Vermilion Int'l Compass: Global Equity Strategy
Value Remains LeadershipGlobal equity indexes have staged impressive rallies from oversold levels, and certain hard-hit areas in Europe (STOXX 600 Technology, Industrial Goods & Services, and Chemicals Sectors) display bullish short-term price reversals. We view this as a potential signal that the lows may have been established for this correction, but we need to see more upside follow-through and we still believe a bottoming process would likely take weeks or potentially months. Regardless, we want to stick with Sectors and stocks that have remained technically attractive throughout this pullback, not on areas that are just now spiking from oversold levels within downtrends. Generally speaking, that means we are staying with value (especially Energy and Materials) and defensives (Health Care, Staples, and Utilities).
Index Overview. The EURO STOXX 50 is currently testing resistance at the 3875 level but could continue this relief rally toward the 4040-4090 area. Germany's DAX remains below major resistance at 14,815. Japan's TOPIX is testing resistance in the 1840-1880 range. Additionally, MSCI ACWI ex-US (ACWX-US) remains below $54, MSCI EAFE (EFA-US) remains below $75.25, and MSCI ACWI (ACWI-US) remains below $99... see charts below.
Monitoring For A Bottom. In addition to bullish reversals on the above-mentioned indexes, we continue to watch for other signs that global equities have likely bottomed. So far, we have yet to get a bullish reversal on the MSCI ACWI Consumer Discretionary vs. Consumer Staples ratio (RXI vs. KXI), though it is on the cusp of a reversal. We have yet to see bearish inflections in US and European high yield spreads. Additionally, the US dollar (DXY) remains above 97 and the 13-month downtrends remain intact on MSCI EM (EEM-US) and MSCI China (MCHI-US). These need to reverse in order for us to have confidence that global equities are bottoming... see page 2.
Actionable Theme: Value. Remain overweight value as the path of least resistance remains higher for global sovereign 10-year yields. Sectors covered include Energy, Financials, Industrials, and Materials -- add exposure... see pages 3-16.
Dixie Group markets, manufactures and sells finished carpet, rugs and vinyl tile in the domestic floorcovering market. The company's brands include: Fabrica, which markets and manufactures residential carpet and custom rugs; Masland Residential, which markets and manufactures design-driven carpets and rugs for the residential marketplace; Dixie Home, which markets an array of residential tufted broadloom and rugs to selected retailers and home centers under the Dixie Home and private label brands; and Atlas Masland Contract, which markets to the architectural and specified design community and directly to commercial end users, as well as to consumers through floorcovering retailers.
Electricite et Eaux De Madagascar SA Formerly known as Viktoria Invest SA. Viktoria Invest SA, formerly Electricite et Eaux de Madagascar SA, is a France-based holding company engaged in the hotel industry. The Company is divided into five main sectors: the hotel industry, the wood industry, wines, real estate and casinos. In the hotel sector, the Company runs hotels in Paris and Hong Kong, under the brand name Victoria Hotels and Resorts, through the subsidiaries: Victoria Angkor and Victoria Angkor Estate. In the wood and paper industry, it owns a minority stake in Groupe Gascogne. Its real estate activities are primarily carried out in Paris through SAIP, SNC Paris Croix des Petits Champs and Les Vergers. In the casino sector, it holds a minority stake in Societe Francaise de Casinos. It also owns minority stakes in Tokaj Lencses Dulo Kft and in Tokaj Hetszolo, the Hungarian wine producers.
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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