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.

Netflix

Posted on by Derek Higa

Key points from this report:

 

  • Yesterday, NFLX gained 6.7% on above average volume. The stock is currently trading near the pivot of a stage-one five-week flat base. We recommend adding to positions as the stock makes a new high.
  • The company remains the primary beneficiary of the secular shift to online streaming. It has the most original content among its peers and is set to release 60 originals in July alone. We believe it is comfortably positioned for releases through 2020.
  • Revenue and EPS had CAGR of 31.3% and 81.8%, respectively, between 2017 and 2019. Consensus estimates 23% and 56% revenue and EPS growth, respectively, for 2020.
  • Best-in-class fundamental ratings: EPS Rank of 99 and SMR Rating of A.
  • Technical ratings: RS Rating of 89 and A/D Rating of B.
  • Institutional sponsorship was 2,435 (+9% q/q) in March.

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 is testing resistance near March highs and has immediate support along its 21-DMA. As a positive signal, look for the index to find support off its 21-DMA and break above March resistance on above average volume.
  • Nine out of 13 markets remain in a Confirmed Uptrend.
  • The number of stocks breaking out in APAC is lower than the 10-year median, despite markets being in an Uptrend. This could be due to narrow leadership and a sharp recovery in markets since March lows.
  • APAC emerging markets are outperforming developed markets. Refer to page 6 for a five-year price comparison of the S&P 500, EEMA, and IPAC.
  • Growth stocks are outperforming value stocks in both emerging and developed markets. Refer to pages 4 and 5 for charts.
  • Highlighted Focus List idea: Daikin Industries (DA@N.JP).
  • Refer to pages 9 and 10 for stocks breaking out with an RS Rating greater than 70.
  • Refer to page 11 for APAC actionable ideas.

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.

 

  • MSCI Asia is consolidating above its 200-DMA. We continue to recommend allocating capital to ideas breaking out from sound bases and trimming extended ideas.
  • Ten out of 13 markets are in a Confirmed Uptrend. The average number of distribution days increased to 4.3 from 4.1 last week.
  • If volatility subsides, the average number of distribution days will decline by the end of next week as ten distribution days are set to expire across six markets in the next seven trading sessions.
  • The list on page 5 has ideas from outperforming industry groups the Health Care and Technology sectors in the past eight to 13 weeks.
  • Refer to page 6 for ideas trading near pivot in APAC.
  • Highlighted Focus List idea: Nintendo (NNDO.JP). Refer to page 4 for an annotated chart.
  • Refer to page 7 for APAC actionable ideas.

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 is testing support at its 200-DMA. Look for it to hold above this level to remain constructive.
  • We shifted Japan, Hong Kong, and South Korea to an Uptrend Under Pressure. Distribution has risen to 4.1 days on average. The majority of countries remain in a Confirmed Uptrend.
  • The outperformance of large-cap growth versus value indices is staggering. This deviation is absent in mid- and small-cap indices. Refer to pages 3–5.
  • Health Care and Technology have the greatest number of stocks trading above the 200-DMA. Basic Material, Capital Equipment, and Consumer Cyclical have performed well in the past eight weeks but are still lagging compared with 26 weeks ago. Refer to page 6.
  • Highlighted Focus List idea: Pi Industries (PII.IN)
  • For extended ideas to trim profits, see page 9.
  • Refer to page 10 for actionable ideas in APAC.

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.

 

  • This week, we shifted China and Hong Kong to a Confirmed Uptrend from an Uptrend Under Pressure. With these changes, all 13 APAC markets are in a Confirmed Uptrend. We recommend that investors continue to commit capital to stocks breaking out from sound bases.
  • We expect consolidation in the near term as >90% of stocks are trading above their 50-DMA. To remain constructive, we are looking for leaders to hold their key moving averages if the markets pull back.
  • The MSCI Asia Pacific Large Cap Index has continued to outperform the mid- and small-cap indices. Improvement in the performance of mid- and small-cap indices compared with large cap would indicate increased risk appetite among investors.
  • Technology underperformed relative to Capital Equipment and Consumer Cyclical over the last eight weeks. However, semiconductor stocks within the sector have continued to outperform. Refer to page 8 for stocks near pivot in the sector.
  • Highlighted Focus List idea: Advantest (AB@N.JP)

