Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

Major global indexes (MSCI ACWI, ACWI ex-US, EM, and EAFE) continue to trend higher and are devoid of bearish inflections. Additionally, the US dollar (DXY) is likely headed lower, something we view as a positive risk-on signal for global equities. As a result, we remain bullish and we continue to recommend adding exposure on pullbacks.

Major global indexes (MSCI ACWI, ACWI ex-US, EM, and EAFE) continue to trend higher and are devoid of bearish inflections. Additionally, the US dollar (DXY) is likely headed lower, something we view as a positive risk-on signal for global equities. As a result, we remain bullish and we continue to recommend adding exposure on pullbacks.

Japan Breaking Out; EM Remains Leadership

Japan/Asia Long-Short, LightStream Research

Mio Kato

Japan/Asia Long-Short

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

Event-Driven

Harmonic Drive reported middling results as revenue got back on track, increasing 11.1% QoQ and the company revised guidance upwards from a -¥800 operating loss to a ¥1bn operating profit (revenue guidance was raised from ¥35bn to ¥37bn). Valuations point to overextended expectations for the stock, however, and with the news of Nabtesco selling its stake it will be interesting to watch the market’s reaction to relatively benign results. This is especially so given the 9% drop in Daifuku’s share price today despite results which, while slightly below consensus, were also middling.

Harmonic Drive reported middling results as revenue got back on track, increasing 11.1% QoQ and the company revised guidance upwards from a -¥800 operating loss to a ¥1bn operating profit (revenue guidance was raised from ¥35bn to ¥37bn). Valuations point to overextended expectations for the stock, however, and with the news of Nabtesco selling its stake it will be interesting to watch the market’s reaction to relatively benign results. This is especially so given the 9% drop in Daifuku’s share price today despite results which, while slightly below consensus, were also middling.

Harmonic Drive – Recovery Coming Through but Will This Be Another Daifuku?

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Yesterday, reducing gear maker <a href="https://www.smartkarma.com/entities/nabtesco-corp" target="_blank" data-smartkarma-citation="entities:13176:1" rel="noopener">Nabtesco Corp (6268 JP)</a> announced that it would dissolve its cooperative relationship with the specialist maker of the smallest reducing gears <a href="https://www.smartkarma.com/entities/harmonic-drive-systems-inc" target="_blank" data-smartkarma-citation="entities:10238:1" rel="noopener">Harmonic Drive Systems (6324 JP)</a> which it had formed in 2008. This means they will dissolve their capital relationship too. Nabtesco has heretofore owned 19.03% since well over a decade ago, and also owns share options which were purchased in 2018 when harmonic Drive last issued shares. There is a <a href="https://www.nabtesco.com/pdf/39b194f5f075a6fc8bf15eb51036f2a6.pdf" target="_blank" rel="noopener">presentation</a>.This ends the "hopes" of many that eventually Nabtesco would buy out Harmonic Drive Systems.Nabtesco sold half their stake in the company to Nomura, will keep the other half to sell at a later date, will sell the options back to HDS, and due to the fact that HDS will no longer be an equity-method affiliate, Nabtesco will report a significant gain in Q1, currently estimated at ¥130.6bn, and approximately ¥100bn after tax, if the shares are sold at ¥8,000/share. Nabtesco will also sell its 49% ownership in a JV in the US with HDS' US subsidiary. There are some details worth looking at here. More below the fold.

Yesterday, reducing gear maker Nabtesco Corp (6268 JP) announced that it would dissolve its cooperative relationship with the specialist maker of the smallest reducing gears Harmonic Drive Systems (6324 JP) which it had formed in 2008. This means they will dissolve their capital relationship too. Nabtesco has heretofore owned 19.03% since well over a decade ago, and also owns share options which were purchased in 2018 when harmonic Drive last issued shares. There is a presentation.This ends the "hopes" of many that eventually Nabtesco would buy out Harmonic Drive Systems.Nabtesco sold half their stake in the company to Nomura, will keep the other half to sell at a later date, will sell the options back to HDS, and due to the fact that HDS will no longer be an equity-method affiliate, Nabtesco will report a significant gain in Q1, currently estimated at ¥130.6bn, and approximately ¥100bn after tax, if the shares are sold at ¥8,000/share. Nabtesco will also sell its 49% ownership in a JV in the US with HDS' US subsidiary. There are some details worth looking at here. More below the fold.

End of An Era: Nabtesco and Harmonic Drive Dissolve Their Alliance - Event Lost, Pressure On

While a more cautious outlook is appropriate, as long as $77 holds (the September lows) we are constructive and would be buyers on a pullback. A move below $77 would start to get very concerning, and would leave $75 and the 200-day MA as last-ditch support. Considering the recent pullback we want to be sticking with areas that have continued to outperform in spite of recent broad market weakness. For that we look to the following leadership Sectors: Technology, Consumer Discretionary, Manufacturing, Materials, and Transportation

While a more cautious outlook is appropriate, as long as $77 holds (the September lows) we are constructive and would be buyers on a pullback. A move below $77 would start to get very concerning, and would leave $75 and the 200-day MA as last-ditch support. Considering the recent pullback we want to be sticking with areas that have continued to outperform in spite of recent broad market weakness. For that we look to the following leadership Sectors: Technology, Consumer Discretionary, Manufacturing, Materials, and Transportation

Key $70 support on the MSCI ACWI (ACWI-US) held strong last week, and ACWI-US is now inflecting topside its bullish falling wedge pattern. This bullish price action combined with market dynamics which remain mostly healthy lead us to believe the lows of this recent correction are in. Consumer Discretionary and Manufacturing Sectors continue to be two attractive Sectors that are outperforming globally; we highlight numerous actionable names in today's report.

Key $70 support on the MSCI ACWI (ACWI-US) held strong last week, and ACWI-US is now inflecting topside its bullish falling wedge pattern. This bullish price action combined with market dynamics which remain mostly healthy lead us to believe the lows of this recent correction are in. Consumer Discretionary and Manufacturing Sectors continue to be two attractive Sectors that are outperforming globally; we highlight numerous actionable names in today's report.

Japan

Nabtesco Corporation manufactures Aircraft and Hydraulic products, Precision equipment, and transportation equipment. The Company's products include landing gear system for aircrafts, railroad vehicle brake system, and precision reduction gears for industrial robots.

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Nabtesco (6268 JP)

Japan Breaking Out; EM Remains Leadership

Major global indexes continue to trend higher and are devoid of bearish inflections. As a result, we remain bullish and we continue to recommend...

Vermilion Research

Harmonic Drive – Recovery Coming Through but Will This Be Another Daifuku?

Harmonic Drive posted reasonable results and revised up guidance to more reasonable levels, but the real driver for the stock could be the sale of...

Mio Kato

End of An Era: Nabtesco and Harmonic Drive Dissolve Their Alliance - Event Lost, Pressure On

Harmonic Drive and Nabtesco have decided to dissolve their partnership and Nabtesco will sell the 19% it owns in the market over time. This means...

Travis Lundy

Cautiously Optimistic on Global Equities

We are constructive on global equities and would be buyers on a pullback. A move below $77 would start to get very concerning, and would leave $75...

Vermilion Research

Global Equity Strategy:

Key $70 support on the MSCI ACWI (ACWI-US) held strong last week, and ACWI-US is now inflecting topside its bullish falling wedge pattern. This...

Vermilion Research

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