What’s happened? US Focus List NKE will report Q2 FY21 (ending November)
results today after market close. . We recommend that investors hold on to
positions ahead of the print and look for immediate support at the 50-DMA.
Author: Tristan d'Aboville
Tristan d’Aboville is an Executive Director, Research Analyst, managing the European Research Product.
Mr. d’Aboville has more than 16 years of experience in equity research and sales. Since joining the firm in 2012, he has applied his client-centric style with analysts and portfolio managers, anticipating and exceeding their needs. He writes the well-received weekly European commentary, and follows it with a client conference call to discuss findings.
Prior to William O’Neil + Co., Mr. d’Aboville was a top-producing salesperson at Kepler Capital Markets, formerly known as Julius Baer, and at Natixis Bleichroeder, covering European equities for large U.S. institutional clients. He started his career as an equity analyst at Aurel-BGC, later moving to Natixis Bleichroeder, where he became the lead analyst for the European Hotels, Leisure and Catering Sector. He was recognized as a Top Analyst for Predictability & Recommendations by AQ Publications in 2003. Extel named him one of the top three European analysts covering the business services and hotel & leisure industries. Prior to the securities industry, Mr. D’Aboville was an auditor with Arthur Anderson.
Mr. d’Aboville earned a Master of Science in Managerial and Financial Economics from ISC Paris School of Management. Later, he studied Global Affairs at New York University. He is a Certified International Investment Analyst (CIIA).
A sportif, Mr. d’Aboville enjoys kite surfing, sailing, skiing, tennis, chess, and spending as much of his free time as possible with his wife, young daughter, and son.
Malibu Boats
Key points from this report:
- We are reiterating our buy call on Malibu Boats as shares are breaking out of a stage-one consolidation base (pivot is at $63.88).
- Its strong fundamental O’Neil Ratings (EPS Rank of 89 and an SMR Rating of B) reflect the recent business recovery post-lockdown.
- Looking ahead, the industry is likely to experience a sharp acceleration as consumers reassess their recreation plans, shifting from traditional travel/hotel destinations to outdoor experiences. In this favorable environment, Malibu Boats will emerge as a key beneficiary owing to its strategic acquisitions (Cobalt and Pursuit Boats) strengthening its position in the outboard market, the largest and fastest-growing segment for leisure boats.
- For FY21 (ending June), consensus expects revenue to grow 22% and EPS to grow nearly 45%. The stock trades at 13x PE 2021, below the industry average PE forward of 19x.
Consumer Staple
Attached is a report on the premiumization trend in China’s Consumer Staple sector by Executive Director, Research Analyst Tristan d’Aboville and William O’Neil India Analyst Bhaskar Maheshwari.
In China, premiumization is a structural trend covering all aspects of the consumers’ life. This trend has been driven by higher wage growth and disposable income following long decades of high GDP growth. This structural trend is obviously not new and has been, in the past decade, a source of outstanding performance among stocks on our Focus List, such as A2 Milk (+356%) and Yihai (+219%). However, we believe that the recent pandemic has created the perfect environment to boost Chinese consumers’ appetite for a healthier lifestyle, providing opportunities for companies offering premium products in areas such as food and beverages.
Through the lens of our proven O’Neil Methodology, we have identified key stocks to play this trend:
- China Feihe ( CHIF.HK; Focus List constituent ): A play on the premiumization of China’s infant milk industry.
- Build on the right side of a base or a breakout of HKD 19.5 (pivot point).
- Budweiser Asia Pacific ( BBCA.HK ): A play on the premiumization of China’s beer industry.
- We would recommend buying should the stock break HKD 28.85 on volume.
- Nongfu Spring ( NONS.HK; Focus List constituent ): A play on the premiumization of packaged drinking water in China.
- Buy: The stock broke out of a 39-day IPO base in mid-November. Since then, the stock has retraced toward its rising 50-DMA and trades 9% above pivot. We recommend building positions at this level.
European Weekly Summary
Key points from this week’s report:
Please refer to the attached PDF for the full report.
