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.

Facebook

Posted on by Derek Higa

Attached is an update on Facebook (FB) from Director, Research Analyst Derek Higa and William O’Neil India Analysts Shailendra Bhogaraju and Pavan Kumar HK.

 

  • FB shares are up 8% intraday following better-than-expected Q2 results. We recommend adding to positions as shares rise to new highs and find strong support along its 50-DMA.
  • Engagement continued to accelerate in Q2, fueled by the pandemic.
  • Ad revenue decelerated less than its peers owing to a rise in SMB use and advertisers as more businesses realize the necessity for an online presence in a post-COVID world.
  • The company’s Q3 ad revenue guidance exceeded consensus estimates, taking into account several possible headwinds.
  • Strong fundamental ratings: EPS Rank of 99, SMR Rating of A, Composite Rating of 98.
  • Good technical profile: RS Rating of 79, A/D Rating of B+, Up/Down Volume ratio of 1.7.
  • Institutional sponsorship increased to 4,638 (+11% y/y) as of June.

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 trading sideways while testing resistance at January highs.
  • Eight of 13 markets are in a Confirmed Uptrend. The average number of distribution days will decline from 4.2 to 3.2 if no distribution days are recorded in the next five trading sessions.
  • The U.S. Dollar Index is at 52-week lows, while the EEMA index is trading near 52-week highs. The recent decline in the U.S. dollar is resulting in a rotation into emerging markets. See pages 6 and 7 for annotated charts of the EEMA and U.S. Dollar Index, respectively. See page 12 for Emerging Market Focus List ideas and comments on technical price action.
  • South Korea and Taiwan along with China are among the top leading markets in APAC. See pages 8 and 9 for year-to-date performance comparisons of major emerging and developed markets in APAC. See pages 10 and 11 for annotated charts of the KOSPI and TAIEX, respectively.
  • Refer to page 13 for stocks near pivot in these markets and page 14 for stocks that are extended from an ideal buy point but are near secondary entry points within 10% of their 50-DMA.
  • Highlighted Focus List idea: Samsung Electronics ( SGL.KR ). See page 5 for an annotated chart.
  • Refer to page 15 for actionable Focus List 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 Index is consolidating near January highs. Look for a break above this level to remain positive. Avoid chasing extended names and look for extended stocks to hold key moving averages and form a new base before taking fresh positions.
  • Eleven markets are in a Confirmed Uptrend, while Japan and Singapore are in an Uptrend Under Pressure. Yesterday, we shifted South Korea’s KOSPI to a Confirmed Uptrend from an Uptrend Under Pressure as it closed above its previous high.
  • In the trailing four weeks, the Basic Material sector is outperforming, led by stocks in building materials, precious metals, and cement groups. The Transportation and Utility sectors have remained consistent laggards over the short and long term (52 weeks).
  • India’s Sensex broke above 200-DMA resistance for the first time since February 28. See page 4 for an annotated chart of the Sensex. Financial and Technology are outperforming, led by consumer loan and computer tech-services companies, respectively. See page 6 for ideas near pivot in India.
  • Highlighted Focus List idea: HDFC Bank ( HFC.IN ). Refer to page 5 for an annotated chart.
  • See 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 consolidating at January highs. We see immediate support at February highs, followed by the 21-DMA. We recommend a disciplined approach; avoid chasing and trim positions in extended ideas. Refer to page 7 for a list of extended ideas to trim.
  • Ten out of 13 markets are in a Confirmed Uptrend. Hong Kong’s Hang Seng has failed to hold above its 200-DMA and is 4% above its 50-DMA. The average number of distribution days in APAC has increased to 4.5, from 4 last week.
  • The spread between growth and value stocks remains wide. See page 4 for the five-year price performance of growth versus value indices. Growth ideas are still leading, and we have yet to see a significant rotation into value stocks.
  • Leading sectors including Health Care, Technology, and Retail continue to display strength, while lagging sectors like Energy, Transportation, and Financial have worsened.
  • Highlighted Focus List idea: Britannia (BRI.IN). Refer to page 6 for an annotated chart.
  • See page 8 for APAC actionable ideas.

New Oriental Education

Posted on by Derek Higa

Key points:

 

  • New Oriental Education (EDU) shares are breaking out to a new high after 20 weeks of consolidation.
  • Schools in China have opened gradually starting in April, and approximately 71% of schools had reopened by early June. Management is confident that tutoring can be shifted to Sunday if school days are extended to Saturday. We do not see a material impact from a month’s delay in Gaokao. We expect the industry to undergo consolidation due to the pandemic and the company to be a key beneficiary due to its leadership.
  • Barring a hiccup in Q4 FY20 due to COVID-19, operating margin expansion is expected to continue due to the utilization of capacity added in FY18 and FY19. We recommend that investors add to positions.

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 January highs. Stay disciplined, buying only as stocks pivot or display strong support along key levels. Avoid chasing.
  • We shifted Hong Kong to a Confirmed Uptrend from an Uptrend Under Pressure Monday, leaving 10 of 13 markets in a Confirmed Uptrend.
  • Financial stocks are gaining in the recent rally in China and Hong Kong. Refer to pages 7 and 8 for annotated charts of the Hang Seng and CSI 300, respectively.
  • In Hong Kong, lagging sectors such as Basic Material, Capital Equipment, and Financial are showing strength the last five sessions. Breakouts are near January highs led by Financial stocks.
  • Stocks in APAC are consolidating between the 50- and 200-DMA. The percentage of stocks trading above the 50-DMA has declined but has been stable for the 200-DMA over the past four weeks.
  • Refer to pages 10 and 11 for ideas near pivot in Hong Kong and watch list ideas in China, respectively. Refer to page 12 for APAC actionable ideas.
  • Highlighted Focus List idea: Jinxin Fertility (JIFG.HK). Refer to page 9 for an annotated chart.

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.