Author: Derek Higa

Derek Higa is a senior equity analyst and a lead for the APAC region and the Consumer Cyclical sector. He serves on the Global Focus List Committee, which approves all equity recommendations for developed, emerging, and frontier markets, and compiles Asia Watch, a weekly recap of regional investing news. Since joining William O’Neil + Company in 2005, he has lent his market expertise to alpha capture, product development, and historical studies on outperforming stocks. Derek graduated summa cum laude from California State University Los Angeles with a B.S. in Finance and Information Systems. He holds a Series 65 securities license.

Charter Communications

Posted on by Derek Higa

Key points from this report:

 

  • Accumulate CHTR as the stock broke out to an all-time high from a stage-two five-week flat base on above average volume. It is up 33% since we added it to our U.S. Focus List in May 2020.
  • Good technical profile: RS line is edging upward. A/D Rating has turned positive over the past few weeks, indicating accumulation. Good Up/Down Volume ratio of 1.2 denotes money inflow.
  • Charter is the second largest cable and high-speed internet player in the U.S., with more than 29M broadband subscribers, second to Comcast (31M broadband subscribers). Its increasing broadband customer base and improving free cash flows are the key growth drivers. The company’s mobile business is expected to break even on an adjusted EBITDA basis this year.
  • Cable cash flows are improving due to expanding EBITDA margin and lower capex intensity. EBITDA margin expanded 3ppts to ~39% over the past two years due to increased internet penetration and churn improvement.

APAC Weekly Summary

Posted on by Derek Higa

Key points from this week’s report:

Please refer to the attached PDF for the full report.

 

  • The MSCI Asia-ex Japan index has pulled back below the 50- and 100-DMA after briefly gaining above these moving averages for a few sessions. A clear direction has yet to emerge for the index. We continue to recommend a selective approach. Avoid chasing extended ideas.
  • Six markets are in a Confirmed Uptrend, four are in an Uptrend Under Pressure, and three are in a Rally Attempt. Hong Kong was shifted to an Uptrend Under Pressure this week.
  • Markets have remained range-bound for several weeks. Growth sectors such as Technology, Health Care, and Retail have shown signs of recovery in the past two sessions. We will look for this strength to continue to raise our conviction.
  • Vaccinations across major APAC countries accelerated over the last four weeks. One dose of the vaccine has reached ~20% of the population in Australia, Hong Kong, India, Japan, and South Korea. The reopening of economies continues to be an important theme that we will keep an eye on, as it impacts sector performance and rotation.

APAC Weekly Summary

Posted on by Derek Higa

Key points from this week’s report:

Please refer to the attached PDF for the full report.

 

  • Seven markets, including Hong Kong, South Korea, India, and Taiwan, are in a Confirmed Uptrend. Three markets are in an Uptrend Under Pressure. Japan, Indonesia, and New Zealand are in a Rally Attempt. Markets are trading in a range-bound fashion with low distribution. We would look for a definite direction after the Fed meeting today.
  • The MSCI Asia Pacific Growth index and Value index are trading sideways. Thus far, the performance of either index has not signaled an emergence of leadership. We believe a breakout of the Growth index from consolidation would be positive for markets.
  • Among $1B-5B market cap stocks, the median RS Rating has declined across sectors compared with thirteen weeks ago (mid-March). Technology has been an exception to this with a stable RS Rating during this period.

APAC Weekly Summary

Posted on by Derek Higa

Key points from this week’s report:

Please refer to the attached PDF for the full report.

 

 

  • The MSCI Asia ex Japan index is 8% off 52-week highs and is testing support at its 100-DMA after breaking above it recently. The iShares MSCI Emerging Market Asia index is closely tracking the MSCI Asia index. The iShares Core MSCI Pacific is trading near 52-week highs.
  • Eight markets including China, Hong Kong, Korea, and Taiwan are in a Confirmed Uptrend. We recommend increasing risk gradually as markets strengthen, with a focus on quality ideas with rising relative strength and constructive setups.
  • Overall, small-cap stocks are outperforming by a narrow margin in APAC. Among major markets, India, and Hong Kong have seen the widest spread of outperformance from small caps over the trailing year.
  • In India, the spread between small-cap outperformance over large caps is at a historically high level. Therefore, we recommend trimming any extended small-cap ideas in India.

APAC Weekly Summary

Posted on by Derek Higa

Key points from this week’s report:

Please refer to the attached PDF for the full report.

  • The MSCI Asia ex Japan Index broke above its February downward trend line and is trading 6% off highs. We continue to look for indices to rise above resistance this week and recommend a gradual approach to increasing risk as markets strengthen.
  • Major markets, except for Japan, are back in a Confirmed Uptrend. The average number of distribution days declined to 3.2 from 3.6 last week and is below the elevated level of four.
  • We are noticing outperformance in select Financial industry groups such as Finance-Invest Bnk/Bkrs, Finance-Consumer Loans, Insurance-Life, and Financial Svcs-Specialty.
  • Refer to page 6 for Financial charts with timely technical setups and page 7 for a list of Financial stocks with good O’Neil metrics.
  • Highlighted Focus List idea: China Merchants Bank (CMBC.HK). Refer to page 4 for an annotated chart.

