Lululemon Athletica

What’s happened? US Focus List constituent Lululemon reported strong Q3 and
FY22 results. Q3 revenue grew 30% y/y, beating estimates by 1%, while diluted
EPS improved by 31% y/y above estimates by 4%. We recommend that investors
hold positions here and add to positions when the stock retakes its 50-DMA on
strong volume.

Indian FMCG

Owing to the tapering of asset purchases and expected rate hikes by the U.S. Federal
Reserve in the first half of 2022, we believe broader Indian markets will have a
lackluster year in 2022. Under this scenario, we expect defensive stocks to outperform
benchmark indices, citing data from 2018 and 2013.

European Weekly Summary

Key points from this week’s report:

Please refer to the attached PDF for the full report.

 

  • The Stoxx 600 is in an Uptrend Under Pressure with four distribution days. The index now trades 5.7% off highs and is just 1.7% above its immediate support at 200-DMA. We are cautious about the overall market and recommend a patient approach as breadth has significantly narrowed, although some buy opportunities may arise from this pullback. Focus should be on ideas with high relative strength that are trading at their short-term support levels.
  • Energy led the market last week, while Health Care and Consumer Staple lagged. Our rotation chart shows short-term momentum (over four weeks) continuing to improve among Tech and Cyclical and turning positive among Basic Materials. Transportation remains the weak spot of the market.
  • European Focus List Update: No additions or removals occurred last week. The list still consists of 45 stocks, overweighted toward Capital Equipment and Financials. Refer to page 2 for stocks trading near their short-term support levels and stocks trading with their RS line at an all-time high.

Indian FMCG

Owing to the tapering of asset purchases and expected rate hikes by the U.S. Federal
Reserve in the first half of 2022, we believe broader Indian markets will have a
lackluster year in 2022. Under this scenario, we expect defensive stocks to outperform
benchmark indices, citing data from 2018 and 2013.

European Weekly Summary

Key points from this week’s report:

Please refer to the attached PDF for the full report.

 

  • The Stoxx 600 is in an Uptrend Under Pressure with two distribution days. The index pulled back sharply last week and gapped down below its 50-DMA amid concerns over the new COVID variant.
  • Historical precedents suggest market sell-off due to the threat of a new COVID wave tends to be very short-lived and thus could offer opportunity to buy leading stocks retracing towards their short term moving averages.
  • Short-term momentum in Cyclical and Tech continues to rise. Performance of Travel & Leisure on a 12-month rolling period versus the Stoxx 600 is heading toward a decade low.
  • We removed Intesa Sanpaolo (ISP.IT) from our European Focus List. The list is now made of 45 names and is overweighted toward Capital Equipment and Financials.
  • Actionable names include Coface (COFA.FR), Vitrolife (VITR.SE), Novo Nordisk (NON.DK), Infineon (IFXX.DE), Sartorius (SRT3X.DE), Nibe (NIBE.SE).
  • Stocks at support level (short-term moving averages) offering secondary entry point: Schneider Electric (QT@F.FR), ASML (ASML.NL), Puma (PUMX.DE), Partners Group (PGHN.CH), Pandora (OND.DK), Interpump (IP.IT), Halma (HLMA.GB), Interroll (INRN.CH), Richemont (CFR.CH), EQT (EQT.SE), Straumann (STMN.CH).

L’Occitane International

L’Occitane International (LOIS.HK) manufactures and sells beauty and cosmetic
products. Its prominent brands are L’Occitane, ELEMIS, and Lime Life, and its
three other brands are L’Occitane Brasil, Melvita, and Erborian. The company
sells its products in about 90 countries across 3,500 retail stores, in which about
1,600 stores are self-operated. By distribution channel, revenue is divided into
two segments:

European Weekly Summary

Key points from this week’s report:

Please refer to the attached PDF for the full report.

 

  • The Stoxx 600 is in a Confirmed Uptrend but pandemic jitters return to haunt trade recovery. European markets closed 14bps down last week, despite starting the week on a very strong foot, as the spike in COVID-19 infections and a potential wave of new restrictions dented investor sentiment.
  • Of the 17 indices we cover, nine are in a Confirmed Uptrend, one in a Rally Attempt, and seven in an Uptrend Under Pressure. We downgraded Austria and Portugal to an Uptrend Under Pressure after the indices breached their 50-DMA. The average distribution day count remains low at 3.63.
  • Sector rotation: Momentum in Energy and Financials continues to deteriorate. Sectors with improving momentum include Technology and Cyclical.
  • Q3 earnings season update: On average, FY21 EPS for the Stoxx 600 rose over 2% in the last four weeks, led by Energy and Banks.
  • European Focus List Update: CFR.CH was added to the list. Actionable names include: Schneider Electric (QT@F.FR), Ashtead (AHT.GB), JD Sports (JD.GB), Interpump (IP.IT), Vitrolife (VITR.SE), Rentokil (RTO.GB), Sartorius (SRT3X.DE), Halma (HLMA.GB), ASML (ASML.NL), and Partners Group (PGHN.CH).

O’Neil Consumer/Retail Weekly

Consumer Cyclical (XLY): The index regained its 10-DMA and is trading 1% off highs. Its RS Line is trending higher,
signalling outperformance, while volume metrics steadily improved. It is extended from an ideal entry point. We
recommend investors look for stocks with good fundamentals breaking out of sound consolidation bases, and holding
onto names that are not too extended but are trading above pivot.