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 point from this week’s commentary:
  • We have classified and ranked the eleven sectors according to five categories: 2018 EPS growth, placement versus the 50-DMA, long-term relative performance, Q2 seasonality, and historical performance after sharp 10-year yield increases. The top three or four groups are shaded green, middle three to five are yellow, and bottom three or four are red (1-11 ranking, 1 is best).
  • Retail is top ranked, followed by Technology, while Consumer Cyclical and Utility are the two worst.

Global Sector Commentary

Posted on by Kenley Scott
Key points from this week’s commentary:
  • Sharply higher 10-year bond yields (and a stronger dollar) in the U.S. may be adversely affecting many 2017 leading markets, including those that are especially sensitive to currency movements (more on the EM side).
  • The weakest markets since January include 2017 leaders Hong Kong, Indonesia, the Philippines, Poland, Turkey, South Africa, and Argentina.
  • Meanwhile, the strongest markets are now a combination of 1) Developed European (France, the U.K., Italy, Norway, Finland, the Netherlands); 2) Emerging/frontier EMEA (Egypt, Saudi Arabia, Pakistan, Qatar, Bangladesh); and 3) Oil-dependent APAC and LatAm (Singapore, India, Brazil, Colombia, Peru).
  • Easily the top three markets since January are Egypt (+22%), Saudi Arabia (+14%), and Norway (+6%). Top picks in each market include Commercial International Bank ( CIB.EG ; COMI EY ), Mouwasat Hospitals ( MOU.SA; MOUWASAT AB ), and Nordic Semiconductor ( NOD.NO; NOD NO ).

Global Sector Commentary

Posted on by Kenley Scott

Key Points from this week’s commentary

  • 50%+ of global markets back in an Uptrend, but still on shaky ground.
  • Looking for pockets of strength, biggest standout area continues to be Energy.
    • Crude gains helping most oil-dependent countries. The U.S., the U.K., Norway, Canada, Russia, Brazil, India, Saudi Arabia, and Colombia are all in the top 28 countries globally in terms of reliance on oil for growth (World Bank). Each of these markets is in an Uptrend.
    • Producers and field service companies are biggest gainers. Actionable names: Diamondback Energy (FANG), Parex Resources (PXT.CA), Ecopetrol ( ECO.CO ).
  • Smaller pockets of strength:

o Americas and Europe apparel manufacturers Kering ( KER.FR ), Canada Goose ( GOOS.CA ), PVH ( PVH ), and Puma ( PUMX.DE ) all actionable.

o U.S. and emerging market retailers from a few different specialties are actionable: At Home Group ( HOME ), Ollie’s Bargain Outlet ( OLLI ), Clicks Group ( CLSJ.ZA ), and Titan Company ( TIT.IN ).

o Utilities in several countries showing relative improvement over a few weeks: Smart Metering Systems (SMS.GB), Power Grid Corp of India ( PGC.IN ), Enn Energy Holdings ( XINA.HK ), China Gas Holdings ( IWAI.HK ).

Global Sector Commentary

Posted on by Kenley Scott
Key points from this week’s commentary:
  • The energy sector is leading over the trailing four- and eight-week periods and has moved up from last place over 26 weeks to the middle of the pack.
  • The next step would be a move to leadership versus the S&P 500 over that longer-term period, a trigger that could signal an even bigger move.
  • We note that Energy is close to par with the S&P 500 over 26 weeks, but still trails leaders Retail and Technology substantially.
  • Strength is broad across industry groups. Fastest improving over four weeks include Intl Expl&Prod, Integrated, Field Services, Drilling, and Refining/Mktg, each up at least 40 spots over four weeks.
  • Added three names to Focus List over six days: Continental Resources ( CLR ), Wildhorse Resource Development ( WRD ), Schoeller-Bleckmann ( SCBL.AT ; SBO: AT )
  • Large-cap integrated stocks are breaking out globally: Statoil (STL.NO; STL:NO), Total (TAL.FR, FP:FP), Galp Energia (GES.PT, GALP:PL), Ecopetrol
    Company Lukoil (LKO.RU, LKOH:RM), Eni (ENI.IT, ENI:IM), Petroleo Brasileiro (PET.BR, PETR3:BZ), and China Petroleum & Chemical (CHPE.HK, 386:HK).

Global Sector Commentary

Posted on by Kenley Scott

Key points from this week’s commentary:

While we do not recommend buying stocks aggressively at this time in the short-term global downtrend, we have noticed some positive activity from various stocks across our three Focus Lists. Relative strength improvement (against each countries’ respective benchmark index) has come from a variety of sectors, not just defensives, which is encouraging.

