Report
Dave Nicoski ...
  • Ross LaDuke

Vermilion Compass: Weekly Equity Strategy

Upgrading Consumer Discretionary, downgrading Utilities; S&P 500 approaching potential resistance

Sector Relative Strength Rankings. Stocks within retail and apparel Groups, long time favorites of ours, remain on a tear. Outperformance continued last week and allowed our equal-weighted Consumer Discretionary RSR to improve more than any other Sector. With both the XLY and our equal-weighted Sector breaking out to new price and relative strength highs, we are upgrading Consumer Discretionary to overweight. On the other hand, relative strength for Utilities is breaking below support to new multi-year lows. Combine this with lower highs and lower lows from a price perspective and we are prompted to downgrade the Sector to underweight... see below and page 2.

Vermilion Group CD-23 Casinos & Gaming, Large-Cap. We highlight two attractive Consumer Discretionary stocks, MLCO and LVS, that are actionable at current levels... see page 3. For additional Sector recommendations, see page 6 and 10-19.

Outlook and market internals. In the last several weeks we have laid out the case for our increasingly bullish outlook - an outlook that remains very much intact. Indeed, we believe the recent pattern of higher highs and higher lows is signaling an early-stage uptrend forming. With that said, we are monitoring potential resistance at 2,790-2,800 on the S&P 500. One of the few remaining indicators of concern, the S&P 500's percentage of stocks above their 200-day moving average, recently hit a new high - a bullish development... see page 4.

The USD; Small vs. Large; Growth vs. Value. The DXY appears to have found some resistance at 95, a formidable level that we expect the dollar to remain below for now. Reiterations: maintain overweight allocations to small-caps and growth stocks... see page 5.

In today's report we highlight attractive and actionable Groups within Consumer Discretionary and Health Care: CD-42 Retailers, Major Department Stores, CD-47 Retailers, Home Furnishings, CD-48 Online Travel Services, and HC-22 Life Science Instruments... see pages 10-25.
Underlyings
Bed Bath & Beyond Inc.

Bed, Bath & Beyond is an omnichannel retailer providing products, services and solutions for the home and life events. The company operates an ecommerce platform consisting of various websites and applications, including bedbathandbeyond.com, bedbathandbeyond.ca, harmondiscount.com, and facevalues.com. The company sells an assortment of domestics merchandise and home furnishings. Domestics merchandise includes categories such as bed linens and related items, bath items and kitchen textiles. Home furnishings include categories such as kitchen and tabletop items, fine tabletop, basic housewares, general home furnishings (including furniture and wall decor), consumables and certain juvenile products.

Bio-Rad Laboratories Inc. Class A

Bio-Rad Laboratories is a manufacturer and distributor of its own life science research and clinical diagnostics products. The company has two primary segments: Life Science, which is engaged in the life sciences market and develops, manufactures and markets reagents, apparatus and laboratory instruments; and Clinical Diagnostics, which designs, manufactures, sells and supports test systems, informatics systems, test kits and quality controls that serve clinical laboratories in the diagnostics market. The company sells its products and services to a client base comprised of scientific research, healthcare, education and government customers.

Booking Holdings Inc.

Booking Holdings provides travel and restaurant online reservation and related services. The company's brands include: Booking.com and Rentalcars.com, in which Booking.com provides booking online accommodation reservations, based on room nights booked, and Rentalcars.com provides online rental car reservation services; KAYAK, which provides an online price comparison service; Priceline, which provides consumers hotel, rental car and airline ticket reservation services, and vacation packages and cruises; Agoda, which is an online accommodation reservation service; and OpenTable, which provides online restaurant reservation services to consumers and reservation management services to restaurants.

Bruker Corporation

Bruker is a developer, manufacturer and distributor of scientific instruments and analytical and diagnostic solutions. Majority of the company's products are used to detect, measure and visualize structural characteristics of chemical, biological and industrial material samples. The company also develops, manufactures and distributes a range of field analytical systems for chemical, biological, radiological, nuclear and explosives detection. The company also develops, manufactures and markets high and low temperature superconducting materials and devices based primarily on metallic low temperature superconductors. The company's segments include: Bruker Scientific Instruments and Bruker Energy and Supercon Technologies.

Charles River Laboratories International Inc.

