Helen of Troy

What’s happened? Developed Focus List constituent HELE reported strong Q2
FY21 results. Revenue grew 28.2% y/y, beating estimates by 21%, while EPS was
$3.43, 64% above estimates. We recommend that investors hold on to the stock
and add to the positions if it breaks above $213.3 on strong volume.

Givaudan

What’s happened? Developed Focus List constituent GIVN.CH reported strong
nine-month results yesterday. Overall, revenue grew 3.7% y/y on a like-for-like
basis, in line with estimates, while revenue growth in the third quarter
accelerated to 3.1% y/y, beating estimates by 0.26%. We recommend that
investors hold on to the stock and add to positions once it retraces to its 50-
DMA.

Consumer & Retail Sector Overview

Developed Markets
o Beyond Meat (BYND; $11.81B market cap): We added Beyond Meat to our U.S. Focus List
this week. The stock broke out of a stage-one, 14-week cup base. Beyond Meat is a supplier of
plant-based meat alternatives, located primarily in the U.S. It has three primary plant-based
product platforms, revolving around pork, beef and poultry. Market share gains, operating
margin expansion and prospective tie-ups with Quick Service Restaurants (QSRs) are key
positives for the stock going forward. See our report here.

• Emerging Markets
o Localiza Rent A Car On (LOC.BR; $7.71B market cap): We added Localiza to our Emerging
Market Focus List this week. The stock broke above a key resistance level on good volume.
Localiza is the leading car and fleet rental service provider in Brazil, with ~40% market share.
Through its transformational merger with Unidas, the company is re

DraftKings

Key points from this report:

  • Since we added DKNG to our U.S. Focus List, the stock has surged 55% in less than six weeks. Our methodology suggests holding the stock for at least eight weeks (power from pivot flag), although we would not be surprised to see it consolidate given its recent performance, with the first level of support at $58.60, followed by $55.70. Hold positions.
  • Current technical characteristics: strong RS Rating of 99, top A/D Rating of A.
  • Fundamental characteristics: EPS Rank of 52, SMR Rating of D.
  • The Q3 trading update released by management yesterday continues to underpin DraftKings’ strong growth pro­file. Within the nascent U.S. market, we believe that the company is the best positioned to capture the online betting mega-trend thanks to its competitive advantage (brand and product offering), which will translate into a $2.3B–3.5B revenue potential, almost 10x FY19 revenue.

European Weekly Summary

Key points from this week’s report:

Please refer to the attached PDF for the full report.

 

  • The Stoxx 600 gained 2.02% last week. It was able to remain above its recent low (9/25) and thus is now in a Rally Attempt. Until we spot a follow-through day, which would validate a potential uptrend, we recommend avoiding adding risk in the current environment.
  • Our rotation chart suggests improving momentum (over four weeks) for the leading Retail sector (over 26 weeks).
    • Actionable Retail ideas include: B&M European Value (BME.GB, EFL constituent), Zalando (ZALX.DE), and Next (NEXT.GB).
    • The Retail/Wholesale Building Products group has the best rated names as it has benefited from stay-at-home measures. Stocks of interest: Ferguson (FERG.SE), Hornbach Holding (HBHX.DE), and BHG Group (BHG.SE, EFL constituent).
    • Lastly, several Retail-Apparel/Shoes/Acc group stocks are displaying significant improving short-term technicals: Boohoo (BOO.GB), Kering (KER.FR), and JD Sports (JD.GB).

Consumer & Retail Sector Overview

Developed Market

  •   B&M Stores (BME.GB; $6.5B market cap): We added B&M Stores to our Developed Market
    Focus List this week. The UK-based discount retailer broke out of a stage-two cup base on 1.2x
    daily average volume. As a discounter, B&M is well-placed to continue delivering strong rates of
    like-for-like sales growth, given the specter of a recession in the U.K. Growth opportunities
    abound; there’ scope for the core UK business to double its store count to 1,200 long-term. See
    our report here.
  • Trigano (TRI.FR; $2.94B market cap): We added Trigano to our Developed Market Focus List
    this week. The stock has been trading constructively along its rising 21-DMA, recently spiking
    on strong volume after a better than expected Q4 (Revenue +33.7% y/y). Trigano is a leading
    manufacturer of recreational vehicles (RVs) in Europe. It has 30% share in Europe’s motorhome
    market. The global RV industry is expected to have a CAGR of 7% from 2020 to 2026. The
    “staycation” trend has led more families and young adults to consider campgrounds rather than
    traditional holidays leading to a surge in demand for leisure vehicles. See our report here.

Puma

Key points from this report:

 

  • Buy Puma. We reiterate our positive long-term view following a conversation with Puma’s investor relations.
  • While strong short-term momentum is improving in the industry following the outbreak of COVID-19, Puma’s long-term story on margin improvement is very attractive.
  • The pandemic is likely to accelerate the company’s shift toward DTC, including online penetration.
  • Over the long term, based on Puma’s operating margin catching up with its peers and high-single-digit revenue growth led by China, we model a mid-double-digit earnings CAGR.
  • The stock trades at a 2022 EV/EBIT of 18x, versus an average of 24x for its peers.

European Weekly Summary

Key points from this week’s report:

Please refer to the attached PDF for the full report.

 

  • The Stoxx 600 was moved to a Downtrend after it breached its June low and accumulated 10 distribution days over the past five weeks. 
  • Seven of the 17 indices (including the Stoxx 600) we cover in the region are now in a Downtrend. France was shifted to a Downtrend earlier last week.
  • The Denmark OMX has the most constructive chart in the region given its weighting toward renewable and healthcare stocks.
  • Due to the resurgence of the pandemic in the region, a rotation toward defensive sectors has occurred. Utilities, Retail, and Consumer Staple led the market weakness last week on a relative basis. Refer to page 2 for most constructive stocks among Retail and Consumer Staple sectors.
  • Refer to page 3 for extended names showing technical deterioration. These names should be carefully monitored if owned.

Consumer & Retail Sector Overview

Make A House A Home Theme Goes From Strength to Strength: One of the more curious trends
we have observed during the pandemic is increased consumer spend on home improvement and DIY
retail. This is a theme we have seen pervade the developed world. In the U.S., home improvement and
DIY related sales continue to exhibit strong year-on-year rates of sales growth, per the most recent
retail sales print. In Europe, we have seen a similar trend; BHG.SE is a retailer which plays into this
theme. In Asia, a couple of DIY related names broke out on strong volume this week: DOHO.TH and
KEYO.JP

Nike

Nike designs, manufactures, and sells athletic footwear, apparel, equipment, accessories, and services.
The company has products in six categories: running, basketball, the Jordan brand, soccer, training, and
sportswear. It sells its products through retail stores, digital platforms, and independent distributors,
licensees, and sales representatives. FY20 revenue by geography: North America, 41%; Europe, Middle
East, and Africa, 26%; greater China, 19%; the Asia Pacific and Latin America, 14%. Revenue by
segment: footwear, 66%; apparel, 31%; equipment, 3%. Revenue by channel: wholesale, 65%; Nike
Direct, 35%.