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 from this week’s report:

 

 

  • The iShares DJ Stoxx 600 is still in a Rally Attempt.
  • Rotation continues to blur visibility. Many argue that the rotation toward value/beaten sectors is not sustainable over the long term, particularly European banks following the ECB’s decisions.
  • However, despite the recent rebound of banks and automotive, the trailing twelve-month oscillation of these sectors versus the benchmark is still at a bottom. Value may continue to lead the market in the second half the year.
  • Get ready for this rotation. In this report we provide a list of stocks that are currently forming the right side of a base on improving technicals, including money inflow. Buy on a proper breakout.

 

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.

 

 

 

I – Momentum Continued to Rise on Easing Political and Trade Tensions

  • Positive momentum on easing political (Italy and the U.K.) and trade tensions is leading European markets to a third consecutive weekly gain led by Cyclicals and Financials.
  • Along with the iShares DJ Stoxx 600 (Rally Attempt but the index regained its 50-DMA this week), strong action has occurred at the country level. Finland and Spain were moved to a Confirmed Uptrend after recording a follow-through day.
  • Among the 18 European indices we cover, 10 are now in a Confirmed Uptrend including Italy, Norway, and Sweden. See details on page 5.

European Weekly Summary

Posted on by Tristan d'Aboville

Key points from this week’s report:

Italy, Sweden, Norway, Belgium Moved to Confirmed Uptrend

The Stoxx 600 has been in a Rally Attempt since August 21, as it has remained above August 15 lows. Despite the positive action this week (Stoxx 600 up 2.3%), we are still looking for a follow-through day before we become more bullish on the market. As a reminder, a follow-through day is a day up at least 1.5% with price and volume action that brings conviction that the market is starting to rally.

At the country level, we are seeing a similar pattern, with almost half of European markets still in a Rally Attempt. That said, with trade war tensions and some local political uncertainties easing (i.e. Italy), three markets were shifted to a Confirmed Uptrend after a follow-through day this week: Italy, Sweden, Belgium and Norway.

Of the 18 indices covered in this report, seven are now in a Confirmed Uptrend (Italy, Sweden, Norway, Austria, Ireland, Belgium and Luxembourg), versus three last week and none two weeks ago. Eight are in a Rally Attempt and the remaining are Under Pressure (Denmark, France, Switzerland, and Greece).

European Weekly Summary

Posted on by Tristan d'Aboville

Key points from this week’s report:

I – Little confidence in short-term rebound

A majority of indices in Europe were moved to a Rally Attempt this week after holding their August 15 low. The market’s short-term rebound (Stoxx 600 up 2.5% week-to-week) was led by recently lagging sectors such as Cyclical, Capital Equipment, and Retail.

It is way too early to be aggressive on the market. Investors should look for a follow-through day to occur before initiating new positions in this volatile environment.

Our cautious stance is reinforced by the lack of volume accompanying this short-term action. It gave us no confidence that markets have digested the negative news flow surrounding European equities.

On top of the poor macro and political environments ( Italy, Brexit, trade war… ), Q2 earnings brought little hope. According to Refinitiv, only 49% of Stoxx 600 companies that have reported so far beat estimates; Q2 earnings are now expected to decrease 2.6% y/y on average. This makes Q2 one of the worst earnings seasons in the past three years.

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.

 

 

Europe in a Downtrend

  • The Stoxx 600 has been in a Downtrend since August 9 after the index breached key support. Weakness has accelerated this week and spread across the region: 13 out of the 18 markets we cover in Europe are now in a Downtrend. The remaining are in an Uptrend Under Pressure.Selling pressure in leadership is largely reflected by the scarcity of actionable ideas across sectors.
  • This week, we removed Dunelm ( DNLM.GB ) and Telecom Plus ( TEP.GB ) from our European Focus List.
  • Relative leaders are emerging in defensive sectors, namely Staples and Health Care.
    • On our Focus List, the best action remains concentrated in these two sectors. In Staples, Greig Seafood ( GSF.NO ), Mowi ( MHG.NO ), Diageo ( DGE.GB ), and AAK ( AAK.SE ) are still trading constructively, reflected by their rising Relative Strength lines. In Healthcare, Carl Zeiss Meditech ( AFXX.DE ), Coloplast ( COL.DK ), and Lonza ( LONN.CH ) have similar characteristics. Those stocks should be overweighted in your portfolio. 
    • Outside of the Focus List, Staples stocks with Relative Strength lines at new highs include Orkla (ORK.NO), Nestle ( NESN.CH ), Beiersdorf ( BEIX.DE ), and Danone ( BSN.FR ). In Health Care, focus on Genmab ( GEN.DK ).

