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.

European Weekly Summary

Posted on by Tristan d'Aboville
Key points:
  • A majority of European Markets are in an Uptrend Under Pressure. We are concerned by the recent clustering of distribution days, and we recommend trimming positions in extended names and selectively adding positions in ideas that are breaking out of a proper base.
  • Improving short-term momentum among lagging (26 weeks) Cyclical and Capital Equipment is not surprising given the divergence of performance over the past 12 months. While it is still too early to identify a trend, we advise building positions in fundamentally sound companies that are breaking out of a proper base (ROFR.FR, SWEB.SE).
  • Year-to-date, our O’Neil European Focus List is outperforming its benchmark by 20pp.  Last week, we added Simcorp (SIM.DK), Sweco (SWEB.SE), and Teleperformance (ROFR.FR) to the list and did not remove any names.

European Weekly Summary

Posted on by Tristan d'Aboville

Key points:

The Stoxx 600 was moved back to a Confirmed Uptrend after breaking above its 21-
DMA. Of the 17 indices we cover in the region (including the Stoxx 600), 16 are now in
a Confirmed Uptrend.

We are positive on the general market as leadership remains strong, distribution stays
low, and indices continue to trend above support and advise to increase risk in
fundamentally sound companies that are breaking out from constructive
consolidation.

Actionable ideas on our Focus List: Boohoo(BOO.GB), Eurofins (EUF.FR), Lonza
(LONN.CH), Novo Nordisk (NON.DK), Cellnex (CLNX.ES), Euronext (ENX.FR), Halma
(HLMA.GB), and Scatec (SCAT.NO).

Leadership remains concentrated in Health Care: last week, we added Eurofins
(EUF.FR) to our European Focus List. The list now has 27 stocks and is overweighed
health care (5 stocks).

European Weekly Summary

Posted on by Tristan d'Aboville

Key points from this week’s report:

Please refer to the attached PDF for the full report.

  • The European market remains in a Confirmed Uptrend. The index consolidated last week above its rising 21-DMA, which is not surprising given how far and how fast the run off the lows has been. Volume has shrunk during this consolidation, and the number of distribution days remains low at an average of two. We remain positive and open to increase risk in quality leaders coming out of proper bases.
  • Leadership has re-emerged post the follow-through day on March 19 but remains concentrated in small buckets of the market such as Health Care and Technology. From our Focus List, Lonza ( LONN.CH ) and Cellnex ( CLNX.ES ) are actionable.
  • Last week, Boohoo Group ( BOO.GB ) was added to our Europe Focus List. The number of stocks on the list remains at a historical low but stable over the past eight weeks.
  • We added Barry Callebaut ( BARN.CH ) to our Conviction Laggard list and continue to hold Sodexo ( SDX.FR ), Bankinter ( BKT.ES ), and Pandora ( PND.DK ) in this list.

Freshpet

Posted on by Tristan d'Aboville

We recommend adding positions as the stock recently broke out of a 32-day cup-with-handle base. Its RS line is trending upward with strong technical ratings: RS Rating of 97 and improving Industry Group Rank. Institutional support is reflected by the increasing number of funds owning the name. Fundamental ratings are set to improve as the company will turn profitable this year and revenue continue to grow on average in the mid-twenties. The company is scheduled to report Q1 2020 earnings on May 4. We believe the print may provide a positive surprise as the company is experiencing a surge in demand associated with the COVID-19 crisis. In March, management announced that its Freshpet Kitchens in Bethlehem, Pennsylvania will continue to operate as the company is exempted from the state’s order to close all non-essential businesses. Over the long term, we believe the company’s growth path is likely to remain extraordinary as Freshpet has a real competitive advantage in a large and growing addressable market.

Global Retail

Posted on by Tristan d'Aboville

Key points from this report:

 

  • Our proprietary risk framework identifies retail stocks across the globe that are at greatest risk from insolvency. It incorporates both fundamental and O’Neil factors, and is overlaid with robust qualitative analysis. Annotated Datagraphs are included in the latter part of the report for the most exposed stocks.
  • The Retail sector has been badly affected by the COVID-19 outbreak. Government measures aimed at stemming the spread of the virus have led to temporary store closures, while a rise in unemployment has dampened discretionary spending. This toxic cocktail for retailers is amplified by the persistence of operating leverage; bankruptcies in the sector will ensue, in our view.
  • Our screen over-indexes in terms of North American stocks; more than 50% of the names are from this region. Beacon Roofing Supply (BECN) is the riskiest stock. Meanwhile, Asian stocks account for six of the top 10 riskiest names; Lotte Shopping (LTE.KR), a department store retailer, appears exposed. The riskiest name in Latin America, Ripley Corporation (RPY.CL), is also a department store retailer. This is a sub-segment under structural pressure across the globe. In Europe, travel retailers Dufry (DUFN.CH) and Autogrill (AGL.IT) are most at risk.
  • If you would like access to the underlying data and spreadsheet, please click HERE.

