Dave Nicoski ...
  • Ross LaDuke
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Vermilion Compass: Weekly Equity Strategy

Upgrading cap-weighted Communications to overweight; 10 to 2's Treasury spread breaking out

We continue to move increasingly toward the bullish camp and we believe equities are poised for higher prices moving forward. Below we highlight several developments which help lead us to this conclusion.

• 10 to 2's Treasury yield spread widening & breaking out. The 10 to 2's spread is quietly breaking out to YTD highs and breaking above a ~2.5-year downtrend. This steepening yield curve is good for Financials/banks and also the economy as recession concerns are subsiding... see chart below.

• Communications upgrade. We are upgrading cap-weighted Communications to overweight -- add exposure. Relative strength for the Communication Services Sector SPDR ETF (XLC) is breaking out following a prolonged basing pattern and the price uptrend is intact. Actionable Communications stocks highlighted: TWTR, DISCA, ATUS, RDFN, NPSNY, AABA, YNDX, CETV, GLIBA, DISH, SPGI, and MCO... see pages 2-5 for additional comments and charts.

• Small-caps and banks poised to break out. Breakouts in the Russell 2000 small-cap index and the KBW Bank index are two bullish developments that have eluded us thus far. We believe that is about to change as both of these risk-on areas of the market are on the cusp of breakouts... see page 6.

In today's report we highlight attractive Groups and stocks within Financials, Services, Technology and Manufacturing: FN-27 Credit Card Issuers, SV-23 Education Services, China, TE-39 Solar Energy, and MF-30 Industrial Rental Equipment... see pages 13-23.
Altaba Inc

Altaba is a publicly traded, non-diversified, closed-end management investment company. The company's investment objective is to seek to increase the price per share at which it trades relative to then-existing values of its principal underlying assets (the Alibaba Group Holding Limited (Alibaba) ordinary shares and American Depositary Shares and Yahoo Japan Corporation (Yahoo Japan) shares of common stock). In addition to the Alibaba shares and Yahoo Japan shares, the company also owns investments in certain additional companies Excalibur IP, LLC, which owns a portfolio of patent assets and short-term investments.

Altice USA

Altice USA is a holding company. Through its subsidiaries, the company is a broadband communications and video services providers. The company has two reportable segments: Cablevision Systems Corporation (Cablevision) and Cequel Corporation (Cequel). Cablevision provides broadband, pay television and telephony services to residential and business customers in and around the New York metropolitan area. Cequel provides broadband, pay television and telephony services to residential and business customers in the south-central U.S., with the majority of its customers located in Texas, West Virginia, Louisiana, Arkansas, North Carolina, Oklahoma, Arizona, California, Missouri and Ohio.

American Express Co.

American Express is a payments company. The company's principal products and services are charge and credit card products and travel-related services provided to consumers and businesses. The company's range of products and services includes: charge card, credit card and other payment and financing products; merchant acquisition and processing, servicing and settlement, and point-of-sale marketing and information products and services for merchants; network services; other fee services, including fraud prevention services and the design and operation of customer loyalty programs; expense management products and services; and travel-related services.

Bright Scholar Education Holdings ADS (N)

Canadian Solar (N Shares)

Capital One Financial Corp.

Capital One Financial is a financial services holding company. Through its subsidiaries, the company provides an array of financial products and services. The company's segments are: Credit Card, which consists of the company's domestic consumer and small business card lending, and international card businesses in Canada and the U.K.; Consumer Banking, which consists of the company's branch-based deposit gathering and lending activities for consumers and small businesses, national deposit gathering and national auto lending; and Commercial Banking, which consists of the company's lending, deposit gathering, capital markets and treasury management services to commercial real estate and commercial and industrial customers.

Central European Media Enterprises Ltd. Cl A

Discover Financial Services

Discover Financial Services is a bank holding, as well as a financial holding company. The company manages its business activities in two segments: Direct Banking, which includes consumer banking and lending products, specifically Discover-branded credit cards issued to individuals on the Discover Network and other consumer banking products and services, including student loans, personal loans, home equity loans, and deposit products; and Payment Services, which includes the PULSE network, Diners Club International and its Network Partners business, which provides payment transaction processing and settlement services on the Discover Network.

