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.

Long-Term Themes in the Consumer Staple Sector

Posted on by Tristan d'Aboville

Some highlights from this report:

Momentum in the Consumer Staple sector has been rising across the globe on the back of increasing trade tensions and concerns about Europe’s economic growth.

In the U.S, leadership has emerged recently, led by Food-Meat and Beverages groups. Performance has been driven by the sector’s defensive profile and improving earnings momentum, particularly among small- and mid-caps ( 12.2% EPS surprise in Q1 among the Stoxx 600 ). Overall, Q1 earning season has led to a 5.2% earnings upgrade revision for FY19 on average.

Top U.S. Focus List picks: FRPT, PG

Other actionable ideas in the U.S.: SAM, NOMD, GIS, KDP

U.S. laggards: USNA, FIZZ, PBH, HLF, BGS, BUD

European Staples display indisputable technical and fundamental leadership characteristics. The sector has been outperforming the general market over 52, 26, 13, and four weeks. Recent performance was also driven by Q1 earnings season, during which Staples had the best earnings growth profile.

We are particularly enthusiastic about the global flavor & fragrance market, which is growing by mid-single digits and expected to have a $36B TAM by 2022 due to growing demand for natural food flavors. Listed companies in this segment offer top defensive profile characteristics including stable margins and double-digit ROE.

Top European Focus List picks: Davide Campari ( CPR.IT ), Kerry Group ( KRZ.IE ), AAK ( AAK.SE )

Other actionable ideas in Europe: Christian Hansen ( CHR.DK ), Heineken ( HB.NL ), CCH ( CCH.GB )

European laggards: Ontex ( ONTE.BE ), Glanbia ( GL9.IE ), Imperial Tobacco ( IMB.GB )

In APAC, leadership has emerged, led by Chinese stocks. However, the picture is a bit mixed with recent momentum deteriorating among Indian and Japanese staples.

We continue to focus on long-term trends like hotpot cuisine, which is expected to have a +10% revenue CAGR through 2022, driven by rapid urbanization and rising international consumption of Chinese cuisine.

Top APAC Focus List picks: Yihai ( YIHA.HK ), Austnutria Dairy ( AUST.HK )

Other actionable ideas in APAC: Nh Foods ( FY@N.JP )

APAC laggards: Uni Charm ( UNRM.JP ), Pola Orbis ( POLA.JP )

European Weekly Summary

Posted on by Tristan d'Aboville

Key Points

This week, we downgraded a majority of markets in Europe (incl the Stoxx600), reflecting our cautious approach toward European equities, initiated two weeks ago. The U.S.-China trade war that’s come back into focus has recently increased our concern. We expect the market to consolidate in Q2 2019 and recommend sticking to leaders that are not too extended and trimming positions in extended names.

Historical precedents corroborate our view: equity markets in Europe are unlikely to continue rallying at the same pace as Q1. Investors should be aware that it is time to take some profit off the table.

The market is not cheap and thus Q2 earnings will be key in the second half of the year along with decreasing international trade tensions.

Rising momentum of defensive sectors such as Healthcare and Staples, is the first sign of rotation toward risk averse strategy. Most actionable ideas from our Focus List are concentrated in those sectors and include Carl Zeiss Meditec ( AFXX.DE ), Davide Campari ( CPR.IT ), Givaudan ( GIVN.CH ), and Kerry Group ( KRZ.IE ).

European Focus List Updates. Best actions of the week include actionable ideas: IMCD ( IMCD.NL ) and Davide Campari ( CPR.IT ). New Addition of the Week: Kerry Group ( KRZ.IE ).

European Weekly Summary

Posted on by Tristan d'Aboville

I – Market is Currently Extended

The iShares Dj Stoxx 600 is in a Confirmed Uptrend with only one distribution day. Although the index continues to trade constructively along its rising 50- and 21-DMA, we can’t ignore the market’s extended profile:

As of Friday, more than 70% of European stocks are now trading above their 50- and 200-DMA outside of a base.

Leadership is extended, which is reflected by a majority of stocks on our Focus List trading above buy points from their last consolidation. Sixty-nine percent of our Focus List has cleared consolidation, trading 10% above pivot, on average.

Although earnings season ( 54% of Stoxx 600 companies reported better-than-expected earnings ) and recent economic news have brought some relief to investors, we believe that the market is likely to consolidate at some point. We recommend avoiding chasing extended names and building positions in select ideas that are just breaking out.

European Weekly Summary

Posted on by Tristan d'Aboville

Key points from this week’s report:

After hitting a new high for the year last week, the IShares DJ Stoxx 600 ( EXSA.DE ) traded sideways this week. Pressure increased after the U.S. threatened tariffs on goods from the EU and the IMF indicated that global growth is slowing. Momentum among Staples stocks has been rising the past five days along with Energy and Transportation. Momentum in Basic Material also continued, and the sector is one of the best performers over four weeks.

