Vermilion Int'l Compass: Global Equity Strategy
Stick With Consumer Discretionary, TechnologyThe weight of the evidence continues to support our bullish outlook, and we believe the path of least resistance remains higher for global equities (MSCI ACWI).
· Index Overviews. Europe's EURO STOXX 50 and Japan's TOPIX continue to consolidate below resistance levels we highlighted last week (3400 and 1635, respectively) -- be selective. Conversely, all of the broad global indexes we follow (MSCI ACWI, ACWI ex-US, EAFE, and EM, priced in USD) are in uptrends and are hitting multi-month highs. As long as there continues to be an absence of breakdowns our bullish outlook remains appropriate... see chart below and page 2.
· US Dollar's (DXY) Downtrend Intact. The downtrend remains intact on the DXY which we continue to see as a risk-on signal for global equities. 92 is short-term support to watch; a breakdown would signal a continuation of the downtrend which would be positive for equities. On the other hand, 94 is short-term resistance; a break above this level could mean a visit to 95-96 and would potentially come alongside a pullback for equities. Ultimately, as long as the DXY is below 96 resistance we believe it will be a positive for global equities in the intermediate to long-term... see chart below.
· Defensive Sectors Hitting New RS Lows. Defensive MSCI ACWI Sectors including Utilities and Consumer Staples are hitting new RS lows while sporting bullish price trends. This is a hallmark of historical bull markets and helps lead us to our positive outlook.
· Actionable Themes: Consumer Discretionary and Technology. Within Discretionary, Internet Retailers (CD-60) remain leadership. We also highlight several attractive stocks within autos & auto parts, a space that is holding up quite well in Europe. Additionally, Technology continues to offer a plethora of attractive setups -- add exposure/remain overweight... see pages 3-4 and pages x-xx.
· Actionable Theme: China CSI 300 Consumer Staples. The Consumer Staples Sector within China remains leadership -- remain overweight/add exposure. Stocks highlighted include Inner Mongolia Yili Industrial (600887-CN), DaShenLin Pharmaceutical (603233-CN), and Kweichow Moutai (600519-CN)... see page 5.
Dometic Group AB serves the market with a range of air conditioners, refrigerators, awnings, cookers, sanitation, lightning, mobile power equipment, windows, doors and other comfort and safety products. The products are sold in approximately 100 countries and are mainly produced in wholly owned production facilities around the world.
Hero MotoCorp is engaged in the production and sale of motorized two wheelers up to 350cc engine capacity for both domestic and international markets.
Koito Manufacturing and its affiliates are mainly engaged in the manufacture and sale of automotive lighting equipment, aircraft components, electric equipment and other products. Co.'s automotive lighting and accessories include light-emitting diode (LED) headlights, discharge headlights, halogen headlights, fog lights, turn signal lights and other lighting products. Co.'s aircraft lighting and other equipment include interior and exterior lights, electrical equipment and hydraulic equipment. Co.'s other principal products include electrical components for railroad cars, LED marine lamps, traffic control systems, road and tunnel lighting equipment and seats for aircraft and railroad cars.
Mahindra & Mahindra is a holding company. Through its subsidiaries, Co. is engaged in manufacturing, distributing and selling of tractors and multi utility vehicles, light commercial vehicles and three wheelers. In addition, Co. is also engaged in provision of information technology and telecommunications services and other services related to financing, leasing, hire purchase of automobiles and tractors. Co. has four significant segments: Automotive, Farm Equipment, IT Services and Financial services.
Mango Excellent Media Co., Ltd., formerly Happigo Home Shopping Co., Ltd. is a China-based company principally engaged in the new media operation business. The Company operates its business through three segments. The New Media Platform Operation segment is managed by its subsidiary, Happy Sunshine, which includes Internet video business and operator business. The New Media Interactive Entertainment Content Production segment is mainly engaged in the content of production and operation of movie and TV dramas, variety shows and games. The Media Retail segment mainly uses various marketing methods such as graphics and textures, video, live broadcast, community and other marketing methods to attract network flow through content, and realize cash flow through multi-channel content distribution and integrated marketing.
Stanley Electric is mainly engaged in the manufacture and sale of automotive equipment and electronics equipment. Along with its affiliates, Co. operates in four business segments: automotive equipment, electronic components, applied electronic products, and others. Co.'s principal products include light emitting diode ("LED") headlamps, high-intensity discharge ("HID") headlamps, rear combination lamps, high mount stop lamps, fog lamps, automotive bulbs, LED bulbs, infrared LED lamps, optical sensors, liquid crystal displays ("LCDs"), sub miniature lamps, LED lighting products, backlight units for LCDs, flash units for cameras, operation panels, and others.
Zalando is an e-commerce group based in Germany. Co. is engaged in the online retailing of clothing, shoes and accessories for women, men and children. Co.'s product offering include more than 1,500 brands, including global and local brands, as well as private labels, including shoes, clothing and accessores as well as sportswear and homeware designed especially for the Co. The Co.'s product offering is complimented by the Zalando Lounge and Zalon apps, which provides registered members special offers at discounted prices. Co. also provides a combination of services that include free delivery and returns.
Start Today is mainly engaged in the electronic commerce ("EC") business. Along with its subsidiaries, Co. operates in three principal businesses: ZOZOTOWN, B to B, and FURIMA. The ZOZOTOWN business operates brand's online shop on ZOZOTOWN by handling their inventory on a consignment based contract. Co. also purchases fashion items from brands and resell them on each brand's online shop on ZOZOTOWN. Additionally, Co. purchases/resales used fashion products from/to its users. The B to B business supports the brands to operate their individual online stores. The FURIMA business offers users a smartphone application called "ZOZO FURIMA" to sell and purchase personal fashion items.
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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