Actionable Names
U.S – SKX, CLR, FLIR
Developed – PBH.CA, TGYM.IT
Emerging – IEZ.IN, PI1.IN, NES.IN, IBK.IN, VGA.IN, HFC.IN

Global Sector Commentary

Posted on by Kenley Scott

Key points from this week’s commentary:

U.S. Markets – Q1 Recap

  • Indices: The market was stuck in a wide trading range as indices hit resistance at or near all-time highs twice, but also found long-term support at the 100- or 200-DMA. The Nasdaq (+2.3%) was the only index in positive territory for the quarter, as the Dow (-2.3%), S&P 500 (-1.2%), and Russell 2000 (-0.41%) finished lower.
  • Sectors: Currently all 11 O’Neil sectors are trading below their 50-DMA except Utility, which was the best performing sector in March, up 3.7%.
  • Looking forward: Stock picking is back. Buy and sell points are extremely important given the market’s wide swings. Although we maintain a cautious approach until we get a follow-through day, there are limited pockets of emerging strength. In Retail, we favor recent breakouts: Lululemon Athletica ( LULU ), Five Below ( FIVE ), and Floor & Decor ( FND ).

Global Sector Commentary

Posted on by Kenley Scott

Key points from this week’s commentary:

*   The streak of 89 weeks with majority of 47 global markets in Uptrend is over.
*   Over the period, the Russell Global gained 38% to January highs and closed Monday up 30%.
*   Leading over the period were Brazil, Hong Kong, Italy, the U.S. (NDQC), Turkey, and Japan, which were all up more than 40%.
*   The twelve largest developed markets are now 10% off 52-week highs on average. The nine largest emerging markets are better, at 5% off highs.
*   The Utility sector is improving relatively on a global basis. All four industry groups showing relative gains (Diversified, Electricity, Water, Gas).
*   A few actionable names include Enn Energy (XINA.HK; 2688:HK), NRG Energy ( NRG), Vistra Energy ( VST), Verbund ( VERB.AT; VER:AV), China Gas ( IWAI.HK; 384:HK), and China Affairs Water ( CEDA.HK; 855:HK).

Global Sector Commentary

Posted on by Kenley Scott

Global Markets Recap

Twenty-three developed markets edged down 0.1% on average after last week’s gain of around 1.4%. Three markets are in a Confirmed Uptrend (U.S., Hong Kong, New Zealand) while four are Under Pressure and the other 16 remain in a Rally Attempt.

• U.S. indices fell 1%. EMEA markets were mixed on the week. Most remain below their respective 40-WMA. APAC markets outperformed, led by Hong Kong (1.7%), which retook its 10-WMA. Japan gained 1% but remains 10% off highs.

Twenty-four emerging markets declined 0.3% on average. Seventeen markets are in a Confirmed Uptrend, including 10 in an Uptrend Under Pressure. Five markets are in a Rally Attempt, while two are in a Downtrend. It’s the 64th week with a majority of indices in an uptrend.

• APAC markets were mixed, with Taiwan and South Korea gaining solidly. Both are back in a Confirmed Uptrend. Meanwhile, India reversed its weekly gains after sharp Friday losses, and the Philippines fell below its 40-WMA and was shifted to a Downtrend.

Global Sector Commentary

Posted on by Kenley Scott

Key points from this week’s commentary:

*   Technology and Health Care are the two sectors showing strong breadth across stocks with greater than $1B market cap.
*   69% of Tech stocks and 65% of HC stocks are above their respective 50-DMA. No other sector has more than 50%.
*   Across the 39 industry groups within the two sectors (ex telecom and office supplies), the average gain is more than 10% YTD.
*   Many software groups are up 15% or more. Computer Sftwr-Enterprise is up 23%

Global Energy Sector

Posted on by Kenley Scott

Key Points:

U.S.

*   Energy is the worst sector over eight weeks, down 8%. Crude prices have held much better than the sector, just 7% off highs.
*   U.S. crude production is now at all-time highs (10.3 MMbpd, from 9.9 in Dec. 2017, 9.3 for full-year 2017, and 8.8 in 2016)
*   As of its March release, 2018 and 2019 estimates from EIA are up to 10.7 and 11.3, respectively.
*   However, global supply/demand balance slightly favors demand, which is rising based on slight increases in 2018 GDP growth estimates.
*   OPEC cuts are the reason for the favorable conditions. If the 1.8MMbpd that OPEC has cut through this year come back online, there will be an oversupply again.
*   Still favor low cost operators rapidly growing production in the Permian: FANG is our top pick. CDEV is under pressure after another secondary offering this week.
*   Small-cap stocks of interest in field services group: GTLS ( extended ) and CLB ( basing ) have the best growth prospects.

EMEA

*   RUI.FR, a gas distributor in niche markets like Haiti and Madagascar, is our only Focus List pick. Shares are consolidating.
*   Areas of outperformance (missing one or more keys for Focus List inclusion) include:
*   Integrated companies in Europe: Statoil ( STL.NO ; STL:NO) and Lukoil ( LKO.RU ; LKOH:RM )
*   Saudi Arabia refiners and chemical companies: Saudi Kayan Petrochemical ( SAK.SA; KAYAN:AB ), Saudi Basic Industries ( BIC.SA; SABIC:AB )

APAC

*   Alternative picks in Thailand removed after 8-9 months on list. Weak Q4 results for both Energy Absolute ( ENAP.TH ; EA:TB ) and BCPG ( BCPG.TH; BCPG:TB ).
*   New Focus List idea: China Everbright Greentech ( CBEL.HK; 1257:HK )