Report
Dave Nicoski ...
  • Ross LaDuke
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Vermilion Int'l Compass: Global Equity Strategy

Opportunities in Europe, Japan

As markets pull back amid the tariff saga we continue to believe this is an attractive time to add exposure. This view is supported by the technicals with all major global indexes (MSCI ACWI, ACWI ex-U.S., EAFE, and EM) pulling back to their respective 200-day moving averages... see charts below.

• Actionable Sectors: Services and Consumer Staples in Europe and Japan. We often view the Services Sector as a defensive way to invest in Technology. We also highlight several Consumer Staples stocks within Europe (the STOXX 600 Food & Beverage index remains leadership) and Japan (Group CS-32 Cosmetics & Toiletries, Japan is bottoming)... see pages 2-3.

• Bottoms-up: We peruse additional actionable opportunities from a bottoms-up perspective within Europe (attractive pullback opportunity on the STOXX Europe 600 index) and Japan, including stocks within Financials, Communications, Consumer Discretionary, and Manufacturing... see page 4.

• Germany: Germany's DAX continues to be one of the most timely and attractive countries within Europe, and we reiterate our 4/18/19 and 4/25/19 recommendations to add exposure... see page 5.

• China: We highlight key levels we are watching on the Shanghai Composite... see page 5.
Underlyings
Adecco Group AG

Adecco Group provides human resource services, including temporary staffing, permanent placement, outsourcing, consulting and outplacement. Co. has more than 5,500 branches in over 60 countries and territories. Co.'s Office and Industrial businesses offer a range of general staffing services, including temporary staffing, permanent placement, assessment, training and integrated human resources applications. In addition, Co. operates professional business lines, which include Adecco Finance & Legal, Adecco Engineering & Technical, Adecco Information Technology, Adecco Medical & Science, Adecco Sales, Marketing & Events and Adecco Human Capital Solutions.

Allianz SE

Allianz is engaged in the provision of a range of insurance and asset management products and services. Co. has three business segments: Property-Casualty, which provides insurance products to both private and corporate customers, including motor liability and own damage, accident, general liability, fire and property, legal expense, credit and travel insurance; Life/Health, which provides life and health insurance products including annuities, endowment and term insurance, unit-linked and investment-oriented products and private health and supplemental health and long-term care insurance; and Asset Management, which provides institutional and retail asset management products and services.

Aurelius Equity Opportunities

Aurelius Equity Opportunities is an industrial holding with a long-term investment horizon. Co. is engaged in the acquisition and restructuring of medium-sized companies and corporate spin-offs throughout Europe. Co. acquires the companies with potential for development with the goal of increasing their profitability by means of operational improvements. Co.'s portfolio companies operate primarily in the sectors of industrial enterprises, chemicals, business services, consumer goods/food & beverage, and telecom, media & technology. Co.'s operating segments are Industrial Production (IP), Services & Solutions (S&S) and Retail & Consumer Products (R&P).

Benefit One

Benefit One is mainly engaged in the outsourcing business for welfare services. Co. provides two business divisions. Welfare Program division offers various welfare services to employees from corporate members under the benefit station scheme. Its services include the usage and benefits of partner lodging facilities, sports clubs and various schools, among others. Sales division provides shopping services for individual members by using membership points to purchase various products through seasonal magazines, guidebooks, fax services and mail order services.

BNP Paribas S.A.

BNP Paribas is engaged in the provision of banking and financial services. Co.'s business activities are divided into two segments: Retail Banking & Services and Corporate and Investment Banking. The Retail Banking and Services business includes domestic markets and international financial services. The Corporate and Institutional Banking comprises of corporate banking, global markets, and securities services. Other activities include principal investments, which related to Co.'s central treasury function, some costs related to crossbusiness projects, the residential mortgage lending business of personal finance, and certain investments.

Britvic

Britvic operates in the soft drinks manufacturing and distribution industry. Co. manufactures, markets and sells a range of brands in Great Britain (GB), France, Ireland and Brazil. In addition, Co. is the sole bottler for PepsiCo in GB and Ireland, enabling it to sell their range of soft drinks alongside its owned-brands. Co.'s brand categories include: kids, which includes the Fruit Shoot Hydro, Fruit Shoot Hydro Sparkling, and My5 brands; adult, which includes the Purdey's, J2O Spritz, and J2O brands; and family, which includes the Club Orange and MiWadi brands. Co. also has a portfolio of carbonates and still brands including the brands that it bottles and markets on behalf of PepsiCo.