Discovery Inc Series A

Discovery, through its subsidiaries, is a media company that provides content across distribution platforms, including pay-television, free-to-air and broadcast, other digital distribution platforms and content licensing agreements. The company's portfolio of networks includes nonfiction television brands such as Discovery Channel, TLC, Animal Planet, and Investigation Discovery. The company's portfolio includes Eurosport, a sports entertainment provider. The company classifies its operations in two segments: U.S. Networks, consisting of domestic television networks and digital content services, and International Networks, consisting of international television network brands and digital content services.

Dish Network

DISH Network is a holding company. Through its subsidiaries, the company operates two business segments: Pay-TV and Wireless. The company provides pay-TV services under: the DISH? brand, which consists of, among other things, Federal Communications Commission licenses authorizing the company to use direct broadcast satellite and Fixed Satellite Service spectrum, the company's owned and leased satellites, and certain other assets utilized in the company's operations; and the Sling? brand, which consists of, among other things, live, linear streaming over-the-top Internet-based domestic, international and Latino video programming services. In addition, the company invests to acquire certain wireless spectrum licenses and related assets.

Enphase Energy Inc

Enphase Energy designs, develops, manufactures and sells home energy solutions that connect energy generation, energy storage and control and communications management on one platform. The company's semiconductor-based microinverter system converts direct current electricity to alternating current (AC) electricity at the individual solar module level, and brings a system-based approach to solar energy generation using its design capability across power electronics, semiconductors, networking and cloud-based software technologies. The company's Enphase Home Energy Solution with IQ consists of four main components: Enphase microinverters, the AC Battery, an Envoy gateway, and Enlighten cloud-based software.

First Solar Inc

FirstSolar is a provider of photovoltaic (PV) solar energy solutions. The company designs, manufactures, and sells PV solar modules with a thin film semiconductor technology and also develops, designs, constructs, and sells PV solar power systems that use the modules it manufactures. The company's modules segment involves the design, manufacture, and sale of cadmium telluride (CdTe) solar modules, which convert sunlight into electricity. The company's second segment is its integrated systems segment, through which the company provides turn-key PV solar power systems, or solar solutions, which include project development, engineering, procurement, and construction services, and operations and maintenance services.

GCI Liberty

GCI Liberty is a holding company. Through its subsidiaries, the company is a communications provider. The company provides a range of wireless, data, video, voice, and managed services to residential customers, businesses, governmental entities, and educational and medical institutions primarily in Alaska under its GCI brand. The company provides services to consumer and business customers through its call center, direct mail advertising, television advertising, Internet advertising, local media advertising, and through its retail stores. The company sells its managed services, wholesale data, voice, and wireless services, and data services to rural schools and health organizations through direct contact marketing.

H&E Equipment Services

H&E Equipment Services is an equipment services company focused on heavy construction and industrial equipment. The company rents, sells and provides parts and services support for four main categories of equipment: hi-lift or aerial work platform equipment; cranes; earthmoving equipment; and industrial lift trucks. The company engages in five principal business activities in these equipment categories: equipment rentals; new equipment sales; used equipment sales; parts sales; and repair and maintenance services. In addition to its principal business activities, the company provides ancillary equipment support activities including transportation, hauling, parts shipping and loss damage waivers.

Herc Holding

Herc Holdings is engaged in the business of renting equipment. The company conducts substantially all of its operations through subsidiaries, including Herc Rentals Inc. Operations are conducted under the Herc Rentals brand in the U.S. and under the Hertz Equipment Rental brand in Canada and other locations. In addition, the company sells used equipment and contractor supplies such as construction consumables, tools, small equipment and safety supplies; provides repair, maintenance and equipment management services; provides equipment re-rental services and on-site support to its customers; and provides ancillary services such as equipment transport, rental protection, cleaning, refueling and labor.

JinkoSolar Holding Co ADS (N Shares)

Moody's Corp.

Moody's is a provider of credit ratings; credit, capital markets and economic related research, data and analytical tools; software solutions; quantitatively derived credit scores; learning solutions and certification services; offshore financial research and analytical services; and company information and business intelligence products. The company's segments are: Moody's Investors Service, which publishes credit ratings on a range of debt obligations and the entities that issue such obligations in markets worldwide; and Moody's Analytics, which develops products and services that support financial analysis and risk management activities of institutional participants in global financial markets.

