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

Posted on by Kenley Scott

Key points from this report:

 

  • O’Neil market conditions look positive, with the majority still in an uptrend, which has persisted since March 2020.
  • Underlying important areas of weakness:
    • U.S. small caps: 70% of all U.S. stocks, IWM testing 200-DMA, 8% off highs.
    • Japan: 25% of EFA and most cyclically-exposed market, 12% off highs, below 40-WMA.
    • China/Hong Kong: more than 30% of EEM, both below 40-WMA, 20% off highs.
    • Taiwan: 15% of EEM, testing 40-WMA, 9% off highs.
    • Korea: 13% of EEM, below 40-WMA, 8% off highs.
    • Brazil: 6% of EEM, below 40-WMA, 11% off highs.
  • Except U.S. small caps, all are heavily tied to China, which is the largest trading  partner for each.
  • Basically half of global coverage (by total number of stocks) is weak, but from the perspective of market conditions and capped weighted global indices like the VT, it looks more positive.
  • Standouts in U.S. large growth; European markets Denmark, Switzerland, France, and the Netherlands; and emerging markets India, Hungary, Mexico, and Saudi Arabia.

O’Neil Energy/Material Weekly

Posted on by Kenley Scott

AP Moller Maersk B (DSB.DK; MAERSKB:DC) – $26B market cap – Technicals: The stock is breaking out of a stage-two eight-week flat base. The pivot range is DKK 18,900-17,515. Technical ratings improved from the beginning of the month to a high RS Rating of 87 and an A/D Rating of B- (indicates rising money flows). Group Rank has also improved to 7. It has decent EPS Rank of 71 and SMR Rating of B and has shown sharp acceleration of growth in recent quarters. Company Description: AP Moller Maersk is an integrated container logistics company and member of the A.P. Moller Group, operating in 130 countries. The business is divided into four segments: Ocean, Logistics and Services, Terminals and Towage, and Manufacturing and others.

DSV Panalpina

Posted on by Kenley Scott

Key points from this report:

 

  • $60B market cap DSV has become the third-largest global freight forwarding company. Operates in Air & Sea (79% of revenues), Road (13%), and Logistics Solutions (8%).
  • Add to positions as shares broke out of a six-week consolidation this week and into all-time highs. It was the third base since a base-count reset in Q1 2020.
  • Strong fundamental ratings: EPS Rank of 95 driven by five-year EPS growth of 19% and sharp acceleration in recent quarters.
  • Technical setup: RS Rating of 82, above average volume over past two days on the breakout.
  • DSV attempting to repeat history with another meaningful acquisition.
    • Past two major purchases (UTI in 2015, Panalpina in 2019) panned out exceptionally, as DSV boosted their margins post-integration. DSV has superior IT infrastructure and operational efficiencies.
    • Completed purchase of Agility global integrated logistics business (GIL) for $4B in stock. Adds 22% to the top line, with a target to boost GIL’s EBIT margin from ~5% to at least 7-8%.

Global Sector Commentary

Posted on by Kenley Scott

Key points from this report:

 

  • Five of the stronger themes globally, given strong participation and favorable fundamental profiles of companies involved:
    • US Infrastructure: Cyclical growth + passage of $1T infrastructure bill in U.S. Senate.
      • Recent breakouts: United Rental, Crane, CNH Industrial, Martin Marietta Materials, James Hardie, Cleveland Cliffs, Alcoa.
    • Global Apparel/Accessories: Strong brands from mass market to luxury. Direct-to-consumer and ecommerce additional drivers.
      • LVMH, Kering, Moncler, Zozo, Titan, Skechers, JD Sports Fashion, Bosideng International, Under Armour.
    • EV Battery Materials: Lithium miners, and other EV battery parts makers, huge EV sales growth projections.
      • Livent, Samsung SDI, BYD, Chunbo, Hansol Chemical, Allegro Microsystems, ST Microelectronics, NXPI Semiconductors.