APAC Market Update

Posted on by Derek Higa

Key points from this report:

 

  • Following our upgrade of Hong Kong on May 26, we are upgrading Taiwan to a Confirmed Uptrend and shifting India to a Confirmed Uptrend from an Uptrend Under Pressure. Japan has not had a technical follow-through day, but we remain encouraged by price and volume action in the Nikkei and TOPIX this week. Both could rise above short-term resistance next week.
  • Across APAC, mega-cap ideas have lagged. They have found support at recent lows, but several have yet to retake their 50-DMA.
  • After today’s status change, seven out of 13 APAC markets, including Taiwan and India, are in a Confirmed Uptrend, three are in an Uptrend Under Pressure, and three are in a Rally Attempt. The average number of distribution days has fallen to 3.1 and is below the elevated level of 4.0. Refer to page 3 for APAC Market Conditions.
  • We recommend gradually increasing risk as markets strengthen. Refer to pages 3-6 for stocks near pivot in Taiwan, India, and Japan.

APAC Weekly Summary

Posted on by Derek Higa

Key points from this week’s report:

Please refer to the attached PDF for the full report.

 

  • We are encouraged by the recent price and volume action in markets. The number of distribution days is declining, and major indices are either attempting to reclaim their short-term moving averages or have already done so. We continue to wait for follow-through days in Japan and Taiwan, which would tip the scale to a Confirmed Uptrend in APAC.
  • In APAC countries, the share of the population that is fully vaccinated is in the low single digits, compared with 5% worldwide and more than 35% in the U.S. Vaccination will be key to economic recovery and could be correlated with market performance.
  • The MSCI Asia Pacific growth index has pulled back sharply from February highs while the value index has traded sideways. Currently, the one-year performance of both indices is similar. The MSCI APAC small-cap index has outperformed large- and mid-cap indices during this period.
  • Stocks breaking out in the Health Care and Consumer Staple sectors have improved recently. The number of breakouts is near five-year highs for Consumer Staple while the number of breakouts in Health Care has stabilized after a sharp decline in the second half of 2020.
  • Refer to pages 11 and 12 for stocks near pivot.
  • Highlighted idea: Hygeia Healthcare (HYHH.HK; 6078 HK).

APAC market update

Posted on by Derek Higa

Key points from this report:

 

  • We are upgrading Hong Kong to a Confirmed Uptrend from a Rally Attempt after the Hang Seng staged a day-42 follow-through day. The index was up 1.8% on strong day-over-day volume. Refer to page 2 for an annotated chart of the Hang Seng.
  • The index is trading 7% below its February high (31,183). Next resistance is between 29,400 and 29,600 (+2%). Look for it to clear immediate resistance and hold above key moving averages to increase conviction.
  • We recommend gradually increasing risk. Focus on stocks with leading relative strength or breaking out of sound bases. Refer to pages 3 and 4 for a list of stocks near pivot.
  • Over the past eight weeks, Health Care stocks in Hong Kong have been outperforming. However, today’s move was led by Technology and Retail stocks.
  • Mega-cap Technology names have lagged and have yet to retake their key moving averages.
  • Actionable Focus List ideas: China Merchants Bank (CMBC.HK; 3968 HK), Zhongsheng Gp. Hdg. (ZSG.HK; 881 HK), and Hygeia Healthcare Hldgs Co (HYHH.HK; 6078 HK).

APAC Weekly Summary

Posted on by Derek Higa

Key points from this week’s report:

Please refer to the attached PDF for the full report.

 

  • The MSCI Index faces resistance at the 50-DMA, with immediate support at the 200-DMA (-5%). We continue to recommend a cautious approach. Be patient and wait for market volatility to settle before turning constructive.
  • Five of 13 markets, including China and India, are in an Uptrend Under Pressure, two are in a Confirmed Uptrend, four are in a Rally Attempt, and two are in a Downtrend. The average number of distribution days stands at 4.6, compared with 5.3 last week. It is at an elevated level.
  • Value oriented sectors like Basic Material, Transportation, and Utility are outperforming over the past 13 weeks since February highs.
  • Focus List removals have increased since March. The breakdown in growth ideas remains concerning. Additions to our Focus List have also declined over the last few weeks.
  • Surprisingly, the bright spot has been India, where we removed the fewest number of ideas. Mid- and small-cap ideas in India are holding up well despite economic concerns.

Social Media

Posted on by Derek Higa

Key points from this report:

 

  • 2020 was a wash for global traditional advertising. Ad spend for out-of-home advertising, magazines, newspapers, and others declined 16% y/y. Although overall advertising spend was marginally up 1% y/y, it was buoyed by digital advertising growth of 13% y/y.
  • Digital ad spend growth was driven by social media as engagement trends shot up during the pandemic last year. The share of display ads is increasing in comparison to search ads.
  • This scenario is stronger in the U.S. where digital ad share is expected to reach 75% of total U.S. ad spend in 2024, compared with 68% globally. The share of social media spend increased to 30% in 2020 from 22% in 2016.
  • Apple’s new iOS update could be a headwind. Based on research by AppsFlyer, opt-in rates are expected to be a lot better than the wide range of 2-20% estimated by the industry. However, there is reason to believe it can have a short-term transitory effect like GDPR.