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 is currently trading above all key moving averages. We recommend that investors continue to commit capital to stocks breaking out from sound bases.
  • Eleven out of 13 markets are in a Confirmed Uptrend, while China and Hong Kong are in an Uptrend Under Pressure. China, Japan, New Zealand, South Korea, and Taiwan are trading above their 200-DMA, while the remaining markets are trading between 200-DMA resistance and 50-DMA support.
  • The U.S. Dollar index breached 200-DMA support and is trading near two-month lows as the global economies started to ease restrictions. Emerging markets in APAC posted strong performance over last few sessions. The MSCI Emerging Markets index has recovered 30% from March lows and is retesting resistance at its 200-DMA. Refer to page 7 and 8 for an annotated chart of the U.S. Dollar and EEM indices.
  • South Korea rallied above the 200-DMA, driven by a third stimulus which increased the total stimulus to 14% of GDP. Taiwan has retaken its 200-DMA despite U.S./China trade tensions. Refer to page 9 for an annotated chart of the KOSPI.
  • Highlighted Focus List Idea: MediaTek (MDT.TW)

APAC Weekly Summary

Posted on by Derek Higa

Key points from this week’s report:

  • The MSCI Asia continues to consolidate above its 50-DMA. Allocate capital gradually in fundamentally sound companies breaking above key resistance levels.
  • Last Friday, we shifted China and Hong Kong to an Uptrend Under Pressure. Refer to page 5 for an annotated chart of the Hang Seng.
  • Japan markets continue to rally on the government’s fresh stimulus. Refer to page 6 for an annotated chart of the Nikkei.
  • In Japan, we see improving momentum in lagging sectors like Consumer Cyclical and Capital Equipment over the past four weeks. We consider broadening strength across weak sectors as a positive for the market rally.
  • Japanese Retail and Technology outperformed over the past four weeks and 52 weeks. Refer to page 7 for a list of stocks near pivot in stage-one bases in these sectors.
  • Highlighted Focus List idea: Keyence ( KEYE.JP ). Refer to page 4 for an annotated chart.
  • Refer to page 8 for actionable ideas on our Focus List.

Social Media

Posted on by Derek Higa

Key points from this report:

 

  • After Q1 results we find it difficult to change our cautious view on Social Media despite stocks recovering.
  • Overall, the overhang and risk for digital advertising is a prolonged recession given historically high correlation between ad spend and GDP growth. With digital ads comprising more than 50% of total ad spend, we believe spend can decline much faster in certain instances.
  • WON Ratings and Rankings have improved with Snap (SNAP) recovering the most off lows and leading with a 90 RS Rating. Facebook (FB) is next at 86 followed by Alphabet (GOOGL) at 85. Given the high risk, we remain neutral at best for all three, however, SNAP is the most appealing in our view should shares break out.
  • We are more negative on the price action for Twitter (TWTR) and Pinterest (PINS). We recommend avoiding both as they continue to struggle to trade beyond resistance levels.
  • See our comments on each company’s Datagraph™ in the full report.

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 held above its 50-DMA. Volume has been below average throughout the rally. We continue to wait for strength to broaden.
  • Overall, with distribution low and price action mostly constructive, we remain positive on APAC markets. Near term, we recommend staying selective in allocating capital and being disciplined about low risk entry points. Markets have risen significantly off lows and are due for a healthy pullback.
  • Out of 13 APAC markets, nine are trading above 50-DMA support. China and Taiwan are leading, trading near their 200-DMA after breaking above their 50-DMA. India is lagging, still below its 50-DMA.
  • The number of liquid stocks trading above the 200-DMA has stabilized over the trailing four weeks. Outside of narrow leadership, the majority are in consolidation. We expect the number to rise again should markets pivot. This change is highlighted in the LHS chart and on page 3.
  • Over recent weeks, Technology stocks have displayed strong momentum. Refer to page 9 for Technology stocks near pivot.
  • Highlighted Focus List ideas: Tencent Holdings (TCNT.HK) and Appen (APX.AU). Annotated charts on pages 7 and 8.
  • Refer to page 10 for Actionable Focus List ideas.

Kakao

Posted on by Derek Higa

Key points from this report:

 

  • The stock is trading at a multi-year high after breaking out from a stage-one 10-week cup base. It has immediate support at the pivot of the base at KRW 192K (-7%) followed by its 21-DMA (-18%).
  • EPS Rank of 22 and SMR Rating of D are expected to improve in the coming quarters. Consensus estimates EPS growth of 194% and 38% for FY20 and FY21, respectively.
  • Good technical ratings: RS Rating of 94 and A/D Rating of A-.
  • Institutional ownership was 733 (47% y/y) in March.