle for itself and its subsidiaries. Co.'s main subsidiary is DBS Bank Ltd, which is engaged in a range of commercial banking and financial services, principally in Asia. Co.'s various business segments are: Consumer Banking/ Wealth Management, which provides individual customers with a range of banking and related financial services; Institutional Banking, which provides financial services and products to institutional clients; as well as Treasury, which provides treasury services to corporations, institutional and private investors, financial institutions and other market participants.
Identiv provides physical security and secure identification. The company's products, software, systems, and services address the markets for physical and logical access control, video analytics and a range of Radio Frequency Identification (RFID)-enabled applications. The company has two segments: Premises, which includes solutions to address the premises security market for government and enterprise, including access control, video surveillance, analytics, customer experience and other applications; and Identity, which includes products and solutions enabling access to information serving the logical access and cyber security market and protecting assets and objects in the Internet of Things with RFID.
KBC Group is a bank-insurance group engaged in providing products and services mainly to retail, private banking, SME and mid-cap clients. Co. focuses on its primary markets of Belgium, the Czech Republic, Slovakia, Hungary and Bulgaria. Co. is also present in Ireland and, to a limited extent, in several other countries to support corporate clients from its primary markets. Co.'s main brands are KBC and CBC in Belgium, CSOB in Czech Republic and Slovakia, K&H in Hungary, CIBANK and DZI Insurance in Bulgaria, and KBC Bank Ireland in Ireland. As of Dec 31 2014, Co. had 1,601 bank branches. In addition, Co. had total assets of Euro245.17 billion.
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.
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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