Vermilion: EM Leadership Chart Book
Notable themes:• EM sector overweights: Based on long-term relative strength trends, we recommend overweighting Energy, Financials, Materials, and Tech... see pages 2-3.
• Technical “steals†in steel: With steel's leadership status well known, it is challenging to find stocks that are not extended. Within the EM realm, this week's screen uncovered several names that don't fall into this classification; instead, they are either (1) just beginning to break out, or (2) pulling back to support: POSCO (005490-KR), China Steel (2002-TW), ArcelorMittal South Africa (ACL-ZA), and Dongkuk Steel Mill (001230-KR). The first two are large caps, the latter two, small caps.
• Bullish banks: EM banks continue to exhibit constructive technicals. An attractive sub-theme: Taiwan banks. Names like First Financial (2892-TW), E.SUN (2884-TW), and King's Town Bank (2809-TW) depict bull flag patterns. Buy.
• Pullback opportunity in Tech: Tech is a long-term leader in the EM universe. As seen on page 3, the sector's relative strength trend, which is trading in a multi-year uptrend, recently hit new highs. The current pullback is a buying opportunity. Ideas: SK hynix (000660-KR), Elite Material (2383-TW), Gigabyte Technology (2376-TW), Advanced Ceramic X (3152-TW), Hon Hai Precision (2317-TW), and, yes, even Samsung Electronics (005930-KR).
• Energy stocks are bottoming: Stay overweight energy despite the setback in WTI. The sector continues to carve out a price and relative strength bottom.
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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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