Vermilion Int'l Compass: Global Equity Strategy
Commodity-Related Equity Sectors In FocusOur bullish outlook continues to be supported by ongoing positive market dynamics and the absence of breakdowns for major indexes around the globe. The path of least resistance remains higher and we continue to recommend adding exposure on pullbacks.
· Broad Overview. Broad global indexes (MSCI ACWI, ACWI ex-US, EAFE, and EM) continue to develop positively and remain on bullish trajectories. The MSCI ACWI, ACWI ex-US, and EM indexes are hitting all-time highs in local currencies, while the MSCI EAFE index is testing a major 3-year resistance level. Ultimately we expect to see a breakout for EAFE as the expectation is that it follows in the footsteps of the other indexes... see chart below and page 2.
· Actionable Theme: Commodity Sectors Energy and Materials. As we highlighted in last week's Int'l Compass, the weight of the evidence suggests commodities are in the early stages of a new secular bull market. Global Materials remains a favorite Sector overweight and we believe outperformance is likely to continue considering the Sector's long-term bullish RS reversal. Additionally, we are upgrading equal-weighted Energy to overweight due to bullish price and RS inflections -- add exposure with a focus on small- and mid-caps... see pages 3 and 5-14.
· Actionable Theme: Financials. The Global Financial Sector displays improving price and RS trends as global interest rates show signs of bottoming -- add exposure. Additionally, we view rising interest rates as a bullish sign for global equities... see pages 4 and 14-19.
Canadian Natural Resources is an independent crude oil and natural gas exploration, development and production company. Co.'s exploration and production operations are focused in North America, largely in Western Canada; the U.K. portion of the North Sea; and CA'te d'Ivoire, Gabon, and South Africa in Offshore Africa. Co. had total proved reserves of 5.71 billion barrels of oil equivalent. Co.'s gross proved crude oil, bitumen (thermal oil), synthetic crude oil and natural gas liquids reserves totaled 4.70 billion barrels and its gross proved natural gas reserves totaled 6,106.00 billion cubic feet.
Crescent Point Energy is an oil and gas exploration, development and production company with assets focused in properties consist of crude oil and natural gas reserves. Co. is engaged in acquiring, developing and holding interests in petroleum and natural gas properties and assets related thereto through a general partnership and wholly owned subsidiaries. As of Dec 31 2016, net proved reserves for light and medium crude oil were 141,850 million barrels, heavy crude oil were 19,993 million barrels, tight oil were 269,461 million barrels, natural gas liquids were 50,767 million cubic feet, shale gas were 221,238 million cubic feet and conventional natural gas were 115,041 million cubic feet.
Imperial Oil is an integrated oil company. Co. is active in all phases of the petroleum industry in Canada, including the exploration for, and production and sale of, crude oil and natural gas. In Canada, Co. is a producer of crude oil, natural gas and petroleum refiner and a marketer of petroleum products. Co. is also a producer of petrochemicals. As of Dec 31 2017, Co. had 1.57 billion barrels of oil-equivalent basis of net proved reserves, which consisted of 44.0 million barrels of liquids, 641.00 billion cubic feet of natural gas, 473.0 million barrels of synthetic oil, and 946.0 million barrels of bitumen.
OMV is an international energy company with activities in Exploration and Production (E&P), Refining and Marketing including petrochemicals (R&M), and Gas and Power (G&P). Co. explores and develops oil and gas resources and supply energy to over 100 million people. OMV has three operating segments: Exploration and Production (E&P), Refining and Marketing, including petrochemicals (R&M), and Gas and Power (G&P), as well as the segment Corporate and Other (Co&O).
Paragon develops, produces and sells electrical, electronic, and electromechanical components, devices, and systems for the automotive industry. Co.'s segments include Sensors, which develops and markets solutions for air quality within the vehicle cabin; Acoustics, which develops and markets products designed to ensure the transmission of speech from its point of origination to its destination; Cockpit, which develops and markets products for the cockpit; Electromobility, which develops and markets battery packs for utility vehicles and buses; and Body Works Kinematics, which develops and markets technical solutions for the moving parts of the automobile body, both exterior and interior.
PTT Exploration & Production Public is engaged in the exploration and production of petroleum in Thailand and overseas, foreign gas pipeline transportation, and investment in projects strategically connected to the energy business. Co. operates through the following business segments: Exploration and Production segment operates in oil and gas exploration and production both domestically and overseas; Overseas Pipelines segment has investments with its joint venture partners to operate pipelines to transport natural gas from the exploration and production projects; and Other operations consist mainly of investments in projects strategically connected to the energy business.
Santos is a natural gas company engaged in the exploration for, and development, production, transportation and marketing of, hydrocarbons. Co.'s operating segments consist of five key assets/operating areas of: Cooper Basin; Gladstone LNG; Papua New Guinea; Northern Australia; and Western Australia gas; based on the nature and geographical location of the assets, plus Other non-core assets. Co.'s proved petroleum reserves were 485.0 million barrels of oil equivalent at Dec 31 2016.
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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