Naspers Ltd

New Oriental Education & Technology Group ADS

Redfin Corp

Redfin is a technology-powered residential real estate brokerage. The company represents people buying and selling homes in over 80 markets throughout the United States. The company provides its customers a listings-search website and mobile applications, creating an online platform for every Redfin-listed home. The company uses a range of next-generation technologies such as map-based real estate search, machine learning and artificial intelligence to provide customers answers about where to live, how much a home is worth, and when to move. The company operates in 84 markets across 37 states and Washington, D.C.

S&P Global

S&P Global is a provider of transparent and independent ratings, benchmarks, analytics and data to the capital and commodity markets worldwide. The company's segments include: S&P Global Ratings, which provides credit ratings, research and analytics; S&P Global Market Intelligence, which provides multi-asset-class data, research and analytical capabilities that integrate cross-asset analytics and desktop services; S&P Global Platts, which provides information and benchmark prices for the commodity and energy markets; and S&P Dow Jones Indices, which provides a variety of valuation and index benchmarks for investment advisors, wealth managers and institutional investors.

SolarEdge Technologies

SolarEdge Technologies designs, develops, and sells an intelligent inverter solution designed for power generation at the individual photovoltaic (PV) module level. The company's products consist mainly of power optimizers, inverters, a related cloud-based monitoring platform, and a storage solution for homeowners, which designed to provide smart energy functions and home energy backup solutions. In addition, the company provides several communication and smart energy management solutions. The company primarily sells its products directly to solar installers through large distributors and electrical equipment wholesalers and directly to large solar installers and engineering, procurement, and construction firms.

SunPower Corporation

SunPower is a holding company. Through its subsidiaries, the company is an energy company that delivers solar solutions through an array of hardware, software, and financing options and through utility-scale solar power system construction and development capabilities, operations and maintenance services, and Smart Energy solutions. The company operates in three segments: Residential, which refers to sales of solar energy solutions to residential end customers; Commercial, which refers to sales of solar energy solutions to commercial and public entity end customers; and Power Plant, which refers to its solar products and systems business, which includes power plant project development and project sales.


Sunrun is engaged in the design, development, installation, sale, ownership, and maintenance of residential solar energy systems. The company offers its solar service offerings both directly to the homeowner and through its solar partners, which include sales and installation partners, and strategic partners, which include retail partners. In addition, the company sells solar energy systems directly to customers. The company also sells solar energy panels and other products (such as racking) to resellers. As of Dec 31 2017, the company provided its solar services to customers in 22 states, plus the District of Columbia, and sold solar energy panels and other products to resellers throughout the U.S.

Synchrony Financial

Synchrony Financial is a consumer financial services company. The company provides a range of credit products through programs it has established with a group of national and regional retailers, local merchants, manufacturers, buying groups, industry associations and healthcare service providers. The company provides its credit products primarily through its wholly-owned subsidiary, Synchrony Bank (the Bank). Through the Bank, the company provides, directly to retail and commercial customers, a range of deposit products insured by the Federal Deposit Insurance Corporation, including certificates of deposit, individual retirement accounts, money market accounts and savings accounts.

TAL Education Group ADS


Twitter provides products and services for users, advertisers, developers and platform and data partners. The company's products and services for users include its Twitter platform for public self-expression and conversation in real time and its Periscope mobile application. The company's products and services for advertisers include Promoted Products for advertisers, MoPub mobile-focused advertising exchange and its Twitter Audience Platform. The company's products for developers include a set of tools, public application program interfaces (API) and embeddable widgets. The company's products for data partners include subscription access to its public data feed for partners who wish to access data beyond its public API.

United Rentals Inc.

United Rentals is an equipment rental company that operates throughout the U.S. and Canada. The company's segments are: general rentals, which includes the rental of construction, aerial and industrial equipment, general tools and light equipment, and related services and activities; and trench, power and fluid solutions, which includes the rental of specialty construction products and related services. The types of equipment that the company provides include general construction and industrial equipment; aerial work platforms; trench safety equipment; power and heating, ventilating and air conditioning equipment; fluid solutions equipment; and general tools and light equipment.

Yandex N.V. Cl A

Yandex is an internet and technology company that operates an internet search engine in Russia. Co. builds intelligent products and services powered by machine learning. Co.'s products and services are based on complex, unique technologies that are not easily replicated. Co. generates substantially all of its revenues from online advertising. Co. also generates revenues from its e-commerce offerings, classifieds and e-hailing service. Co.'s businesses are organized in the following operating segments: Search and Portal; E-commerce; Taxi; Classifieds and Experimental businesses.

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.

Dave Nicoski

Ross LaDuke

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