Vermilion ETF Pathfinder: Actionable ETF research & Ideas
BIG PICTUREBullish big picture. We will keep the preamble short: tops patterns and breakdowns remain on the endangered species list. The technical environment favors further upside. The supporting cast includes: (1) cyclical sectors continue to lead; (2) defense is on the defensive; (3) and overseas markets are strengthening. Stay the course, stay long.
• Value plus a side of tech: No changes--value continues to outperform growth. This trend is primarily driven by outsized strength in financials (“valueâ€) and relative weakness in biotechs (“growthâ€). Outside of value, tech remains attractive, having yet to deviate from its long-term leadership status.
U.S. SECTORS... see pages 2-5
• Overweights: Energy (RYE), Financials (RYF), Industrials (RGI), Materials (RTM), and Tech (RYT). Of these, energy depicts a timely pullback opportunity. Buy.
• Underweights: Consumer Staples (RHS), Health Care (RYH), Utilities (RYU). Their price patterns depict bottoms/stabilization, but relative strength continues to point south.
U.S. INDUSTRIES... see pages 6-11
• Commodity-related industries:. As energy and materials continue to outperform, related industries depict technically attractive opportunities: E&Ps (XOP), copper miners (COPX), and Fertilizer (SOIL).
• Tech industries: Within tech, a long-term leader, opportunities exist in social media (SOCL) & cyber security (HACK).
• Shippers--a contrarian idea: Shipping stocks are bottoming. It appears sentiment has hit sediment. Buy SEA.
INTERNATIONAL EQUITIES... see pages 12-16
• BRIC: Leadership within emerging markets is concentrated in the BRIC segment (Brazil, Russia, India, and China). The BRIC ETF (EEB) is breaking out above long-term resistance, and rallying relative to the broad EM ETF, EEM.
• Japan is leading: Stay overweight Japan, a global leader. We like the currency-hedged ETFS, DXJ (large cap) and DXJS (small cap). Take advantage of short-term weakness.
• Canada: Buoyed by large weightings in bank and commodity stocks, EWC continues to outperform.
• European PIGS are bottoming. Leadership? No. But countries Spain (EWP) and Italy (EWI) are nearing breakouts from cyclical bottoms. These are “catch-up†plays.
BONDS, COMMODITIES, & CURRENCIES... see pages 17-18
• Commodities are bottoming. Led by base metals (DBB) and a slow-but-steady advance in energy (DBE), the commodity universe is emerging from a cyclical bottoming process. This is visible in the chart of DBC. That said, equities continue to outperform commodities.
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CF Industries Holdings is a global fertilizer and chemical company. The company's principal nitrogen fertilizer products are anhydrous ammonia, granular urea, urea ammonium nitrate solution and ammonium nitrate. The company's other nitrogen products include diesel exhaust fluid, urea liquor, nitric acid and aqua ammonia, which are sold primarily to its industrial customers, and compound fertilizer products, which are solid granular fertilizer products for which the nutrient content is a combination of nitrogen, phosphorus, and potassium. The company serves its customers in North America through its production, storage, transportation and distribution network.
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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