Vermilion Compass: Weekly Equity Strategy
THEMES:• Bullish Big Picture. The New Year is kicking off with a short-term pullback opportunity amidst a bullish technical backdrop. Small caps and cyclical sectors continue to lead, with Energy and Financials the frontrunners; defense remains on the defensive; and foreign markets are recovering. Our positive outlook remains intact... see page 2
• Value with a side of Tech. Maintain overweights in: Energy, Financials, Materials, Manufacturing, Tech, and Transports. Stay underweight defensive Sectors like Consumer Staples, Health Care, and Utilities... see page 2
• Stealth improvements in health care. Health Care ranks dead last in our weekly relative strength rankings. And it's our only Sector--equal- and cap-weighted--trading below its 200-day MA. So what's to like? From a bottom-up perspective, improvements are visible, with downtrodden names like ABC exhibiting a bottom, and many others like GILD displaying bullish momentum divergences... see page 3
• Confirming technicals overseas. Europe and Japan have transitioned to renewed advances. And once “problematic†markets, at least in a headline sense, like China are bottoming... see page 3
• Theme 1: Small-Cap Hotels & Resorts. The Group ranks as one of our favorite ideas within the small-cap universe. Relative strength is emerging from a cyclical bottom, and many individual names depict short-term pullback opportunities... see pages 7-9
• Theme 2: Small-Cap Casinos & Gaming. Casinos & gaming stocks represent a bullish, global theme, ranging from Macau names (e.g. Galaxy Entertainment) to U.S. small caps... see pages 10-13
• Theme 3: Small-Cap Construction & Engineering. The Group is spearheading the recent improvements in our Services Sector.... see pages 14-20
• Highlighted charts: CACQ, BEL, BW, ERI, GVA, H, IESC, ISLE, KBR, LQ, MCRI, MCS, MDR, MTZ, MYRG, MTRX, NYNY, ORN, PNR, PRIM, SOHO, TPC, TRR
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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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