Research from Superfluous Value, Superfluous Value

Superfluous Value

Research from Superfluous Value

Stock selection has rarely been as important as it is today. After a roaring decade for US markets and with signs of mania everywhere, the S&P 500 as over-priced as it has ever been.

But, there is better way. Superfluous Value is a contrarian, deep-dive into the markets forgotten by the 60/40 instos and indexing, momentum chasers. Where the hot money has long moved on, it leaves behind investments offering great safety and prospective returns.

I believe the 2020s will look diametrically opposite to the recent past, with Emerging Markets, the UK, Japan and commodities set to rip and I intend to be holding the best opportunities available as they do.

Please feel free to come along on the journey.

Contrarian Deep-Dive into the Markets

Thematic (Sector/Industry)

<ul><li>Just a short pre-Christmas note today. A number of market pundits have been giving the all clear to jump back in the pool now that crypto has been nuked and Peleton et al are down 80%+.</li><li>Yes, those were bubbles of the more ridiculous variety, but the S&amp;P 500 is still dangerously expensive and growth stocks are not the sole reason.</li><li>Under the hood, the index is stuffed with mature industrial and consumer businesses still trading well above their historical norms.</li></ul>

Just a short pre-Christmas note today. A number of market pundits have been giving the all clear to jump back in the pool now that crypto has been nuked and Peleton et al are down 80%+.Yes, those were bubbles of the more ridiculous variety, but the S&amp;P 500 is still dangerously expensive and growth stocks are not the sole reason.Under the hood, the index is stuffed with mature industrial and consumer businesses still trading well above their historical norms.

High Quality Stock Setups, Weekly Stock Bull Finder

Weekly Stock Bull Finder

High Quality Stock Setups

Finding high potential stock setups on quality companies

<ul><li>In just a few weeks, we will be in the thick of the third quarter earnings season which will steal the spotlight, at least temporarily, from global macro developments. </li><li>There appears to be mounting evidence from downside earnings surprises from Nike, FedEx, and CarMax that the consumer and economic pullback is now showing up in the financial reporting of companies quarterly profits and margins. </li><li>The global economic slowdown and inflation impacts are eroding margins and causing retailers like Nike to experience significant inventory builds which will require price cuts to clear the inventory (while good news for inflation). </li></ul>

In just a few weeks, we will be in the thick of the third quarter earnings season which will steal the spotlight, at least temporarily, from global macro developments. There appears to be mounting evidence from downside earnings surprises from Nike, FedEx, and CarMax that the consumer and economic pullback is now showing up in the financial reporting of companies quarterly profits and margins. The global economic slowdown and inflation impacts are eroding margins and causing retailers like Nike to experience significant inventory builds which will require price cuts to clear the inventory (while good news for inflation). 

Alpha-Centric ESG Research

Kyle Rudden

The Biden-Harris administration recently announced four "Day One" priorities, the first of which is their COVID-19 response plan. COVID-19 response is first, because it is a prerequisite to economic recovery, which is the second of their four "Day One" priorities.Several investment themes are inherent in Biden's COVID-19 plan, some more direct and obvious than others. This Insight overviews more significant themes and their most representative stocks, in three sections (the first two will be expanded on in separate upcoming reports):<ol>
<li>
COVID-19 Testing: Testing is the largest, most tangible, nearest-term investment opportunity created by Biden's plan. An estimated US$75-100 billion for testing could be windfall for certain stocks, but not all. Selectivity is key, and timing is critical (related to vaccine development).</li>
<li>
Vaccine Delivery: Biden's plan emphasises vaccine manufacturing and delivery, versus vaccine development (Trump had allocated <a href="https://www.hhs.gov/coronavirus/explaining-operation-warp-speed/index.html" target="_blank" rel="noopener">billions</a> to vaccine development companies). Some might go to big pharma companies for M&amp;D, but most should benefit other "cold chain" stocks.</li>
<li>
PPE Supply/Other: PPE manufacturing, of course, but that is largely old news. I will address it, but do so along with other more interesting collateral themes. For example, retail drugs chains, elder-care, medical technologies, and a few other related industries.</li>
</ol>

The Biden-Harris administration recently announced four "Day One" priorities, the first of which is their COVID-19 response plan. COVID-19 response is first, because it is a prerequisite to economic recovery, which is the second of their four "Day One" priorities.Several investment themes are inherent in Biden's COVID-19 plan, some more direct and obvious than others. This Insight overviews more significant themes and their most representative stocks, in three sections (the first two will be expanded on in separate upcoming reports):

COVID-19 Testing: Testing is the largest, most tangible, nearest-term investment opportunity created by Biden's plan. An estimated US$75-100 billion for testing could be windfall for certain stocks, but not all. Selectivity is key, and timing is critical (related to vaccine development).

Vaccine Delivery: Biden's plan emphasises vaccine manufacturing and delivery, versus vaccine development (Trump had allocated billions to vaccine development companies). Some might go to big pharma companies for M&amp;D, but most should benefit other "cold chain" stocks.

PPE Supply/Other: PPE manufacturing, of course, but that is largely old news. I will address it, but do so along with other more interesting collateral themes. For example, retail drugs chains, elder-care, medical technologies, and a few other related industries.


Biden COVID-19 Response Plan: Overview of Its Inherent Investment Themes

Expert on Japan Retail and Consumer Markets, JapanConsuming

Michael Causton

Expert on Japan Retail and Consumer Markets

Real Insight on Japanese Consumer Markets

JapanConsuming

JapanConsuming is a specialist research firm producing intelligence on Japanese retail and consumer markets. Founded in 2000, JapanConsuming has become the leading provider of insights on Japanese retailers and consumer trends to retailers, brands, government agencies and investors. As well as a highly regarded monthly report on the market, JapanConsuming produces in-depth reports on retail sectors, seminars on key trends and telephone consulting to investors on trends and retailers.

