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

Breadth is waning – there’s no question about that. Yet selling appears to be discriminate, so far, as if there’s a reason behind which stocks get hit, not the indiscriminate “sell-button.” But even with waning breadth, the weight-of-the-evidence still supports further upside. We believe this dip in breadth is a favorable sign for stock-pickers, creating an environment where selectivity can aid in outperformance. This week we provide an update to our investment thesis and highlight attractive opportunities within the gaming stocks, and a wide range of other cyclical companies.

Breadth is waning – there’s no question about that. Yet selling appears to be discriminate, so far, as if there’s a reason behind which stocks get hit, not the indiscriminate “sell-button.” But even with waning breadth, the weight-of-the-evidence still supports further upside. We believe this dip in breadth is a favorable sign for stock-pickers, creating an environment where selectivity can aid in outperformance. This week we provide an update to our investment thesis and highlight attractive opportunities within the gaming stocks, and a wide range of other cyclical companies.

Asian Equities Analyst, Logistics & Transport, Tracking Traffic

Daniel Hellberg

Asian Equities Analyst, Logistics & Transport

Equity Bottom-Up

After <a href="https://www.smartkarma.com/entities/23628" target="_blank" data-smartkarma-citation="entities:23628:1">ZTO Express (ZTO US)</a>'s months-long IPO process last Fall, and after the subsequent release of two sets of quarterly financial results and its first Form 20-F, the precise nature of the company's relationship with its largest trucking vendor Tonglu Tongze (桐庐通泽物流有限公司, hereafter 'TT') remains maddeningly unclear. TT is a line haul (ie, 'Point A to Point B') trucking company whose sole customer is ZTO. ZTO's 853 mn RMB of payments to TT last year were equivalent to 23% of ZTO's line haul trucking expenses, or 13% of overall operating expenses, or 9% of ZTO's revenue. We believe TT is probably ZTO's single largest vendor, as ZTO handles roughly half of its own line haul trucking needs and the vast majority of its parcel sorting activities in-house.TT is also majority-owned by unidentified ZTO employees, and this unusual arrangement presents an obvious conflict of interest: TT as a profit-seeking entity should strive to maximize returns for its shareholders, but maximizing returns for TT would almost by definition depress profitability at ZTO, its only customer. And the anonymous group of ZTO employees who control TT stand to benefit from moves to lift profitability at 'their' company, which would necessarily hurt their employer, ZTO. Ultimately, we believe TT still exists for one of three reasons: a) the relationship between ZTO and TT could be exploited to flatter profitability or reduce debt at ZTO; b) the relationship could also be a means of diverting profits away from the larger company to the group of ZTO employees who control TT; or c) TT could simply be a messy but harmless remnant of ZTO's rapid growth over the last few years, a loose end that's yet to be tidied up.In this note we aim to accomplish three objectives: 1) to lay out what we do know about TT and its relationship with ZTO; 2) to identify signs of potential and actual conflict between the two entities; and 3) to propose remedies that would clarify the relationship and give minority shareholders increased confidence in ZTO's governance.

After ZTO Express (ZTO US)'s months-long IPO process last Fall, and after the subsequent release of two sets of quarterly financial results and its first Form 20-F, the precise nature of the company's relationship with its largest trucking vendor Tonglu Tongze (桐庐通泽物流有限公司, hereafter 'TT') remains maddeningly unclear. TT is a line haul (ie, 'Point A to Point B') trucking company whose sole customer is ZTO. ZTO's 853 mn RMB of payments to TT last year were equivalent to 23% of ZTO's line haul trucking expenses, or 13% of overall operating expenses, or 9% of ZTO's revenue. We believe TT is probably ZTO's single largest vendor, as ZTO handles roughly half of its own line haul trucking needs and the vast majority of its parcel sorting activities in-house.TT is also majority-owned by unidentified ZTO employees, and this unusual arrangement presents an obvious conflict of interest: TT as a profit-seeking entity should strive to maximize returns for its shareholders, but maximizing returns for TT would almost by definition depress profitability at ZTO, its only customer. And the anonymous group of ZTO employees who control TT stand to benefit from moves to lift profitability at 'their' company, which would necessarily hurt their employer, ZTO. Ultimately, we believe TT still exists for one of three reasons: a) the relationship between ZTO and TT could be exploited to flatter profitability or reduce debt at ZTO; b) the relationship could also be a means of diverting profits away from the larger company to the group of ZTO employees who control TT; or c) TT could simply be a messy but harmless remnant of ZTO's rapid growth over the last few years, a loose end that's yet to be tidied up.In this note we aim to accomplish three objectives: 1) to lay out what we do know about TT and its relationship with ZTO; 2) to identify signs of potential and actual conflict between the two entities; and 3) to propose remedies that would clarify the relationship and give minority shareholders increased confidence in ZTO's governance.

Relationship Between ZTO and Its Vendor Tonglu Tongze Remains Alarmingly Murky

United States

Knight-Swift Transportation Holdings Inc. provides transportation and logistics services. The Company offers dry van, cross border freight transportation, fleet solutions, consulting, brokerage, equipment leasing, temperature controlled transport, and engineering services. Knight-Swift Transportation Holdings serves customers in North America.

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Knight-Swift Transportation Ho (KNX US)

U.S. Equity Strategy Weekly

Breadth is waning – there’s no question about that. Yet selling appears to be discriminate, so far, as if there’s a reason behind which stocks get...

Vermilion Research

Relationship Between ZTO and Its Vendor Tonglu Tongze Remains Alarmingly Murky

After ZTO Express (ZTO US)'s months-long IPO process last Fall, and after the subsequent release of two sets of quarterly financial results and its...

Daniel Hellberg

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)