Charles River Laboratories International is a contract research organization. The company has a laboratory animal medicine and science to develop a portfolio of discovery and safety assessment services. The company's segments are: Research Models and Services, which supplies research models to the drug development industry; Discovery and Safety Assessment (DSA), which provides DSA services, including in vitro and in vivo studies, laboratory support services, and strategic non-clinical consulting and program management to support product development; and Manufacturing Support, which ensures the production and release of products manufactured by the company's clients.

Illumina Inc.

Illumina is engaged in sequencing- and array-based solutions for genetic and genomic analysis. The company provides whole-genome sequencing, genotyping, noninvasive prenatal testing (NIPT), and product support services. Using the company's services, customers can perform whole-genome sequencing projects and microarray projects (including large-scale genotyping studies and whole-genome association studies). The company provides NIPT services through its partner laboratories that direct samples to the company on a test send-out basis in its Clinical Laboratory Improvements Amendments-certified, College of Pathologists-accredited laboratory. The company also provides support services to customers who have purchased its products.

Kirkland's Inc.

Kirkland's is a retailer of home decor in the U.S., operating in stores as well as an e-commerce enabled website, www.kirklands.com. The company's stores present a selection of merchandise, including holiday decor, furniture, art, fragrance and accessories, ornamental wall decor, decorative accessories, mirrors, lamps, textiles, artificial floral products, gifts, housewares, outdoor living items, frames and clocks. The company's stores provides assortment of holiday merchandise during seasonal periods as well as items carried throughout the year suitable for gift-giving. The company provides its customers an engaging shopping experience characterized by merchandise selection reflecting existing styles.

Kohl's Corporation

Kohl's operates department stores, a website (www.Kohls.com), FILA outlets, and Off-Aisle clearance centers. The company's Kohl's stores and website sell proprietary and national brand apparel, footwear, accessories, beauty and home products. The company's website includes merchandise that is available in its stores, as well as merchandise that is available only online. The company's portfolio includes private brands such as Apt. 9, Croft & Barrow, Jumping Beans, SO and Sonoma Goods for Life and exclusive brands that are developed and marketed through agreements with brands such as Food Network, LC Lauren Conrad, Elle and Simply Vera Vera Wang.

Lindblad Expeditions Holdings

Lindblad Expeditions Holdings provides expedition cruising and adventure travel experiences using itineraries and promotes guest empowerment and interactivity. Majority of these expeditions involve travel to remote places with limited infrastructure and ports (such as Antarctica and the Arctic), including places that are accessed by a ship (such as the Galapagos, the Alaskan coast and Baja California's Sea of Cortez). The company also provides land-based, eco-conscious expeditions across the globe from Antarctica to Zimbabwe through its Natural Habitat, Inc. subsidiary. The company has a business alliance with National Geographic Partners, LLC, including a co-selling, co-marketing and branding arrangement.

Luminex Corp

Luminex develops, manufactures and sells biological testing technologies and products with applications in the life sciences industries, including diagnostics, pharmaceutical and research. The company delivers its products to various market segments, including multiplexing, reduction of labor and ability to test for proteins and nucleic acids. The company's products include: instruments, which include Luminex? 100/200?, FLEXMAP? 3D, MAGPIX?, ARIES?, and ARIES? M1; consumables, which include MicroPlex? Microspheres, MagPlex? Microspheres, and xTAG? Microspheres; software, which includes xPONENT?, TDAS?, SYNCT?, and IDEAS?; and clinical diagnostic assay product families, which include ARIES? Cassettes.

Macy's Inc

Macy's is an omnichannel retail organization operating stores, websites and mobile applications under three brands (Macy's, Bloomingdale's and bluemercury) that sell merchandise, including apparel and accessories (men's, women's and children's), cosmetics, home furnishings and other consumer goods. The company's wholly-owned bank subsidiary, FDS Bank, provides certain collections, customer service and credit marketing services in respect of all credit card accounts that are owned either by Department Stores National Bank, a subsidiary of Citibank, N.A., or FDS Bank and that constitute a part of the credit programs of the company's retail operations.

MakeMyTrip Ltd.

