COMMENTARY
Along with global weakness, short‐term momentum among Cyclicals has been slightly deteriorating, although the sector remains a long‐term
outperformer.
Weakness has been mainly driven by the Leisure Services group that includes casino and hotel and cruise operators. The number of stocks hitting
our Vulnerable List has been increasing significantly and include names like Intercontinental Group ( IHG.GB ), Carnival ( CCL ) and former leader
Multiplus ( MTP.BR ). See complete list on page 11, 12, and 13.
o We continue to play the Macau trend through our Focus List names Sands China ( SNDC.HK ) and Galaxy Entertainment ( PIPE.HK ). The
latter is part of the Top‐Rated names within the Leisure Services group (see page 10) and shares are trading constructively along their 10‐
WMA after breaking out of a 69‐day cup on March 12.
o Tosho ( T@SH.JP, Focus List) is actionable after breaking out of a seven‐week flat base on March 29 (see full actionable list on page 5). The
stock’s RS line is at all‐time highs. This Japanese operator of sports clubs, hotels, and rental apartments continues to increase the number of
assets that it operates. FY 2018 (year ending March 2018) will be the final year of the Company’s three‐year “GOGO” expansion plan and its
fastest year of expansion. See Datagraph on page 6.
Surprisingly, Apparel Manufacturers and Luxury stocks continue to be very resilient in this environment. This is largely reflected by the median RS
Rating of the group remaining high at 69, the best median rating amongst Cyclicals (See page 8).
o Along with Kering ( KER.FR ), we continue to hold Top Rated Moncler ( MONC.IT ) on our Focus List. However, shares are 29% extended
from the pivot, but Moncler’s RS line is hitting an all‐time high.
The Leisure Product group continues to gain momentum, driven by major themes such as “healthy living.” We recommend paying attention to
suppliers of equipment and services for the fitness and wellness industry.
o Technogym ( TGYM.IT, Focus List), Europe’s largest supplier of fitness equipment and Top‐Rated name among the Global Leisure Product
group, is actionable after breaking out of a 10‐week consolidation base with a rising RS line. The Company continues to grow by launching
new products and expanding its cloud‐based offering, the “MyWellness” platform. Its EBITDA margins have expanded from 9% to 18% in
the past four years, and it expects EBITDA margins to reach 19‐20% by 2020, driven by favorable pricing, cost optimization, and operating
leverage. See Datagraph on page 7.
o In the U.S., Planet Fitness ( PLNT ) is finding good support at its 10‐WMA on a rising RS line, coupled with strong earnings momentum. We
recommend adding to positions at this level.