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

 

I – Increasing Pressure Leads to Numerous Market Downgrades  

  • Since we moved the Stoxx 600 ( EXSA.DE ) to an Uptrend Under Pressure on July 19, weakness has intensified. Several markets were downgraded this week (see page 4) after their key indices breached prior lows or undercut their main moving averages (50- and 200-DMA) with a rising number of distribution days. We now have a majority of markets in Europe in a Downtrend (13 out of 18) and the remaining in an Uptrend Under Pressure.
  • We do not recommend aggressively building positions in new names until the market resumes its uptrend. For a majority of markets, we would need to see a follow-though day to become more bullish.
  • The number of stocks breaking out of consolidation remains very low, and the number of stocks showing technical weakness has significantly increased over the past five days, particularly in the Financial, Capital Equipment, and Cyclical sectors (see sector score cards).
  • Our sector rotation tool suggests shifting portfolios toward defensive sectors. Momentum in Transportation, Staple, Technology, and Health Care continues to improve this week, while short-term momentum in Capital Equipment, Financial, and Energy has deteriorated further.

II – The European Focus List  

  • The European Focus List has now 47 names after we removed Seb ( SEB.FR ) this week when shares broke below key 50- and 200-DMA support. Despite strong fundamentals (SMR Rating of A and EPS Rank of 91), the stock’s technicals have deteriorated over the past three weeks. Its RS Rating has dropped to 40 from 87 and its A/D Rating has dropped from B- to E over the past two weeks.
  • The EFL continues to outperform its benchmark and is now up almost 20% year-to-date.
  • Actionable ideas include: Neoen ( NEOP.FR ), Lonza Group ( LONN.CH ), Cellnex Telecom ( CLNX.ES ), Elekta (ELKB.SE), ASML (ASML.NL), Edenred (EDEN.FR), and Mowi (MHG.NO).

European Weekly Summary

Posted on by Tristan d'Aboville

Key points from this week’s report:

I – Mounting Pressure on European Equities

The Stoxx 600 is in an Uptrend Under Pressure with six distribution days. The clustering of distribution days has been the main concern since the index was moved to an Uptrend Under Pressure on July 18. The index breached its 21-DMA on heavy volume on July 30. The 50-DMA is the next key support. Should the pullback persist, the next support would be June’s low near the 200-DMA. Among the 18 countries, we cover, almost half are now under pressure. The average number of distribution days has increased to 4.67, which is four times higher than four weeks ago.

As weakness in the market has increased, short-term momentum of defensive sectors, namely Staples, Health Care, and Technology, has improved over the past four weeks. On the other hand, Capital Goods’ short-term momentum has continued to deteriorate.

We recommend a cautious approach until we see support come back into the major averages and recommend being very selective in adding new positions. Avoid extended names and focus on stocks breaking out of early-stage bases.

 

II – The European Focus List

Our European Focus List continues to be a source of outperformance. Year-to-date, the list is up 25%, outperforming its benchmark iShares DJ Stoxx 600 by almost 1,000bps. Most names remain extended and actionable ideas are scarce. Actionable ideas include: 

Aug 01, 2019 – Finding actionable ideas in Europe

Posted on by Tristan d'Aboville

Although the Stoxx 600 is trading near year highs, the recent clustering of distribution days is a concern. Q2 earnings season so far has been a mixed bag, with almost half of reporting companies missing consensus and FY19 earnings expectations being slashed. Going forward, European equities’ performance could be driven more by external factors, including ongoing trade tensions and Brexit, so in this webinar, Executive Director, Research Analyst Tristan d’Aboville employs O’Neil’s sector rotation tools to uncover the best actionable ideas in Europe.

Best Actionable Ideas in Europe

Posted on by Tristan d'Aboville

Although the Stoxx 600 is trading near year highs, the recent clustering of distribution days is a concern. Q2 earnings season so far has been a mixed bag, with almost half of reporting companies missing consensus and FY19 earnings expectations being slashed. Going forward, European equities’ performance could be driven more by external factors, including ongoing trade tensions and Brexit.

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.

I – Stoxx 600: Looking for a decrease in the number of distribution days

 

  • The iShares DJ Stoxx 600 ( EXSA.DE ) is still in an Uptrend Under Pressure with six distribution days, but two are set to expire in the next four trading sessions. The index is still trading constructively above its 21-DMA, but the clustering of distribution days in the past three weeks across markets was concerning.
  • To turn more bullish and move the index back to a Confirmed Uptrend, we will look for it to breach resistance at 39.15 with no further addition of distribution days.
  • Austria was moved back to a Confirmed Uptrend this week after the index retook its 200-DMA and claimed new highs since the first week of June. Norway had a follow-through day July 23 and was moved to a Confirmed Uptrend. Of the 18 European markets covered in this report, 12 are in a Confirmed Uptrend, including France, Germany, and the U.K.
  • The Staple and Cyclical sectors continue to lead over 26 weeks. Capital Equipment’s short-term momentum (over four weeks) continues to deteriorate while short-term momentum improved in Transportation, Health Care, Staple, Financial, and Technology.