JapanConsuming was founded by Michael Causton and Roy Larke. 

Lopia is a small unlisted supermarket chain but we cover this here to demonstrate the following that discount supermarkets have in Japan, pointing to further growth for listed companies in this sector such as <a href="https://www.smartkarma.com/entities/kobe-bussan-co-ltd" target="_blank" data-smartkarma-citation="entities:4701:1" rel="noopener">Kobe Bussan (3038 JP),</a> <a href="https://www.smartkarma.com/entities/pan-pacific-international-holdings-corporation" target="_blank" data-smartkarma-citation="entities:13475:1" rel="noopener">Pan Pacific International Holdings (7532 JP),</a> and <a href="https://www.smartkarma.com/entities/cosmos-pharmaceutical-corp" target="_blank" data-smartkarma-citation="entities:3797:1" rel="noopener">Cosmos Pharmaceutical (3349 JP).</a>
With average sales growth of 18% a year since 2011, Lopia is a rising star. Alongside OK Super, another unlisted chain, Lopia has proven that aggressive and consistent low prices work in Japan, and that careful cost control can provide profits even at low margins. It is a chain to watch as it is likely to list at some point, with a target of ¥1 trillion sales by the end of the next decade.
Its success is also a worry for <a href="https://www.smartkarma.com/entities/aeon-co-ltd" target="_blank" data-smartkarma-citation="entities:3:1" rel="noopener">Aeon Co Ltd (8267 JP)</a>. Aeon has seen its share of food sales in the greater Tokyo region fall from 10.8% to 9.7%, overtaken by OK Super which increased from 8% to 10.9%, a jump of 2.9 points. Lopia is half the size of OK Super but has also grown from 1.2% to 2.9% in the same period, more than doubling its effective share. Aeon is <a href="https://www.smartkarma.com/insights/new-aeon-style-format-shows-hope-for-aeon-s-core-business" target="_blank" rel="noopener">fighting back</a> but still does not compete on price.

Lopia is a small unlisted supermarket chain but we cover this here to demonstrate the following that discount supermarkets have in Japan, pointing to further growth for listed companies in this sector such as Kobe Bussan (3038 JP), Pan Pacific International Holdings (7532 JP), and Cosmos Pharmaceutical (3349 JP).
With average sales growth of 18% a year since 2011, Lopia is a rising star. Alongside OK Super, another unlisted chain, Lopia has proven that aggressive and consistent low prices work in Japan, and that careful cost control can provide profits even at low margins. It is a chain to watch as it is likely to list at some point, with a target of ¥1 trillion sales by the end of the next decade.
Its success is also a worry for Aeon Co Ltd (8267 JP). Aeon has seen its share of food sales in the greater Tokyo region fall from 10.8% to 9.7%, overtaken by OK Super which increased from 8% to 10.9%, a jump of 2.9 points. Lopia is half the size of OK Super but has also grown from 1.2% to 2.9% in the same period, more than doubling its effective share. Aeon is fighting back but still does not compete on price.

Why Discount Works in Japan: Lopia, Tokyo’s ‘Low Price Utopia’ Triples Sales Since 2011

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

S&amp;P 500 Potential Support Levels. Current logical support levels we are monitoring include the December 2018 low of 2,346 and prior resistance in 2015-2016 at 2,130-2,200. The 2,346 level would make a lot of sense, however there is nothing that says we can’t be down 35% (coinciding with the 2,130-2,200 level) or more from the highs. Ultimately, COVID-19 is holding the market hostage and it likely will stay that way until the virus spread diminishes.

S&amp;P 500 Potential Support Levels. Current logical support levels we are monitoring include the December 2018 low of 2,346 and prior resistance in 2015-2016 at 2,130-2,200. The 2,346 level would make a lot of sense, however there is nothing that says we can’t be down 35% (coinciding with the 2,130-2,200 level) or more from the highs. Ultimately, COVID-19 is holding the market hostage and it likely will stay that way until the virus spread diminishes.

S&P 500 Technical Appraisal and Support Levels

United States

Costco Wholesale Corporation operates wholesale membership warehouses in multiple countries.  The Company sells all kinds of food, automotive supplies, toys, hardware, sporting goods, jewelry, electronics, apparel, health and beauty aids, as well as other goods.

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Costco Wholesale (COST US)

The Bubble Isn't Where You Think It Is

A number of market pundits have been giving the all clear to jump back in the pool now that crypto has been nuked and Peleton et al are down 80%+.

Superfluous Value

Weekly Stock Bullfinder - Week of 10/3

In just a few weeks, we will be in the thick of the third quarter earnings season which will steal the spotlight, at least temporarily, from global...

Weekly Stock Bull Finder

Biden COVID-19 Response Plan: Overview of Its Inherent Investment Themes

Biden's recently-announced COVID-19 response plan suggests a number of investment themes. This Insight overviews the more significant of those...

Kyle Rudden

Why Discount Works in Japan: Lopia, Tokyo’s ‘Low Price Utopia’ Triples Sales Since 2011

The low price food market is booming in Japan but still doesn't get the recognition it deserves. As well as listed firms, we highlight the unlisted...

Michael Causton

S&P 500 Technical Appraisal and Support Levels

S&P 500 Potential Support Levels. Current logical support levels we are monitoring include the December 2018 low of 2,346 and prior resistance...

Vermilion Research

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