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.

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 index breached 21-DMA support on Monday on above average volume. Distribution is rising across markets and is now above elevated levels of four after being muted for several months. We recommend that investors remain patient in allocating capital and look for leaders to hold logical support levels in case of a pullback.
  • Twelve of 13 markets are in a Confirmed Uptrend and Thailand is in an Uptrend Under Pressure.
  • Southeast Asian markets have bounced back in the later part of the year. Malaysia is the leading market in the region with a 3% YTD gain. In terms of gains since a follow-through day, the Philippines PSE Composite index has gained 43%.
  • The number of stocks breaking out in SE Asia is at multi-year highs but still below the levels seen in 2011 and 2013. Basic Material, Capital Equipment, Consumer Cyclical, and Energy are leading over the past eight to 13 weeks across SE Asia. Refer to pages 6 and 9 for outperforming industry groups and stocks near pivot in the region.
  • Highlighted Focus List idea: Bank Mandiri (BKM.ID; BMRI: IJ). Refer to page 8 for an annotated chart.

 

Chegg

Posted on by Derek Higa

Key points from this report:

 

  • Chegg (CHGG) shares broke out to all-time highs yesterday. RS is also near highs and A/D has improved over the several weeks. The company has leading fundamental ratings. We recommend adding to positions as it breaks out above $90 today.
  • Strong fundamental profile: EPS Rank of 90, SMR Rating of A, and Composite Rating 98.
  • RS line is trending upward with a strong RS Rating of 89 and A/D Rating of B+. Up/Down Volume ratio is strong at 1.5, indicating money inflow.
  • Chegg is the leader in the fragmented U.S. tutoring market of ~$10B with ~4% market share.
  • Subscribers grew to 3.7M or 69% y/y in Q3. Management targets 10M subs over the longer term.
  • Chegg Study pack was recently rolled out in 2020. Management expects 30-50% of subs to come from study pack and this will increase ARPU.
  • Internationally, Chegg is focusing on 15 markets. Only 10% of subscribers are international currently but management expects it to be larger than the U.S over time.

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 Index rebounded from its 21-DMA and is trading 5% and 20% above its 50- and 200-DMA, respectively. We remain positive as it trades above its 21-DMA. We recommend investors follow a selective approach and avoid chasing extended ideas.
  • All 13 markets are in a Confirmed Uptrend. The average number of distribution days increased to 3.6 from 2.8 last week.
  • Japan’s Nikkei is a leading developed market in Asia and has outperformed the IPAC index. On the other hand, broader indices like the Mothers index and the Nikkei 500 have outperformed the Nikkei 225. Refer to page 5 for an annotated chart of the Nikkei 225 and page 6 for a price comparison chart of these indices.

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 index continues to trade at all-time highs. We remind investors to stay disciplined and avoid chasing extended ideas and to look for leaders breaking out of bases.
  • All 13 markets remain in a Confirmed Uptrend. The average number of distribution days declined to 2.8 from 3.6 last week and remains below the elevated level of four.
  • South Korea and Taiwan are the first and third best performing markets since their follow-through day on March 25. Refer to pages 6–7 for an annotated chart of the KOSPI and TAIEX index.
  • The Health Care and Consumer Cyclical sectors are leading in South Korea, while Technology and Transportation are leading in Taiwan. Refer to pages 4 and 5 for ideas in outperforming industry groups.
  • Refer to pages 10 and 11 for stocks trading near pivot in South Korea and Taiwan, respectively, and page 12 for extended ideas to trim or avoid.

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 is consolidating near all-time highs. We remain positive as it trades above 21-DMA support. We remind investors to stay disciplined. Avoid chasing extended ideas and look for leaders building the right side of sound bases or breaking out before adding to positions.
  • All 13 markets are in a Confirmed Uptrend. The average number of distribution days increased to 3.6 from 3.1 last week but is still below elevated levels of four.
  • Highlighting leading APAC markets: India is the second-best performing market after South Korea since its follow-through day on March 31. Refer to page 4 for an annotated chart of the Sensex.
  • In line with the trend across APAC, laggards are leading gains in the trailing four weeks, while leaders continue consolidating. In terms of sectors, Financial and Utility are leading, while long-term leading sectors like Health Care, Retail, and Technology have taken a backseat.
  • Refer to page 5 for Indian ideas in outperforming industry groups, including Auto and Tires, Consumer Loans, Metal/Steel Producers, and Gas Distribution. Refer to page 9 for Indian ideas trading near pivot.
  • Highlighted Focus List idea: Infosys (INE.IN). Refer to page 8 for an annotated chart.