The index remains in a Confirmed Uptrend with four distribution days. The 21-DMA (1% below the current level) remains its key support and we look for the next level of resistance at 39.76.

Actionable ideas this week include Imcd ( IMCD.NL – Focus List ) in Basic Material, Nexans ( NXS.FR ) in Capital Equipment, Getinge ( GIND.SE ) in Health Care, and CAF( CAF.ES ) in Transportation.

From our Focus List, we recommend adding to positions in LVMH ( LVMH.FR ), Sartorius ( SRT3X.DE ), IMCD Group ( IMCD.NL ), Dassault Systemes ( DSY.FR ), and Puma( PUMX.DE ).

European Weekly Summary

Posted on by Tristan d'Aboville

Europe: Leadership Emerging in Cap Equipment and Basic Material

The Ishares DJ Stoxx 600 ( EXSA.DE ) has been back in a Confirmed Uptrend since March 26, when it crossed above its 21-DMA. Action remains constructive overall, with the number of distribution days dropping to three. Since the follow-through day on October 4, the 21-DMA remains the key support level of this uptrend. Next resistance is at 38.99 ( high of July 2018 ), 10% above the current level.  

All European market indices, with the exception of Finland and Norway, followed a similar path and are now in a Confirmed Uptrend. The average number of distribution days in European markets dropped to 3.2 from greater than 4 two weeks ago. 

Despite the weak macroeconomic environment, we recommend adding to positions in names that are breaking out of constructive patterns, while avoiding chasing stocks that are too extended.

Leadership emerged this week in Capital Equipment ( Huhtamaki, Safran, Interroll, Jenoptik, Schneider Electric – see page 10) and Basic Material (Air Liquide, Anglo American, Rio Tinto – see page 9 ).

European Markets Overview

Posted on by Tristan d'Aboville

Year-to-date, the strong market rally has been exceptional in many aspects. Not only because of its magnitude (the Stoxx 600’s bottom-to-peak spread is 17%) but also because of the near-unison move of all asset classes.

At the end of January, we expected the market rally to continue based on historical precedents. Was it too fast, too high? The recent consolidation is not surprising after the strong year-to-date performance of European equities.

We do not try to predict the future. However, historical precedents and behavioral market studies suggest this uptrend may not be over. Macro uncertainties are the biggest risk for this trend but the market has already priced them in on some levels.

Valuation multiples of European equities are not too extended but are hardly cheap either. Dividend yield is attractive and – in our view – will be a key focus for investors in 2019.

Through the O’Neil lens, a majority of European indices are in an Uptrend Under Pressure. Such classification suggests we remain invested in the market but selective in adding new names. Focus on strong fundamentals and yields, and avoid chasing extended names.

In terms of sectors, we recommend overweighting Technology, Capital Equipment, and part of Cyclical. We also remain positive on Staples and Health Care.

Inside the EU’s Precarious Uptrend – Webinar, March 28, 2019

Posted on by Tristan d'Aboville

European markets have recently made tentative gains but are racked with uncertainty due to Brexit chaos, rising volatility, and fears of a looming global economic slowdown. Executive Director, Research Analyst Tristan d’Aboville reveals which European equities deserve your attention in this week’s webinar, which will be available here starting at 11am ET on Thursday, March 28.

Weekly European Sector Review

Posted on by Tristan d'Aboville

Key points:

  • Leadership continues to emerge in Europe, indicating a persistent favorable trend. Leading sectors this week include Financials and Technology. The iShares DJ Stoxx 600 ( EXSA.DE ) remains in a Confirmed Uptrend with five distribution days.
  • Actionable ideas from our Focus List in these two sectors include Adyen ( ADYE.NL ), Dassault Systemes ( DSY.FR ), and Nemetschek ( NEMX.DE ).
  • We added ASML ( ASML.NL ) back to the Focus List (Long Ideas) this week. Credit Agricole
    ( CRDR.FR ) was added to our European list of Shorts.

European Weekly Summary

Posted on by Tristan d'Aboville

Our bottom-up approach suggests increasing exposure to European Equities

  • Despite a rising number of distribution days across European markets, the iShares DJ STOXX 600 (

    )

    ) continued to trade constructively year-to-date. As mentioned earlier this month (see our weekly European Summary from February 4), historical precedents suggest in the short term, the index will likely maintain its positive momentum from January.
    The index is now sitting at its 200-DMA, historically a key level of resistance. To remain constructive on European markets, we want to see the index stay above this level, along with an increasing number of stocks breaking out of consolidation.

  • Our cautiously optimistic market view remains as we fear this momentum could break rapidly over the medium term if the global slowdown worsened on rising trade war tensions. So far, our bottom-up approach continues to suggest increasing exposure to European markets: our European Focus List has now doubled from its December low.