Brunel International N.V.

Accrued employee expensesBrunel is a global provider of business services that specializes in the flexible placement of professionals in the fields of Engineering, IT, Legal, Finance, Insurance & Banking and Energy. Co. provides such specialists through a range of staffing, project management, recruitment and consultancy services. Co. serves the world market for professional staffing and recruitment services from two main perspectives. On the one hand, Co. aims its services at specific supra-regional business lines. On the other hand, Co. focuses on specific countries such as The Netherlands, Germany, Belgium and Canada.

Cancom SE

Cancom is an information technology ("IT") systems vendor. Co. is engaged in the provision of information technology (IT) products and services. Co. divides its products and services in four divisions: IT solutions, providing security, network and system solutions, communication, storage, backup and archive services, and IT management; IT services, offering rollout, installation, move, add, change (IMAC) of IT solutions, support and repair, and managed services; IT operations, providing remote management, outtasking and outsourcing, and Hard and Software, supplying hardware, software and accessories.

Deutsche Boerse AG

Deutsche Boerse is a financial services provider. Co.'s segments include Eurex, which comprises areas such as T7 electronic derivatives market trading platform, T7 electronic options trading platform, and Eurex Repo® over-the-counter trading platform; Xetra, which comprises areas such as cash market, the Specialist trading, and Eurex Bonds® OTC trading platform. Clearstream, which comprises custody and settlement services, securities financing services and collateral management, and investment funds services; and Market Data + Services, which comprises areas such as Distribution of licenses for real-time trading and market signals, and development and sales of indices.

Devro PLC

Devro is a manufacturers of collagen products for the food industry. Co.'s collagen casings are used to manufacture a variety of sausages. Co. sells collagen products directly to food manufacturers and, in some markets, local distributors. Co. has three operating segments: Americas, which includes North America and Latin America; Asia-Pacific, which includes Australia, New Zealand, Japan, China and the rest of South East Asia; and Europe, which includes Continental Europe, U.K., Ireland and Africa.

Digital Garage

Digital Garate is a business context company engaged in the provision of marketing technology, financial technology and incubation technology solutions. Co. is engaged in the provision of integrated promotion solution services and data management solutions utilizing web marketing; the development and sales of social media-related advertising technology; the development and sales of overseas travel information apps for cellular phones; the sales of website support tools; the e-commerce payment solution services; the investment and incubation of venture companies and start-up companies; and the provision of data security related solutions.

Euronext

Euronext is a cross-border exchange. Co. operates combined regulated markets across Belgium, France, the Netherlands, Portugal and the United Kingdom (derivatives only). Co. offers a range of integrated services including the listing of financial instruments, trading in securities and derivatives, clearing, netting and settlement, market data dissemination and IT solutions and support. Co.'s customers include listed companies, members, institutional and individual investors who trade on Co. markets, other organizations, notably exchanges that use its technologies and services, and users of the financial and information generated by market activity.

Experian Group

Experian is an information services group. Co. has four businesses: Credit Services, which collects data to analyze the credit histories of people and businesses, sorting through information about the credit they applied for and how they repaid the credit; Decision Analytics, which combines Co.'s data with data from its clients and third parties, and uses software and analytics to access, organize and analyze this data to help its clients to minimize the risk of fraud; Marketing Services, which helps Co.'s clients to plan, build and deliver their marketing campaigns; and Consumer Services, which, among others, monitors the information in people's credit reports for suspected fraud patterns.

Fancl Corp.

FANCL is engaged in the development, manufacture and sale of additive free cosmetics and nutritional supplements. Co.'s principal business segments are cosmetic, nutritional supplements, and others. Co. is engaged in the mail-order, retail sale and wholesale of cosmetics, such as FANCL skin care products, FANCL mild cleansing oil, and ATTENIR skin care products; HTC (High Tripeptide Containing) collagen drink and supplement, "Bitoki," and "Co-enzyme Q10"; and the sale of germinated brown rice, powdered kale juice, comfort undergarments, health equipment, and other lifestyle goods.

