Mercari (MERA.JP; $8.9B marketcap): We added Mercari to our Developed Markets Focus List this week after the stock broke out of a stage-one cup-with-handle base on above average volume. Long-term growth drivers include the growing lucrative second-hand goods market in Japan and the U.S., a strong delivery network, Merpay financial services, and plans to expand in Europe. See our report
Author: Tristan d'Aboville
European Weekly Summary
Key points from this week’s report:
Please refer to the attached PDF for the full report.
- The Stoxx 600 gained 82bps last week but remains in an Uptrend Under Pressure with seven distribution days. The index is currently consolidating in an eight-week flat base, trading below its 50- and 100-DMA with next support at its 200-DMA.
- Of the 17 indices we cover, three are in a Confirmed Uptrend, one in a Downtrend, and 13 in an Uptrend Under Pressure. We upgraded Norway and Portugal to a Confirmed Uptrend and downgraded Germany to a Downtrend. The average distribution day count has increased to 7.40.
- Sector Rotation: value continues to lead with short-term momentum accelerating among financials and energy stocks.
- We removed Trigano (TRI.FR), Nordic Semiconductor (NOD.NO), and Neste (NEST.FI) from our focus list last week. Actionable names in the focus list include Intesa Sanpaolo (ISP.IT), Euronext (ENX.FR), and Rentokil Initial (RTO.GB).
- Refer to page 4 for our European watch list, which includes several banks, including Barclays (BARC.GB).
O’Neil Consumer/Retail Weekly
Consumer Cyclical ( XLY ): The index regained its 50-DMA this week, an important technical level. Technical metrics are
mixed: its RS line is starting to trend higher but volume metrics are weak (A/D Rating D-). Within the sector, focus on
strong fundamental names breaking out on good volume.
Consumer Staples ( XLP ): The index bounced off its 200-DMA support this week. However, its RS line continues to lag
as investor appetite for Staples wanes.
Retail ( XRT ): Retail stocks rebounded this week. The ETF was up 0.5%, after finding support at the 200-DMA. We
recommend trimming positions in stocks that are breaching their 50- or 200-DMA.
Radico Khaitan
Radico Khaitan (RKT.IN) is one of the oldest and largest manufacturers of Indian-made foreign liquor (IMFL). It was previously known as Rampur Distillery Company and was a third-party supplier for other beverage manufacturers. The company started its own brands in 1997. From 2006 onward, the company has focused on premiumization with the launch of the Magic Moments brand.
The company is the market leader in vodka and brandy categories in India with 58% and 56% market share, respectively. It has three distilleries in Rampur and two distill-
eries as a JV in Aurangabad. The company holds a 36% stake in the JV.
Revenue by segment: IMFL (prestige & above), 40.4%; IMFL (regular & others), 41.1%; non-IMFL, 18.5%. Exports contribute 5% to sales.
European Weekly Summary
Key points from this week’s report:
Please refer to the attached PDF for the full report.
- The Stoxx 600 lost 200bps last week, closing in the red for the fourth time in the last five weeks. The index is trading below its 50-DMA with support at the bottom of its current base, followed by the 200-DMA.
- Of the 17 indices we cover, a majority is in an Uptrend Under Pressure. We upgraded Austria, Norway and Portugal to a Confirmed Uptrend and downgraded Ireland and the Netherlands to an Uptrend Under Pressure.
- All the sectors closed in the red, barring the Energy sector. From our rotation chart, short term momentum (4-weeks) among leading Tech and Healthcare (over 26-weeks) is rolling-over. Energy continues to show strong short -term momentum.
- We removed Sika (SIKA.CH), Alphawave (AWE.GB), Carl Zeiss Meditec (AFXX.DE) from our focus list last week. Focus List Actionable Ideas include Rentokil Initial (RTO.GB) and B&M European Value Retail (BME.GB). Focus List defensive plays include IMCD (IMCD.NL) and Novo Nordisk (NON.DK).
- Watch List (Fundamentally Top-rated names showing improving technical characteristics) include several financial ideas such as Mediobanca (MB.IT) and Coface (COFA.FR). Refer to page 4 for the list.
Beneteau
What happened? Revenues was 3% above estimates and margins expanded 35 bps to 14.8%. Company reiterated FY21 guidance but is facing supply shortage.
O’Neil Consumer/Retail Weekly
Consumer Cyclical ( XLY ): The index breached its 50-DMA on above average volume this week. There is support at the
100-DMA. Technical ratings are weakening: RS Rating is at 62 and A/D Rating is at E. We recommend that investors
avoid adding any risk and book profits in extended names.
European Weekly Summary
Key points from this week’s report:
Please refer to the attached PDF for the full report.
- The Stoxx 600 recorded a small gain last week amid volatility after closing in the red for three consecutive weeks. The index is in an Uptrend Under Pressure with seven distribution days and faces resistance at its 50-DMA.
- Of the 17 indices we cover, three are in a Confirmed Uptrend and 14 in an Uptrend Under Pressure. We downgraded Denmark, Portugal, Luxembourg, and Italy to an Uptrend Under Pressure. The average distribution day count has increased to six.
- On the sectoral front, Energy and Consumer Cyclical gained the most while Transportation stocks were the major losers. Sectors with improving short-term momentum include Energy and Technology, while cyclicals and basics resources continue to deteriorate significantly.
- We removed De’Longhi (DLG.IT) from our focus list last week. Actionable names in the focus list include Beneteau (CHBE.FR), Ashtead (AHT.GB), Intesa (ISP.IT) and B&M European Value Retail (BME.GB).
O’Neil Consumer/Retail Weekly
Consumer Cyclical (XLY): The index traded in and around its 50-DMA this week. It is facing resistance at at its all time high. We recommend investors look for strong names breaking out of consolidation on good volume.
Nike Inc
What’s happened? Nike reported Q1 FY22 results, yesterday after market close,
with revenue 2% below estimates and EPS slightly ahead on better-than-
expected gross margin expansion. Supply chain disruption might be temporary
but led management to lower its FY 22 guidance. We see consensus cutting FY
EPS 2022 estimates by 10 to 15% leaving the stock at a stretched valuation. We
recommend holding to position and look for $148 key support level.