MakeMyTrip Limited is an online travel company in India. The Company's services and products include air ticketing, hotels, packages, rail tickets, bus tickets, car hire and ancillary travel requirements, such as facilitating access to third-party travel insurance and visa processing. Its segments include Air ticketing, which provides the facility to book international and domestic air tickets through an Internet-based platform; Hotels and packages, which provides holiday packages and hotel reservations through an Internet-based platform, call-centers and branch offices, and Others, which include advertisement income from hosting advertisements on its Internet Web-sites, income from sale of rail and bus tickets and income from facilitating Website access to a travel insurance company. Through the Company's Website, www.makemytrip.com, and mobile platforms, travelers can research, plan and book a range of travel services and products in India, as well as overseas.

Nordstrom Inc.

Nordstrom is a fashion retailer providing a selection of brand-name and private label apparel, shoes, cosmetics and accessories for women, men, young adults and children. The company serves customers through two businesses: Full-Price and Off-Price. The company's operations consist of the company's Nordstrom U.S. and Canada full-line stores, U.S. and Canada Nordstrom Rack stores, Jeffrey boutiques, Last Chance clearance stores, Trunk Club clubhouses and Nordstrom Local. Additionally, customers are served online through Nordstrom.com, Nordstromrack.com, HauteLook and TrunkClub.com.

PerkinElmer Inc.

PerkinElmer is a provider of products, services and solutions for the diagnostics, life sciences and applied markets. The company operates in the following segments: Discovery and Analytical Solutions and Diagnostics. The company's Discovery and Analytical Solutions segment serves the life sciences and applied markets. The life sciences market consists of the life sciences research market and laboratory services market whereas the applied markets consist of environmental, food and industrial markets. In its Diagnostics segments, the company provides instruments, reagents, assay platforms, and software to hospitals, medical labs, clinicians, and medical research personnel to help improve the health of families.

RH
RH

RH is a holding company. Together with its subsidiaries, the company is a retailer in the home furnishings marketplace. The company provides merchandise assortments across a number of categories, including furniture, lighting, textiles, bathware, decor, outdoor and garden, and child and teen furnishings. The company positions its Galleries as showrooms for its brand, while its Source Books and websites act as virtual extensions of its stores. The company's business is integrated across its various channels of distribution, consisting of its stores, Source Books, and websites. The company operates its retail Galleries throughout the U.S. and Canada, and its Waterworks showrooms throughout the U.S. and in the U.K.

Sabre Corp.

Sabre is a technology solutions provider to the travel and tourism industry. The company operates through three business segments: Travel Network, which consists primarily of its global distribution system (GDS) and a range of solutions that integrate with its GDS; Airline Solutions, which provides a portfolio of software technology products and solutions, through software-as-a-service (SaaS) and hosted delivery model, to airlines and other travel suppliers and provides software solutions; and Hospitality Solutions, which provides software and solutions, through SaaS and hosted delivery model, to hoteliers around the world.

STERIS Plc

Thermo Fisher Scientific Inc.

Thermo Fisher Scientific is engaged in serving science. The company's segments include: Life Sciences Solutions, which provides reagents, instruments and consumables used in biological and medical research, discovery and production of new drugs and vaccines as well as diagnosis of disease; Analytical Instruments, which provides instruments, consumables, software and services that are used for a range of applications in the laboratory, on the production line and in the field; and Specialty Diagnostics, which provides diagnostic test kits, reagents, culture media, instruments and associated products for customers in healthcare, clinical, pharmaceutical, industrial, and food safety laboratories.

Travelport Worldwide Ltd.

Travelzoo

Travelzoo provides insider deals on travel, entertainment, and lifestyle experiences across multiple digital platforms, including email, web, social media and mobile applications. The company's publications and products include the Travelzoo website (travelzoo.com), the Travelzoo iPhone and Android apps, the Travelzoo Top 20? email newsletter, and the Newsflash email alert service. The company operates the Travelzoo Network, a network of third-party websites that list deals published by Travelzoo. The Travelzoo website includes Local Deals and Getaway listings that allow its members to purchase vouchers for deals from local businesses such as spas, hotels and restaurants.

Waters Corporation

Waters is a holding company. Through its subsidiaries, the company is a specialty measurement company. The company primarily designs, manufactures, sells and services high performance liquid chromatography, ultra performance liquid chromatography and mass spectrometry technology systems and support products, including chromatography columns, other consumable products and post-warranty service plans. In addition, the company designs, manufactures, sells and services thermal analysis, rheometry and calorimetry instruments through its TA? product line. The company is also a developer and supplier of software-based products that interface with its instruments, as well as other manufacturers' instruments.

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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