Fevertree Drinks

Fevertree Drinks is a holding and investment company, engaged in the development and marketing of mixer drinks, and selling into the U.K., European, North American and international markets. Co. provides a range of carbonated mixers, including Tonics, Ginger Ales, Ginger Beer, Cola and Lemonades. Co. sells a range of products, all under the Fever-Tree brand and provides regular and Refreshingly Light variants: Indian Tonic Water, Mediterranean Tonic Water, Elderflower Tonic Water, Aromatic Tonic Water, Clementine Tonic Water, Lemon Tonic Water, Ginger Beer, Ginger Ale, Smoky Ginger Ale, Spiced Orange Ginger Ale, Madagascan Cola, Sicilian Lemonade, Lemonade, and Spring Soda Water.

GL Events

GL events is an international provider of event solutions and services. Co. operates in three segments of the event industry market: the organization of trade fairs, conventions and events(Co. organizes proprietary trade shows); the management of venues(Co.'s venues are managed under concession agreements or long-term public-private partnerships); and services for events(Co. equips and installs every type of event). Co. assists companies, institutions, and event organizers at every stage of the process from the definition of their event strategies to final implementation in the field.

Greencore Group

Greencore Group is engaged in convenience food business. Co. provides a range of food to go products supplemented by other chilled, frozen and ambient foods to major retail and food service customers in the U.K. and the U.S. Co.'s operating segments include: Co.'s Convenience Foods segment consist of convenience foods U.K. and convenience foods U.S., which is engaged in the production and sale of convenience food; and Ingredients & Property, which is engaged in the distribution of edible oils and molasses and the management of Co.'s property assets. Co. has seven U.S. convenience foods facilities and 15 U.K. convenience foods facilities.

Homeserve PLC

HomeServe provides home repair and improvement services under its brand, HomeServe. Co. has partnerships with global brands that are relevant to Co.'s home assistance and improvement products. Co.'s partnerships include utilities, heating manufacturers and specialist service providers. Co.'s home assistance products are underwritten by third party underwriters, independent of HomeServe. Co. provides water, heating and electrical-related home assistance and repair products. Co.'s segments are: the U.K.; North America, France, Spain; and New Markets. The New Markets segment comprises Co.'s business in Italy, investment in digital initiatives, together with international development.

Intage Holdings

Intage Holdings is a holding company mainly engaged in the provision of marketing research. The Marketing Support (Consumer products/Service) segment provides market research services including consumer panel research, retail tracking research, custom market research services. The Marketing Support (Healthcare) segment is engaged in the contract research, as well as the provision of data management, statistical analysis and post-marketing research services for pharmaceuticals and medical equipment. The Business Intelligence segment is engaged in the development and sale of the software; the operation, maintenance and management of the system; the operation of the data center.

Investor AB B

Investor AB is an industrial holding company. Through its subsidiaries, Co. invests in companies and industries. Co.'s holdings are divided into two business areas: Core Investments and Financial Investments. Core Investments consists of listed holdings, in which Co. is a major owner, and its wholly-owned subsidiaries. Financial Investments consists of Co.'s investments in EQT and Investor Growth Capital, its partner-owned investments and other investments and activities.

Itochu Techno Solutions

ITOCHU Techno-Solutions is an information technology ("IT") solution services company based in Japan. Along with its affiliates, Co. operates in five principal business segments: distribution & enterprise, telecommunications, public & regional, finance & social infrastructure, and IT services. Co. is engaged in the comprehensive proposal and sales activities, including consulting to system design, construction, maintenance and operation services; and the joint proposal and procurement focusing on IT infrastructure outsourcing and maintenance and operations. In addition, Co., through its subsidiaries, is engaged in the product procurement, the sale of software, and others.

Johnson Service Group PLC

Johnson Service Group provides textile rental and related services across the U.K. Co.'s Workwear business is the supplier of workwear and protective wear in the U.K., providing these services through the Apparelmaster brand. Co.'s Hotel, Restaurant and Catering business provides linen services for the hotel, restaurant and catering markets through the Stalbridge, London Linen, Bourne, Afonwen and PLS brands.

Kobe Bussan

Kobe Bussan is a supermarket operator. Along with its affiliates, Co. operates in four business segments. Business Supermarket segment is engaged in the production, wholesale and retail of food products targeted at business users, offering products from other manufacturers, as well as products produced in the factories owned by Co. and manufacturers in collaboration with Co. Kobe Cook segment offers cooked food products. Cook Inoventure segment is engaged in the restaurant and education businesses. Eco-Regenerated Energy segment operates solar power plants and sells renewable energy to electric power companies. As of Oct 31 2017, Co. operates 780 business supermarkets throughout Japan.