- The Stoxx 600 has been in a Confirmed Uptrend since November 4 (follow-through day) with two distribution days. The index has been consolidating the past two weeks, which coincides as expected with a pause in the value trend. We remain bullish on the market and recommend adding risk to stocks breaking out of early bases.
- Lagging over 26 weeks, Health Care is showing some signs of short-term improvement. Stocks of interest include: Straumann (STMN.CH, EFL constituent) and Chemometec (CHM.DK, $1.3B market cap).
- Focus List: This week we added Moncler (MONC.IT) and Evolution Gaming (EVOG.SE) to our European Focus List.
Lululemon
What’s happened? US Focus List Lululemon reported Q3 FY21 (ending
October) results yesterday after market close, beating estimates on all
metrics. The stock is building the right side of a stage-two cup base. We
recommend that investors add to positions when the stock breaks out
above the pivot ($399, 8% away) on heavy volume.
O’Neil Consumer/Retail Weekly
European Weekly Summary
Key points from this week’s report:
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The Stoxx 600 has been consolidating this week after bouncing 46% from March lows, but with only one distribution day over the past 5 weeks, we remain open to adding risk.
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Switzerland joined Denmark this week to an Uptrend Under Pressure after the index (SMI / 0SWISSMI) breached its 21-DMA with four distribution days. Refer to page 2 for market status in the region.
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The Italian MIB and Spanish IBEX are now among the most extended regional indices, trading 10% and 13.8%, respectively, above their 50-DMA.
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The Value trend is approaching an extended level in the short term. We expect Value to pause, but bear in mind that over 12 months, Value is still underperforming Growth significantly. Refer to page 3 and 4.
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Should the market consolidate, we bring to investor’s attention a list of stocks that are currently extended and showing deteriorating short-term technical profile. Refer to page 5 for the list of extended names.
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Refer to page 6 for actionable Focus List names and stocks of interest (watchlist
Consumer & Retail Sector Overview
European Weekly Summary
Key points from this week’s report:
Please refer to the attached PDF for the full report.
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The Stoxx 600 continued on a steady growth path this week and all indices in the region except for Denmark are in a Confirmed Uptrend.
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Rotation into value has continued this week with Auto, Banks, and Energy names leading the gain. The value versus growth trade continues to be valid, in our view.
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In this report, we have updated the list of names that are benefiting from the reopening, looking at stocks that are still trading far from their 52-week highs but have significantly improving technicals.
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We are also highlighting stocks that are extended and showing technical deterioration. These stocks may have further downside in the current rotation.
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From our list of recommendations, we focus on Kering (KER.FR), which was added last week.
European Overview
A short update on our European Overview ( Refer to the Deck attached to this email )
- Slide 2: All countries but Denmark are in a Confirmed Uptrend
- Slide 3: Stoxx 600 in a Confirmed Uptrend since Nov 4th ( FTD ) – Recently broke above ~377 key level of resistance
- Slide 4: Rotation chart: short term momentum still improving among Financials, Utilities / Deteriorating among tech and Healthcare
- Slide 5: Break out in Europe. Constructive set up overall. Similar to H2 2016, Higher level of breakouts led by Value… if history repeats itself, 2021 will be a great year for European equities ( like in 2017 ).
- Slide 6: In the short term, Value trade has still some room to continue …
- Slide 7: … while growth stocks still holding key support levels reflected by the high level of recommendations on our European Focus List.
- Slide 8: European Focus List performance ( O’Neil recommendations )
- Slide 10 : Screening laggards bouncing from lows on strong technicals. Combined with O’Neil fundamental ratings and rankings, key stocks are: Lundin Energy ( LUPE.SE ), Intesa ( ISP.IT ), CNP Assurances ( CNP.FR ) and Orange ( ORA.FR )
- Slide 11: European Focus List – best ideas / themes to play: Puma ( PUMX.DE ), Kering ( KER.FR ), Nordic Semi ( NOD.NO ), STM ( STM.IT ), Ashtead ( AHT.GB ), Halma ( HLMA.GB ), Straumann ( STMN.CH )