European Weekly Summary

Posted on by Tristan d'Aboville

Key points from this week’s report:

  • European markets have been in a Confirmed Uptrend since March 19’s follow-through day. The positive move last week led the index to break through the resistance at 32.26, which coincides with December 2018’s low, a very positive sign, in our view. We recommend gradually adding positions in names that are breaking out of a base or forming the right side of a proper base.
  • After leading over 26-weeks, technology is also showing improving four-week short term momentum. Focus List name ASML ( ASML.NL ) is actionable after breaking out of consolidation.
  • European Focus List update: we didn’t make any changes to our Focus List last week. Among the 24 names on the list, 16 are currently forming a base.
  • Watchlist: in this report, we are providing a list of stocks forming the right side of a base on improving technicals and above average fundamental characteristics

Hindustan Unilever

Posted on by Tristan d'Aboville

Key points:

 

  • We recommend building positions in Hindustan Unilever after the stock broke out of a stage-one six-week consolidation base on strong volume.
  • Technical characteristics have improved recently, reflecting increasing momentum as the company received board approval for the merger of GSK’s Consumer Healthcare division last week. Its RS line is at a new high, its RS Rating moved from 83 eight weeks ago to 96, and its A/D Rating has turned positive.
  • Fundamental metrics are above average: EPS Rating of 85 and SMR Rating of A. EPS growth is set to accelerate at a 19% CAGR in the next three years (versus 12% in the past three years) owing to the integration of GSK’s Consumer Healthcare division.
  • Hindustan’s margins have been consistently expanding over the past nine years. Combined with a healthy balance sheet and strong FCF generation, the stock offers one of the best defensive profiles among India equities, supporting its current 60x forward P/E valuation.

European Weekly Summary

Posted on by Tristan d'Aboville

Key points from this week’s report:

 

  • Although European markets are in a Confirmed Uptrend since March 19 ( FTD ), we continue to believe in a W-shaped recovery, implying a new downward leg.
  • With the market finding resistance to its declining 21-DMA and defensive sectors regaining momentum in recent trading days, we may be at the start of this downward trend where markets could retest their March 16 low.
  • We didn’t make any changes to our Focus List this week and continue to focus on defensive stocks such as Lonza ( LONN.CH ), INWIT ( INW.IT ), Solaria ( SEM.ES ), Galenica ( GALE.CH ), Cranswick ( CWK.GB ), Jeronimo Martins ( JMT.PT ), Swedish Match ( SWMA.SE ), and Coloplast ( COL.DK ).
  • In this report, we also provide a watchlist of stocks among defensive sectors (Staples, Food-Retail, Health Care) based on our quantitative screening. These names are holding well in this environment and likely to relatively outperform the general market, should the market retest the previous low.

European Weekly Summary

Posted on by Tristan d'Aboville

Key points:

Although the Stoxx 600 is in a Confirmed Uptrend since March 19 (follow-through
day), we continue to believe in a W-shape recovery, which implies a second downward
leg, retesting its March 16 low. We see the first key level of resistance at its 21-DMA,
followed by its 50-DMA.

Based on this scenario, we would recommend sticking to defensive quality names that
have held well during the market sell-off such as Givaudan (GIVN.CH), LVMH
(LVMH.FR), Swedish Match (SWMA.SE), Euronext (ENX.FR), Coloplast (COL.DK), and
INWIT (INW.IT).

The European Focus List is outperforming its benchmark by 10pp year-to-date. This
week, we didn’t add or remove any stock to/from our list.

Pandora (PND.DK) was added to our Conviction Laggards this week, joining Sodexo
(SDX.FFR), Glencore (GLEN.GB), and Bankinter (BKT.ES).

European Luxury Sector

Posted on by Tristan d'Aboville

Key points:

 

  • Kering ( KER.FR ) is the first large luxury company to provide indications about the impact of COVID-19 on its business. We model revenue and operating profit declines of 18% and 27%, respectively, in FY20.
  • We maintain a cautious view on the recent market rebound and, within the European luxury sector, we recommend holding the best defensive name: LVMH ( LVMH.FR ).
  • Although we are forecasting a low double-digit revenue decline in 2020 and a 24% decline in operating profit, LVMH’s long-term growth story is still appealing: 1) LVMH rates among the best European luxury players though our lens; 2) it offers one of the best defensive profiles among peers, thanks to its leadership position and brand recognition; and 3) the integration of Tiffany (TIF) adds an attractive long-term growth story.