Meitec Corp.

Meitec is mainly engaged in the provision of temporary and full-time staffing and engineering outsourcing services. Along with its subsidiaries, Co. operates in three business segments. The Temporary Staffing segment is engaged in the provision of temporary staffing services mainly focusing on the engineers staffing business in the manufacturing industry. The Recruiting & Placement segment is engaged in the provision of job placement and information portal site businesses for engineers. The Engineering Solutions segment is engaged in the provision of technology support services for printed-circuit board design.

Milbon Co. Ltd.

Milbon and its subsidiaries are mainly engaged in the manufacture and sale of hair cosmetic products as well as the provision of hair-related services. Co.'s principal products include thioglycolic acid permanent wave lotion, cysteine permanent wave lotion, anti-frizz straightening lotion, shampoo, conditioner, hair treatment, hair tonic, hair cream, liquid and foam hair styling products, setting lotion, hair spray, hair color products, hair bleach products and hair manicure products. Co. also offers permanent wave rods, hair curler, flat irons and organizer.

N. Brown Group PLC

N Brown Group is an online retailer. Co.'s primary retail brands are JD Williams, Simply Be and Jacamo. Co. sells ladieswear, menswear, footwear, homewares and gifting across all its brands. Co. is democratising fashion and are size inclusive, focusing on the underserved customer groups, which size 20 plus and age 50 plus. Co.'s other brands include Fashion World, Marisota, Figleaves, High and Mighty, Ambrose Wilson, Premier Man, Julipa and House of Bath.

NEC Networks & System Integration

NEC Networks & System Integration is engaged in the provision of information and communications technology (ICT) services. Enterprises Networks segment provides service integration of ICT systems for the enterprises market. Co.'s services include planning and consulting of system design, system integration and construction, as well as maintenance, operation, monitoring and outsourcing services. Carrier Networks segment provides service integration of ICT platforms for telecom carriers as well as large-scale, wide-area, carrier-grade ICT platforms and data centers. Social Infrastructures segment provides service integration of ICT infrastructures for governments and public utilities.

Noevir Holdings

Noevir Holdings Co., Ltd. is a Japan-based company engaged in the manufacture and sale of cosmetics, toiletries, pharmaceuticals and foods, as well as the purchase and sale of cosmetic products. The Company operates in two business segments. The Cosmetics segment is engaged in the manufacture and sale of cosmetics and toiletries, as well as the purchase and sale of cosmetic products. The Pharmaceuticals and Foods segment is engaged in the manufacture and sale of general drugs and foods. The other business is engaged in the purchase and sale of apparels, body fashion, aircrafts and vessels, as well as air transportation business.

Obic Co. Ltd.

OBIC is mainly engaged in the provision of system integration, system support, office automation and other computer related services. Along with its affiliates, Co. operates in three business segments. System Integration Services segment develops software for customers based on an analysis of customer requirements for the system. System Support Services segment provides system operation support and maintenance, and hardware maintenance for customers that use Co.'s products. Office Automation Services segment is engaged in the sale of PC-peripherals, telecommunication equipment and related supplies, as well as office furniture. Co. also provides packaged software of financial accounting.

Randstad NV

Randstad is a global staffing and recruitment company, providing various solutions in the human resources (HR) services space. Co.'s services include regular temporary staffing and permanent placement of candidates. In addition, Co. provides several other HR solutions, such as Recruitment Process Outsourcing (RPO), Managed Services Programs (MSP), payroll services, and outplacement. Co. provides four distinct service concepts: Staffing, Inhouse Services, Professionals and HR Solutions.

Rentokil Initial PLC

Rentokil Initial is a holding company. Through its subsidiaries, Co. provides services that include pest control, hygiene and workwear, as well as a range of other services including plants, medical services, property care and hygiene. Co.'s businesses include: Pest Control, which consists of Rentokil Pest Control, a commercial pest control company; Hygiene, which consists of Initial Hygiene, a hygiene services company; Workwear, which consists of Initial Workwear, a provider of workwear services across the four main continental European markets of France, Germany, Belgium and the Netherlands; and Other, which consists of Ambius, an interior landscaping business.

