Vermilion Int'l Compass: Global Equity Strategy
Remain Overweight Japan, Europe, and IndiaWe continue to recommend a tactical overweight to defensives (Consumer Staples, Health Care, and Utilities) as the MSCI ACWI (ACWI-US) tests the top-end of our anticipated 2023 trading range at $93. Important downside targets are $86, $84, and $75-77 on ACWI-US. We also remain overweight Europe, Japan, and India, where a lot more than just defensives continue to outperform.
Japan Outperformance Continues -- Remain Overweight. Japan's TOPIX is breaking above 2120 (the 2021 highs), and is hitting 33-year highs. Meanwhile, the Nikkei 225 and TOPIX Small indexes are approaching, but have not broken above, their 2021 highs. We continue to recommend an overweight to Japan, but we prefer to only add exposure on a pullback to the 1950-2000 range on the TOPIX, as the indexes and countless stocks that we have been recommending are getting extended. It is worth pointing out that the only unattractive Sector in Japan is Energy. Nearly half of today's individual stock recommendations are from Japan... see charts below.
Europe. We continue to recommend an overweight to Europe with the RS uptrend intact on the STOXX Europe 50 index. With that said, the EURO STOXX 50 index remains below 4400-4415 resistance, initially discussed in our 4/27/23 Int'l Compass; we expect pullbacks to the 4000-4100 area to be buying opportunities.... see page 2.
U.S. Dollar (DXY), Copper. The DXY is on the rise after bouncing at $101 support, and we believe a test of $105.50 is likely. We would expect for global equities to be under pressure amid continued DXY strength. "Dr. Copper," the base metal known for having a PhD in economics, is breaking below the important $4 level. Historically, weakness in the price of copper has portended slowdowns in the global economy... see page 3.
Actionable Theme: Consumer Discretionary. We have been overweight MSCI Europe Consumer Discretionary since late October 2022 (10/27/22 Int'l Compass), and we are starting to see broad-based improvement within Japan as well -- overweight Japanese Consumer Discretionary. The majority of Discretionary stocks highlighted today are from Europe or Japan... see pages 4 and 6-10.
Actionable Theme: Defensives. Defensive Sectors are leadership, especially in Europe and Japan. We highlight our favorite names to buy/stay long within Consumer Staples, Health Care, and Services... see pages 5 and 10-17.
Bridgestone and its affiliates are mainly engaged in the manufacture and sale of tires in the Americas, Europe, Asia and Japan. Co.'s principal business segments are tires and diversified products. Co. is engaged in the manufacture and sale of tires for passenger cars, trucks, buses, construction vehicles, industrial vehicles, agricultural machinery, aircraft, motorcycles, as well as tire-related products; and automotive components, industrial products, polyurethane foam products, construction materials, parts and materials for electronic equipment, bicycles and sporting goods. In addition, Co., through its subsidiaries, is engaged in the provision of financing services.
Innovax Holdings Ltd. Innovax Holdings Limited is an investment holding company mainly engaged in the provision of corporate finance advisory services. The corporate finance advisory services include initial public offerings (IPO) sponsorship services, financial and independent financial advisory services and compliance advisory services, among others. In addition, the Company is also involved in the provision of placing and underwriting services, securities dealing and brokerage services, securities financing services as well as asset management services. It provides placing and underwriting services by acting as placing or sub-placing agent for issue of new shares by listed companies; and global coordinator or bookrunner or lead manager or underwriter for IPOs of listing applicants.
Nitori Holdings is a holding company engaged in the retail sale of household furniture and home furnishings. Co. operates its chain stores under the name of "Nitori" "Nitori Express" and "Deco Home Nitori" offering household furniture, floor coverings, curtains, bedding, kitchenware, housewares, other home furnishings, small household appliances, garden supplies, outdoor goods, exercise equipment and miscellaneous daily goods. Co. also operates shopping malls "Nitori Mall." In addition, Co. provides kitchen and bathroom remodeling services, as well as office and commercial facility design services. As of Feb 20 2017, Co. operates 428 stores throughout Japan and 43 stores in overseas.
Sumitomo Rubber Industries is a tire and rubber manufacturer. Along with its affiliates, Co. is engaged in the manufacture and sale of tires and tubes for passenger cars, construction vehicles, agricultural vehicles, race and rally cars, motorcycles, and new transportation system; golf and tennis goods; and industrial and other products, such as artificial turf, precision rubber parts for information technology equipment, dock fenders, high damping rubber, flooring materials, flexible rubber joints, marine-pollution preventive screens, rubber hoses, rubber gloves and medical rubber stoppers. Co. is also engaged in the operation of golf tournaments, golf and tennis schools, and golf courses.
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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