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 index gained 1.3% yesterday on above average volume and broke above January 2018 highs. The index is now trading at all-time highs. Overall, we still recommend a selective approach in APAC, however, as stocks trade higher, we recommend trimming ideas that are becoming the most extended from a historical perspective on a stock-by-stock basis. Refer to pages 11 and 12 for extended stocks trading 10% above the 21-DMA.
  • All 13 markets are in a Confirmed Uptrend. Australia, China, and Hong Kong have four or more distribution days. The average number of distribution days has been declining as days expire and markets are trending upward. The average currently stands at 3.1, less than the elevated level of 4.
  • 73% and 78% of liquid stocks are trading above the 50- and 200-DMA, respectively. They are also trading at a median of 5% and 11% above their 50- and 200-DMA, respectively. We expect consolidation in the short term as the moving averages catch up.
  • India, Japan, South Korea, and Taiwan are trading at multi-year highs following a strong rally this month. Indices from these markets are trading at least 15% above their 40-WMA. Historically, all four indices tend to pull back following a sharp gain above the 40-WMA. Refer to pages 7, 8, 9, and 10 for Nikkei, Sensex, KOSPI, and TAIEX annotated monthly charts highlighting instances when they were extended more than 15%.

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 Index is at multi-year highs. We remain bullish as it is trading above the 21-DMA. Follow a selective approach and gradually allocate capital to stocks breaking out of sound bases.
  • All 13 markets are in a Confirmed Uptrend. The average number of distribution days is 2.9 and remains in a declining trend as distribution days expire.
  • We are seeing rotation to value-oriented sectors like Financial, Consumer Cyclical, and Capital Equipment out of long-term leading sectors like Health Care, Retail, and Technology. Refer to page 4 for a Sector Rotation Chart.
  • The number of stocks breaking out has increased in these sectors, as shown in the chart on page 2. This is also backed by improving median RS and A/D Ratings for these sectors over the past four weeks. We believe it is still early in the reversion trade to value from growth and we are unsure how long this trend will last.

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 rose to two-year highs this week following the conclusion of the U.S. elections. We recommend that investors gradually allocate capital while remaining selective of ideas breaking out of sound bases with rising relative strength.
  • All 13 markets are in a Confirmed Uptrend after we shifted 11 markets to a Confirmed Uptrend since last Wednesday. The average number of distribution days has also declined significantly to 3.1 from 4.1 last week.
  • Value stocks have rallied sharply following the COVID-19 vaccine development on Monday. We believe it is still early in a mean reversion play as outperformance in the growth index is still 26ppt above the value index. Leading growth stocks are under pressure but have yet to break support. Refer to page 7 for an index comparison.
  • Refer to pages 8 and 9 for stocks outperforming this week.
  • See our note on China’s regulation on big tech here.
  • Stocks in the Financial and Energy sectors are leading in the short term, while those in Health Care, Retail, and Technology are lagging. Refer to page 3 for stocks from these sectors.
  • Highlighted Focus List idea: Tokyo Electron (RG@N.JP). Refer to page 6 for an annotated chart.

China Internet Plays

Posted on by Derek Higa

Key points from the report:

 

  • Chinese internet plays have sold off aggressively this week. China’s antitrust regulator has drafted new guidelines around monopolistic practices.
  • We explore the potential impact on Chinese internet plays in this report. We also highlight the key technical levels to monitor for affected stocks.
  • Names discussed in the report include Alibaba, JD.com, Meituan Dianping, Tencent, and Xiaomi. Please contact the team if you would like to discuss in more detail.

The Trade Desk

Posted on by Derek Higa

Key points from this report:

 

  • Historically extended, expect consolidation near term. Shares are up +20% intraday and are ~40% above their 50-DMA. We recommend that investors hold positions and wait for shares to consolidate sideways in the near term. Intraday, the stock is trading more than 100% extended from its 40-WMA. This is the most extended since 2018. Look for consolidation to occur in the near term and wait for moving averages to catch up before adding to positions. We continue to believe the company has high-growth opportunities in programmatic driven by CTV viewership, market share gains, the biggest product upgrade scheduled in 2021, and international expansion.
  • Stellar fundamental profile: Composite Rating of 95, SMR Rating of A, and EPS Rank of 97. It has consistently beat EPS estimates since Q1 2017.
  • Solid technical ratings: RS line in an uptrend, RS Rating of 97, A/D Rating of B. Industry Group Rank improved to 11 from 25, eight weeks ago.
  • Funds holding shares increased 43% y/y to 842 as of September.