AP Moller Maersk B (DSB.DK) – $27B market cap – Technicals: The stock is trading in a pivot buy range between DKK 18,895–19,840. It bounced off its 21-DMA after a brief pullback from all-time highs. It has a decent EPS Rank of 68 and SMR Rating of B, with metrics likely to improve given strong forward growth expectations. It has a strong RS Rating of 88 and a slightly weak A/D Rating of C-. Group Rank has improved to 10 from 17 four weeks ago. Company Description: AP Moller Maersk is an integrated container logistics company and member of the A.P. Moller Group.
Author: Kenley Scott
Kenley Scott is a senior equity analyst and sector strategist covering the APAC region and the Energy sector. He is a member of the Global Focus List Committee, which approves all equity recommendations for developed, emerging, and frontier markets. Kenley also writes the Global Sector Summary, part of the Sector Strategy service, which identifies emerging sector strength and weakness across 46 countries every week. After working as a commodities broker, Kenley joined the firm in July 2006. He has a B.S. in Statistics from the University of California, Riverside and also holds a Series 65 securities license.
Global Sector Commentary
Key points from this report:
- Looking at relative one-year performance graphs for all 11 O’Neil sectors (see the full report), the sectors that could be the most reasonable to be underweight for the time being are 1) those headed in a negative relative direction and underperforming but not to an extreme extent, Basic Material and Capital Equipment; 2) the one headed in a negative relative direction but still outperforming, Consumer Cyclical.
- Strong overweight candidates: Those headed in a positive direction and outperforming but not to an extreme level, Energy and Financial (Technology on the border).
- Equal-weight candidates: 1) Those headed in a positive direction but underperforming, Health Care, Retail, and Utility; 2) those underperforming but at/near extreme levels, Consumer Staple and Transportation.
- Combined with absolute charts for each. Three standouts are Basic Material (weak) and Energy/Technology (best). See the full note for short ideas from Basic Material and long ideas from Energy and Technology.
O’Neil Energy/Material Weekly
Magnolia O&G Corporation (MGY) – $3B market cap – Technicals: The stock broke out of a stage-three nine-week cup base. It has a decent EPS Rank of 65 and a SMR Rating of C. Technical ratings are solid with a high RS Rating of 96 and an A/D Rating of B-. Pivot range $16.4–17.2. Company Description: Magnolia O&G Corporation is an oil and gas exploration and production company with operations mostly in South Texas. The company has 23.5K net acres in the core of Karnes County and 450K net acres in the Giddings area.
Sector Spotlight – Japan Specialty Chemicals
Recap – Global Chemicals Report
• We published a report on Global Chemicals in July where we talked
about strength in small-cap specialty chemical stocks in emerging
markets. Click here for more details.
• Chemical stocks in emerging markets were outperforming, led by India
and South Korea.
Global Sector Commentary
Key points from this report:
- The Global Index (VT) may begin consolidating. The last greater than 5% pullback was in February-March. Now the index is below its 21-DMA with next levels 1-2% lower at 50- and 100-DMA.
- During the last pause, the next round of leaders emerged after March lows.
- First was areas like S&P 500 Growth in the U.S. as well as Denmark for developed markets. Both had lagged into the correction but emerged as relative winners off the lows.
- Although it took a bit longer, emerging markets in India and Russia, both prior leaders, showed a bit weaker RS initially from March lows but had very strong RS gains from April on.
- Conversely, China and Hong Kong were making new RS lows as the VT pulled back, foreshadowing their sharp underperformance from March-September.
- Watch for any leadership changes should markets correct or signs of continued leadership from current outperformers.
O’Neil Energy/Material Weekly
Renova (RNVA.JP; 9519:JP) – $3.9B market cap – Technicals: The stock broke out of a stage-three eight-week cup base. It has a high EPS Rank of 98 and a solid SMR Rating of A. Technical ratings are solid with a RS Rating of 99 and an A/D Rating of B+. Accumulate in the range ¥5,480–5,754. See annotated chart here. Company Description: Renova is a Japan-based independent renewable energy developer and power producer. It develops, owns, and operates solar PV, biomass, wind (onshore and offshore), and geothermal power plants. Aggressive renewable energy targets, large pipeline of projects in wind generation, ventures into geothermal generation, and continuing growth in solar and biomass are its key growth drivers.
Global Sector Commentary
Key points from this report:
- Japan FTD on Friday this week. Nikkei 225 has been basing for 6+ months.
- Notable for non-U.S. equities given Japan is the second-largest weight of global ETFs (VT), it is also one of the top-performing global markets over the past decade.
- Long-term graph looks promising as it held above prior breakout to 30-year highs during consolidation.
- Currency seems less a factor currently. Typically market rises as yen falls and vice versa, but in the recent 9-10 months, inverse relationship has not held.
- FTD this week, best-positioned sectors Staple, Material, Cap Equipment.
- Key as these three make up >30% of market cap, versus 16% of the S&P 500.
O’Neil Energy/Material Weekly
Kunlun Energy (PARG.HK; 135:HK) – $9B market cap – Technicals: The stock is slightly extended after breaking out
of a stage-two seven-week cup base. It has a high EPS Rank of 94 and a solid SMR Rating of B, Technical ratings are
very good as well, including an RS Rating of 91 and an A/D Rating of A+. The ideal pivot range is HKD 7.40–7.77.
Company Description: Kunlun Energy is a Bermuda-based integrated natural gas company controlled by Petrochina
(PECH.HK). It is engaged in urban gas, natural gas pipeline, receiving, processing, storage and transportation of liquefied
natural gas (LNG). It has 232 city gas projects across China and acquired 16 new projects in Q2 2021.
Global Sector Commentary
Key points from this report:
- September is historically a weak period for the market. It is the only month with a negative average since 1970 and is also the third-worst in the first year of a presidency.
- This year has been exceptionally strong, with seven of eight months outpacing their long-term averages and five of seven ahead of their average in the first year of a presidency.
- September averages are weak, mainly because of bear market years.
- In the worst 15 years for the S&P 500, September is down more than 4% on average and is down 12 of 15 times.
- In the best 15 years, which this year is on pace for, September is up 1.3% on average and is down 6 of 15 times.
- Also helping this year is a strong setup going into September.
- Large indices are making highs again, and small caps posted a significant bounce this week.
- Breadth has not been great (mostly because of small caps) but also has not gotten any worse since July.
- Leadership is very strong, especially in key groups like software, semis, tech service, apparel, medical products/equipment, and investment management, among others.
- See the full report for names with top rankings in these groups.