O’Neil Energy/Material Weekly

Posted on by Kenley Scott

Freeport McMoRan (FCX) – $57B market cap – Technicals: The stock is forming a stage-two, 14-week consolidation and
is 16% to ideal buy point of $46.1. It is near breaking above the midpoint of the base @39. Fundamental profile looks
moderate with EPS Rank of 66 and SMR Rating of B. Earnings profile is expected to improve aided by strong EPS growth
estimates for FY21 and FY22. Technical profile mixed with A/D Rating of C- and Up/Down Volume ratio less than 1 but RS
Rating of 93. Company Description: Freeport McMoRan is the third largest global copper producer and also produces gold
and molybdenum.

Global Sector Commentary

Posted on by Kenley Scott

Key points from this report:

 

  • Small/large value still holding their long-term lead over the S&P 500 (from after the November elections), although they have given a good amount back in recent months. Both RS lines ticking a bit higher over two weeks.
  • Comparing with the 2016-2018 yield environment, there was a similar first leg of yield gains in both cases and a similar pullback. 2016-2018 then had a second up-leg during which:
    • Small value, which had held onto RS gains from 2016, had RS bounces as yields rose, but not sustained. Large value had barely any noticeable RS bounce despite higher yields.
    • Now, large value is the better positioned should yields rise again, with the IWD just 1% off highs. Small value has 7% overhead.

O’Neil Energy/Material Weekly

Posted on by Kenley Scott

Enphase Energy (ENPH) – $26B market cap – Technicals: The stock broke through resistance near $190 after holding above its 50-DMA on two recent pullbacks While back slightly below that now, look for an entry on a retake of $190 for aggressive investors. Overall, it is still within a longer base, with about 15% overhead remaining. It has strong fundamental ratings and consensus recently upgraded its 2021 EPS growth estimates. Technical ratings are solid including a 95 RS Rating and B- A/D Rating. Company Description: Enphase Energy is the world’s third largest micro inverter manufacturer by revenue. It provides smart, easy-to-use solutions that manage solar generation, storage, and communication on one intelligent platform.

Global Sector Commentary

Posted on by Kenley Scott

Key points from this report:

 

  • As our commentary from two weeks ago noted, strength in China’s Shenzhen Composite despite meltdowns in ADRs and weakening other/H share indices, this week, we similarly compare EM/DM indices.
    • 2015-2016 and 2018 both EEM/EFA had bear markets (led lower by China’s fall first) and the average market fell substantially.
    • This time, average markets are holding up very well.
    • EEM looks weak but mostly due to heavy China/HK weighting. Ex-China (EMXC) ETF is just 4% off highs and acting constructive.

O’Neil Energy/Material Weekly

Posted on by Kenley Scott

Cleveland-Cliffs (CLF) – $12B market cap – Technicals: The stock  retook its 50-DMA last week after a brief dip below and this week broke out of a seven-week base and to its highest level since 2014. It has good fundamental ratings and consensus expects a strong EPS growth in 2021 led by acquisitions in 2020 and much higher prices in 2021. Technical ratings are at good levels with a top RS Rating of 98 and decent Up/Down Volume ratio of 0.9. Pivot range is $24.8-26.2. Company Description: Cleveland-Cliffs is the largest fully vertical integrated flat rolled steel producer in North America, producing 17M tons of steel annually.

Lithium

Posted on by Kenley Scott

Attached is a note on Lithium Mining and Refining from Director, Research Analyst Kenley Scott and William O’Neil India Analyst Shailendra Bhogaraju.

 

  • Lithium (Li) demand will be driven by energy storage, particularly EVs. Australia is the largest producer, while Chile has the highest reserves in the world.
  • Of ore-based and brine-based Li deposits, the latter makes up almost two-thirds of global Li deposits.
  • Mining and Refining are the first stages in the Li value chain, followed by battery material production, battery assembly, and finally use in OEMs.
  • Australia has the highest ore-based deposits, while South America has all brine-based deposits. Refer to pages 8 and 10 for major Li projects across the world.
  • Looking forward: We expect backward integration by Li refining companies to secure supply by acquiring mines that are expected to start commercial production in the next few years.