USA Compression Partners (USAC) – $2.2B market cap – Technicals: The stock broke out of a stage-two consolidation base and is trading in
the buyable range (pivot $22.0-23.0). Fundamental profile: EPS Rank 75, Composite Rating of 97, and SMR Rating of C. Excellent technical
profile: RS line is sloping upward with a strong RS Rating of 84. Up/Down Volume ratio of 1.4 and A/D Rating of A- denote good accumulation.
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 Strategy
Key Points:
- Comparing the current bull market start to those in the past:
- On the DJIA, a gain of ~20% after the first nine months is below the median 26% gain, but still an ok start.
- Comparing ARKK to the Nasdaq 2002-on period, fairly similar start after the first 175 trading days. ARKK has been more volatile and with more upside, after seeing a bit more overall downside in the bear market.
- Comparing the S&P 500 now, versus the 2002 and 2009 bull market beginnings. Tracking very closely to 2002, but lagging 2009 sharply. Overall, looks like reasonable start.
Global Sector Strategy
Key Points:
- Looking at Industry Group strength/weakness and changes through this market correction.
- Groups moving up in rank over four weeks weighted toward Energy, HC. Still top-ranked groups mainly Tech and building-related.
- Groups moving down in rank over four weeks weighted to Consumer and Cap. Equipment. Still bottom-ranked groups Consumer, Banks, Ags.
Global Sector Strategy
Attached is the latest Sector Strategy Note from Global Sector Strategist Kenley Scott.
Key Points:
- U.S. market in a Downtrend for the first time since late March.
- The S&P 500 and Nasdaq below their 50-DMA and close to testing their 100-DMA. Small/midcap indices testing their 200-DMA.
- One standout category currently is the S&P 500 High Quality Factor ETF (SPHQ-looks for high ROE, operating asset growth, and low debt ratios).
- Two sectors of note are Energy and Health Care, both of which are coming from oversold levels over the trailing one year and outperforming sharply short term.
- S&P 500 stocks within 5% of highs include SLB, HES, TRGP, MPC, REGN, LLY, and BDX.
O’Neil Energy/Material Weekly
Frontline (FRO) – $4B market cap – Technicals: The stock is breaking out of a stage-two consolidation base into multi-year highs. Strong fundamental profile with EPS Rank of 81, best-in-class Composite Rating of 99, and SMR Rating of A. Excellent technical profile: RS line is sloping upward and approaching 52-week highs with a high RS Rating of 95. It has a solid Up/Down Volume ratio of 1.2 and an A/D Rating of B+. Pivot range is $17.3-18.3. Company Description: Frontline is a top-five global shipping company, transporting crude oil and refined petroleum products.
Global Sector Strategy
Attached is the latest Global Sector Strategy from the Director of Global Equity Research Kenley Scott.
- Breadth takes a step back this week, with the percentage of stocks above 30-wk. MA on the NYSE down to mid-60%s from nearly 80%.
- During normal (minor) pullbacks within a bull market, this percentage comes down to the 40–50% range often.
- Steeper pullbacks can drop below 25%, while very deep corrections and/or bear markets can drop to below 15%.
- There was a high degree of dispersion of reactions this week with 35% of stocks reporting moving at least 7% on the week.
- 22% dropped at least 7%.
- 12% rose at least 7%.
- Strong earnings beats helped, as those up >7% beat by median of 18%, while those <7% beat by 4%.
- Also, high RS Rating coming in seemed to continue to work as a detriment. The leading group had an RS Rating of just 51 last week, compared to 81 for the negative group.
O’Neil Energy/Material Weekly
ChampionX Corporation (CHX) – $7B market cap – Technicals: The stock is breaking out of a stage-one 23-week consolidation (pivot: $33.65). Solid fundamental profile: EPS Rank 80 and SMR Rating of B. Strong technical profile: RS Rating of 93, A/D Rating of B+, and Up/Down Volume ratio of 2.2, indicating strong accumulation. Slightly above highs of pivot range ($35.4).
Global Sector Strategy
Key points from this report:
Update to long-term relative performance for all stocks above $100M market cap-outperformance fairly difficult to achieve:
And then looking at three different categories of leaders currently:
1) Long-term outperforming stocks (versus both S&P 500 and Nasdaq) which also have high current RS Ratings.
2) Long-term lagging stocks but with high current RS Ratings.
3) Washed out stocks, <-60% off five-year highs, but with high current RS Ratings.
The profiles of the three groups are very different, but each has a place. Essentially #1 is high quality growth, #2 is cyclical growth, and #3 is speculative growth. See attachment for the names in each which have already reported Q2 earnings.
O’Neil Energy/Material Weekly
Northern Oil and Gas (NOG) – $3B market cap – Technicals: The stock is approaching the pivot of a stage-one 37-week consolidation. It has solid fundamental ratings like EPS Rank 76 and SMR Rating of A and rising money flows (Up/Down Volume ratio of 1.7 and A/D Rating of A-). RS line is trending upward with a solid RS Rating of 85. Pivot range from $39-41.
Global Sector Strategy
Key Points:
- Around 10% of companies have reported earnings. So far:
- Median sales/EPS growth of 6% and 3%.
- Median sales/EPS beats of 0.7% and 4.7%.
- Median reactions (for those reporting since June 1) of +3% but mostly driven by June gains.
- Median reactions (for those reporting since July 1) of -0.2%. This week, -0.7% median reaction.
- Stocks which were down YTD have had better reactions vs. those up YTD.
- Strong reactions so far from managed care, drugs, money centers, regional banks. Weak reactions from airlines, savings & loans, advertising.
- Some of the good results/reactions include BMI, JPM, UNH, NVS, UAL.
- Looking forward to the remaining ~90%:
- Caution warranted on extended ideas, particularly those up significantly from Q1 earnings.
- See attachment for names up >25% since last earnings, >25% above 200-DMA, >10% above 50-DMA, and >10% most recent pivot.
- These include VRT, DKNG, NCLH, TDW, EXPI, MARA, IMGN, ACAD, DASH, PLTR, COIN, MSTR, SPOT, SMCI, SAIA, etc.
- Interested in areas which haven’t moved as much since last earnings (<15%), that also expect positive sales/EPS growth and have seen positive recent EPS revisions.
- Some of these include SHW, AL, APTV, BKNG, ACGL, ALC, VRTX, OPCH, DPZ, SFM, PATH, AVGO, ANET, ZS, etc
- Caution warranted on extended ideas, particularly those up significantly from Q1 earnings.
