Tactical Europe Portfolio :
performance (alpha) : +3.6% versus Stoxx600NR
Megatrend Europe Portfolio :
performance (alpha) : -4.5% versus Stoxx600NR
Core US Portfolio :
performance (alpha) : -2.9% versus S&P500
Trading signal split (stocks only)
- Enter Long : 57.0% of stocks with an « enter long » signal in process
- Enter short : 0.5% of stocks with an « enter short » signal in process
- No signal: 42.4% of stocks of which last signal is an « Exit Long » or « Exit Short »
US: Exposure to US Equity markets 100% / Cash 0% (unchanged)
Europe: Exposure to European Equity markets 100% / Cash 0% (unchanged)
US indices closed mixed in yesterday trading session, with S&P500 falling despite stellar Big Banks results and the successfull Coinbase IPO as profit taking took place on the Technology sector with the Nasdaq down by 1% led by GAFAMs, Internet and Semiconductors sectors. WTI prices rose by c. 5%, the largest gain in a month, after weekly US data showed a surprisingly large drop in crude stockpiles likely due to weaker production from the Permian shale basin that once flooded the market. Therefore it was definitely a cyclical/Financial led trading session in the US. In Europe, there was a marked rebound in re-opening stocks that looks like the last "value" segment, as markets reassessed the J&J news, that could eventually have a minor impact on the vaccine rolling out as Pfizer is expected to increase deliveries dramatically, and as the J&J and Astra Zeneca vaccines should still be injected to people above 55, except in Denmark. The weak spot were defensive sectors in Europe, as the cyclical/value bounced back led by Basic Resources , Oil & Gas and Banks led by a weaker USD after inflation data calms tapering fears. There is currently no more clear driver in the markets, with almost all sectors and stocks in upward trend and alternance between themes on a daily basis. US 10 year rates remain stable near the 1.65% level, while the VIX remain at around 17 close to its lowest level since the beginning of the pandemic. The reopening stocks looks like the possible next trading opportunity to monitor, as it is still far from peak and showing relative strenght despite adverse conditions.
Our Market Pressure Index now stands at 35/100 (-1), still into the "bullish" zone.
The market participation/density is positive. There is 81% (=) of major bullish configurations for the Stoxx600 and 89% (=) for the S&P500, while major bearish trend configurations are 4% (=) for the Stoxx600 and 2% (=) for the S&P500. Therefore the density analysis reflects a positive momentum in Europe and in the US (spread now at +77 in Europe and +87 in the US). During risk-on/bullish market phases, the spread is expected to be > 30.
Buy Signal on Advance Auto Parts (AAP-US)
Advance Auto Parts is a $ 12.6 Bn market cap and an automotive aftermarket parts provider in North America, serving both professional installers (Professional) and do-it-yourself (DIY) customers, as well as independently owned operators. The Company's stores and branches offer a selection of brand name, original equipment manufacturer (OEM) and private label automotive replacement parts, accessories, batteries and maintenance items for domestic and imported cars, vans, sport utility vehicles and light and heavy duty trucks. It operates approximately 4,806 total stores and 170 branches primarily under the trade names: Advance Auto Parts, Autopart International, Carquest and Worldpac. The Company offers products under categories, including parts & batteries, accessories & chemicals and engine maintenance.
Advance has been working to implement a number of long-term initiatives including a new management system for its four largest distribution centers, sharper pricing practices, and rising conversion of loyalty members to higher spend tiers. Advance’s operating margin in 2020 was 8.2% for a $10.2 bn revenue, but is expected to grow its operating profitability to 12% mid term given the rollout of the new initiatives. Management indicates it does not plan significant store openings until sales improve and the turnaround is further along, which shows their seriousness in developing their business model before expanding.
The biggest threat to AAP seems materialized by the online competition of Amazon and CarParts.com, a totally online US Auto Parts Network that is building out its distribution centers and is still not profitable, but could be serious competition down the road. Advance’s real advantage over online retailers is the services it provides, as it not only sell parts but will install light bulbs, batteries, and wipers.
Short term catalyst : Focus on expanding margins, online competition.
This signal looks consistent with the Major Bullish Trend in the US retail sector.