Rheinmetall

Rheinmetall is a holding company. Through its subsidiaries, Co. operates in two sectors: defence and automotive. Co.'s defence sector is comprised of three divisions: combat systems, engaging in armored tracked vehicles and NBC protection systems; electronic solutions, engaging in air defence systems and soldier systems; and wheeled vehicles, engaging in wheeled logistics vehicles and wheeled tactical vehicles. Co.'s automotive sector is comprised of three division: mechatronics, engaging in cutting emissions and air management systems; hardparts, engaging in pistons and plain bearings and bushes; and motorservice, which includes aftermarket activities for replacement parts business.

Saputo Inc.

Saputo produces, markets, and distributes an array of dairy products including cheese, fluid milk, extended shelf-life milk and cream products, cultured products and dairy ingredients. Co.'s products are sold in several countries under brand names such as Saputo, Alexis de Portneuf, Armstrong, COON, Cracker Barrel*, Dairyland, DairyStar, Friendship Dairies, Frigo Cheese Heads, La Paulina, Milk2Go/Lait's Go, Neilson, Nutrilait, Scotsburn*, Stella, Sungold, Treasure Cave and Woolwich Dairy. Co. operates its business through three sectors, the Canada Sector, the USA Sector and the International Sector.

Secunet Security Networks AG

Secunet Security Networks provides consulting services, products and solutions in the field of information technology (IT) security. Co. operates in two business units: Public Sector, which supports authorities in Germany and abroad in areas relating to eGovernment and IT security, including biometric solutions and electronic ID documents, the electronic healthcare card, security validation and secure web solutions; and Business Sector, which focuses on security issues affecting industrial companies and provides identity management systems, mass signature solutions for electronic invoicing, public infrastructures and network security, as well as IT security for automotive manufacturers.

Shift

SHIFT Inc. provides software test services. The Company mainly operates through two business segments. In the Enterprise Market segment, it provides general service on quality assurance of software in business systems and information systems in companies supporting social infrastructure such as financial industry, distribution industry, manufacturing industry, communication industry, web service industry. In the Entertainment Market segment, it provides general services related to quality assurance of software for enterprises providing entertainment centered on mobile games, social games, consumer games.

Shiseido Co. Ltd.

Shiseido is mainly engaged in the manufacture and sale of cosmetics, toiletries, beauty products, health foods, beauty foods and pharmaceuticals. Along with its affiliates, Co. operates in seven business segments: Japan, China, Asia Pacific, Americas, EMEA, travel retail, and professional. Co. markets a wide range of skin care products, hair care products, body care products, perfumes, toiletries, health foods, pharmaceuticals, medical cosmetics, analyzers and other products through cosmetics specialty stores, drugstores, department stores, airport duty free stores and online. Co.'s principal brand names include "SHISEIDO," "cle de peau BEAUTE," "ELIXIR," "MAQuillAGE," "NARS" and "IPSA."

SPIE SA

Spie is a provider of electrical engineering and IT services and an infrastructure and building contractor. Co. helps to design, finance, manage and implement an array of projects ranging from high-speed TGV and conventional rail lines to metros and light rail systems. In addition, Co. offers telecom and information network services. Through the Commercial Segment, Co. is engaged in construction and renovation projects. Co. also offers wired building services as well as multi-disciplinary industrial maintenance and facilities management solutions.

ValueCommerce

ValueCommerce is mainly engaged in the provision of pay-per-performance Internet advertising distribution services. Along with its subsidiaries and associated company, Co. operates in two business segments: Adverting business and Customer Relationship Management (CRM) business. Co.'s advertising business segment includes affiliate marketing service (pay-per-performance internet advertising distribution service for e-commerce sites), storematch service (internet advertising distribution service), and ad networking services (advertising distribution service for smartphones). Co.'s CRM business includes marketing automation service is tool for personalized marketing to build customer loyalty.

VAT Group AG

VAT Group AG is a Switzerland-based company engaged in the manufacture of industrial valves. The Company focuses on designing and producing vacuum valves for semiconductor, display and solar panel manufacturing, as well as for a range of industry and research applications. Its activities are divided into three business areas: Valves, Global Services and Industry. The Valves division provides isolation, control and transfer valves used in vacuum-based manufacturing processes. The Global Services area offers advisory and after sales services, such as trainings, equipment repair and overhaul, valve upgrade and spare parts sale. The Industry segment manufactures and markets welded bellows, machine parts, mechanical components and assemblies. The Company operates worldwide.

Provider
Vermilion Research
Vermilion Research

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.

Analysts
Dave Nicoski

Ross LaDuke

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