Quality-first, Business-perspective Strategy, Urbem (HK) Limited

Steven Chen

Quality-first, Business-perspective Strategy

Equity Bottom-Up

<ul>
<li>Fujian-based Dali Foods operates multiple brands in the categories of food and beverage;</li>
<li>Since its foundation, the company has pursued a simple "copycat" strategy combined with an emphasis on lower-tier regions;</li>
<li>Despite a persistently high return on capital, we do not see a moat that is wide enough and difficult to cross in this rapidly-evolving and fiercely-competitive consumer goods market in China.</li>
</ul>


Fujian-based Dali Foods operates multiple brands in the categories of food and beverage;
Since its foundation, the company has pursued a simple "copycat" strategy combined with an emphasis on lower-tier regions;
Despite a persistently high return on capital, we do not see a moat that is wide enough and difficult to cross in this rapidly-evolving and fiercely-competitive consumer goods market in China.


Dali Foods: Low-Price Copycat With A Persistent High-Return Character But A Too Narrow Moat

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Event-Driven

A short while ago, S&amp;P Dow Jones Indices <a href="https://www.spglobal.com/spdji/en/documents/indexnews/announcements/20201116-1258362/1258362_tdec215addconsult.pdf" target="_blank" rel="noopener">announced</a> the inclusion of <a href="https://www.smartkarma.com/entities/tesla-motors-inc" target="_blank" data-smartkarma-citation="entities:20279:1" rel="noopener">Tesla Motors (TSLA US)</a> in the <a href="https://www.smartkarma.com/entities/s-p-500" target="_blank" data-smartkarma-citation="entities:22886:1" rel="noopener">S&amp;P 500 (SPX INDEX)</a> effective after the close of trading on 18 December. The deletion will be announced later.S&amp;P DJI have also announced they will be conducting a <a href="https://www.spglobal.com/spdji/en/governance/consultations/sp500consultationonimplementationoftslaaddition11-16-20.pdf" target="_blank" rel="noopener">market consultation</a> on whether <a href="https://www.smartkarma.com/entities/tesla-motors-inc" target="_blank" data-smartkarma-citation="entities:20279:1" rel="noopener">Tesla Motors (TSLA US)</a> should be added to the S&amp;P500 all at once or in two tranches to reduce the impact of the funding trade.From the numbers, the market should be able to absorb the buying on <a href="https://www.smartkarma.com/entities/tesla-motors-inc" target="_blank" data-smartkarma-citation="entities:20279:1" rel="noopener">Tesla Motors (TSLA US)</a> and the selling on the other index constituents pretty easily. However, with Christmas just a week away from the implementation date and possibly lower liquidity, market participants may have different views and the trade could be split into two tranches.

A short while ago, S&amp;P Dow Jones Indices announced the inclusion of Tesla Motors (TSLA US) in the S&amp;P 500 (SPX INDEX) effective after the close of trading on 18 December. The deletion will be announced later.S&amp;P DJI have also announced they will be conducting a market consultation on whether Tesla Motors (TSLA US) should be added to the S&amp;P500 all at once or in two tranches to reduce the impact of the funding trade.From the numbers, the market should be able to absorb the buying on Tesla Motors (TSLA US) and the selling on the other index constituents pretty easily. However, with Christmas just a week away from the implementation date and possibly lower liquidity, market participants may have different views and the trade could be split into two tranches.

Tesla: S&P500 Inclusion (Finally) Secured

Thematic (Sector/Industry)

<ul>
<li>Record-breaking 2020 Singles-day Shopping Festival may produce some insights regarding brands winning Chinese consumers;</li>
<li>But most winning brands cannot derive an investable business in China, given the prevalent lack of persistently high ROIC.</li>
<li>We hand-pick four companies that are investable from TMall's Singles-day top brand list.</li>
</ul>


Record-breaking 2020 Singles-day Shopping Festival may produce some insights regarding brands winning Chinese consumers;
But most winning brands cannot derive an investable business in China, given the prevalent lack of persistently high ROIC.
We hand-pick four companies that are investable from TMall's Singles-day top brand list.


Quick Picks: Top Investable Brands From The 2020 Singles-Day Shopping Festival

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

Nasdaq-100 Stock Index / Technical Analysis

In today’s report we outline  our belief that the combination of extreme oversold conditions and several key sectors/industries holding above major long-term support lead us to believe an important bottom has been established. We also highlight attractive Groups and stocks within Staples, Financials, and Health Care: Large- &amp; Small-Cap Soft Drinks &amp; Bottlers, Electronic Exchanges/Markets, and Large- and Mid-Cap Biotech.

In today’s report we outline  our belief that the combination of extreme oversold conditions and several key sectors/industries holding above major long-term support lead us to believe an important bottom has been established. We also highlight attractive Groups and stocks within Staples, Financials, and Health Care: Large- &amp; Small-Cap Soft Drinks &amp; Bottlers, Electronic Exchanges/Markets, and Large- and Mid-Cap Biotech.

A Bottom Has Been Established; Possible Retest?

We remain concerned about the prospect for additional weakness for the broad market due to deterioration in several metrics that we often turn to to get a pulse on the market. At the same time, several cyclical areas of the market have bounced off of logical support while RS has been unable to break out to new highs for defensive Sectors. Absent bearish price inflections in the cyclicals and new RS highs for defensive areas of the market, equities are likely to remain in a state of purgatory.  In today’s report we highlight attractive Groups and stocks within Consumer Staples, Health Care, and Utilities.

We remain concerned about the prospect for additional weakness for the broad market due to deterioration in several metrics that we often turn to to get a pulse on the market. At the same time, several cyclical areas of the market have bounced off of logical support while RS has been unable to break out to new highs for defensive Sectors. Absent bearish price inflections in the cyclicals and new RS highs for defensive areas of the market, equities are likely to remain in a state of purgatory.  In today’s report we highlight attractive Groups and stocks within Consumer Staples, Health Care, and Utilities.

U.S. Equity Strategy: Market Still Susceptible

United States

PepsiCo, Inc. operates worldwide beverage, snack and food businesses. The Company manufactures or uses contract manufacturers, markets and sells a variety of grain-based snacks, carbonated and non-carbonated beverages and foods in countries throughout the world.

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Pepsico Inc (PEP US)

Dali Foods: Low-Price Copycat With A Persistent High-Return Character But A Too Narrow Moat

We appreciate the differentiated strategy and the persistently high return on capital, but the moat appears too narrow for this rapidly-evolving...

Steven Chen

Tesla: S&P500 Inclusion (Finally) Secured

Tesla has been included in the S&P500 after 5 consecutive quarters of profitability. The passive buying on Tesla will be around US$54bn and the...

Brian Freitas

Quick Picks: Top Investable Brands From The 2020 Singles-Day Shopping Festival

Most winning brands cannot lead to an investable business in China, but here are our four hand-picked rare species that are investable from TMall's...

Steven Chen

A Bottom Has Been Established; Possible Retest?

In today’s report we outline our belief that the combination of extreme oversold conditions and several key sectors/industries holding above major...

Vermilion Research

U.S. Equity Strategy: Market Still Susceptible

We remain concerned about the prospect for additional weakness for the broad market due to deterioration in several metrics that we often turn to...

Vermilion Research

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