Indian Staples: Double Whammy Headwinds Triggered a Cautious Approach

Key points from this report:

 

  • Although the Indian market was shifted back to a Confirmed Uptrend from an Uptrend Under Pressure last week, we maintain a cautious view on Indian Staples.
  • The sector is showing decelerating short-term momentum and, in fact, has been continuously lagging the market in the past year due to the threat of a double whammy of a fall in consumption demand and inflationary trend in input costs.
  • We recommend four names that have the leading characteristics and resilient profiles to face this challenging time: Radico Khaitan (RKT.IN), Tata Consumer Products (TEA.IN), Emami (EML.IN), and Varun Beverages (VB1.IN).

European Weekly Summary

Key points from this week’s report:

  • The Stoxx 600 is in a Confirmed Uptrend with five distribution day. It is still trading in its upward channel that started in November 2020, with strong support at its rising 50-DMA. Of the 17 indices we cover, 12 indices are in a Confirmed Uptrend and five in an Uptrend Under Pressure.
  • Last week, we shifted Germany, Switzerland, and Norway to a Confirmed Uptrend. The average distribution day count in the region came down to 4.81 compared to 5.13 last week.
  • Focus List Update: We added Barco New ( BAR.BE ), Cellnex Telecom ( CLNX.ES ), and Beneteau ( CHBE.FR ) to our European Focus List.
  • Other actionable names in the Focus List include Fevertree Drinks ( FEVR.GB ), Dechra Pharmaceuticals ( DPH.GB ), Eurofins Scientific ( EUF.FR ), Interpump Group ( IP.IT ), Intesa Sanpaolo ( ISP.IT ), B&M European Value Retail ( BME.GB ), Novo Nordisk ( NON.DK ), Carl Zeiss Meditec ( AFXX.DE ), and Moncler ( MONC.IT ).
  • Refer to page 4 for our Watch List.

ELF Beauty

What’s happened? Developed Focus List constituent ELF Beauty reported
strong Q4 FY21 results. Revenue grew 24% y/y, beating estimates by 13%, while
adjusted EPS grew 60% y/y, beating estimates by 68%. We recommend that
investors add to positions as the stock has bounced off its 50-DMA on high
volume.

European Weekly Summary

Key points from this week’s report:

Please refer to the attached PDF for the full report.

 

  • The Stoxx 600 (confirmed Uptrend / 6 distribution days) continues to trade constructively in an upward channel trend but distribution is still rising.
  • Of the 17 indices we cover, eight are in a Confirmed Uptrend and nine in an Uptrend Under Pressure. We shifted Belgium and Italy to a Confirmed Uptrend after they reclaimed their prior highs.
  • Over the past five days, we added two stocks to our European Focus List: Dechra Pharmaceuticals (DPH.GB) and Fevertree Drinks (FEVR.GB).
  • Other actionable names in the focus list are Eurofins Scientific (EUF.FR), Interpump Group (IP.IT), Intesa Sanpaolo (ISP.IT), B&M European Value Retail (BME.GB), Novo Nordisk (NON.DK), Carl Zeiss Meditec (AFXX.DE), and Hermès (RMS.FR).
  • European Watch List include: Nexans (NXS.FR) and Royal Mail (RMG.GB). See full List on page 3.

Deckers

What’s happened? Deckers posted Q4 FY21 results yesterday after market
close, with a massive beat on all metrics and a significant rise in FY22 revenue
guidance versus consensus. The stock is likely to retake its 100-DMA after
today’s weakness. We would buy here (secondary entry) on a bounce off its
support at $305.

European Weekly Summary

Key points from this week’s report:

Please refer to the attached PDF for the full report.

 

  • In the short-term, caution is required regarding European equities due to the combination of rising distribution across indices, lower number of breakouts, and the extended nature of the Stoxx 600.
  • Our rotation chart continues to show improving short-term momentum among defensive sectors, e.g., Staple, Utility, and Health Care, while Technology faced further technical deterioration.
  • Among Technology, STMicroelectronics (STM.IT) and Comet Holdings ‘R’ (COTN.CHwere removed from our European Focus List. Stocks showing technical deterioration in the sector and still extended (further downside expected) include ASM International (ASIN.NL)Electrocomp (ECM.GB), and Be semiconductor (BESI.NL).
  • This week’s “Stocks of Interest” include top-rated names NTG Nordic (NEU.DK, Transportation)Zehnder (ZEHN.CH, Cons Cyclicals), and, among large caps, OMV (OMV.A, Energy). They are breaking out and are currently actionable. See Sector Score Cards for details.

 

Arezzo

Arezzo – Ecommerce Driving Growth
What’s happened? Arezzo reported excellent Q1 FY21 results, with net
revenue growing 33% y/y, beating estimates by 1.8%. Adjusted EBITDA grew
80% y/y (beat of 4%), driven by product sales from Reserva, a recent
acquisition, and restructuring in the U.S. We recommend that investors hold
positions and wait for the stock to retreat to its 50-DMA.

Canada Goose

What’s happened? Canada Goose reported Q4 FY21 results. Revenue grew 48%
y/y, beating estimates by 27% driven by strong demand in China and surge in
online sales. The stock surrendered its early gains and ended 9% lower due to a
conservative FY22 guidance. (EBIT margins guided mid-to-high teens growth
versus consensus of 22.2%). We recommend that investors hold positions and
trim if the stock breaches its 200-DMA (+3.42% away).

Medifast

Key points from this report:

 

  • We reiterate our BUY recommendation on MED after the stock broke out of a stage-two consolidation on high volume following the announcement of its Q1 results. Shares are trading constructively above its key moving averages with a top-notch technical profile (RS Rating of 93 and A/D Rating B+). 
  • MED displays the best possible O’Neil fundamental ratings with Composite and EPS Ratings of 99 and an SMR Rating of A, which reflect its excellent growth business model, led by a remarkable increase in the number of OPTAVIA coaches and average income growth per coach. COVID-19 has been a clear tailwind for the OPTAVIA weight control program, and the outlook does not show any signs of slowdown.

European Weekly Summary

Key points from this week’s report:

Please refer to the attached PDF for the full report.

 

  • Although the Stoxx 600 was moved back to a Confirmed Uptrend on Friday after reaching a new high, nine out of the 16 indices we cover in the region are still under pressure, with an average distribution above four. We remain constructive on the market but continue to carefully monitor distribution and changes in leadership.
  • After a good month for growth stocks in April, we believe that a new leg for value to lead the market cannot be ruled out. We particularly pay attention to Basic Resources that are re-emerging; historical precedents suggest that the sector may pursue its rerating in the mid-to-long term but also warn investors of a possible short-term pullback.
  • Thus, we recommend that investors initiate positions in stocks that are not too extended from their pivots and short-term moving averages. It includes Antofagasta (ANTO.GB), Aurubis (NDAX.DE), BHP (BHP.GB), Eramet (ERA.FR) and Rio Tinto (RIO.GB).