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.

Media and Internet

Posted on by Derek Higa

Key points:

  • Thoughts on XLC
  • Old Media versus New Media IG Ranks
  • Theme Updates
    • Cord Cutting and Connected TV: ROKU, TTD
    • OTT Completive Landscape: DIS, NFLX
    • Social Media Regulation: FB, TWTR
    • Education-as-a-Service: CHGG, EDU, TAL, GSX, Koolearn Tech, ARCE
    • Online Food Delivery: Just Eat, Takeaway.com, Delivery Hero, GRUB
  • Focus List Ideas
    • DIS
    • TWTR
    • CHGG
    • Other Focus List Ideas (not in presentation)
    • MTCH
    • InfoEdge (India)
    • Stroeer (Germany)
    • VGI (Thailand)
  • Watch List Ideas
    • TTD
    • ROKU
    • EDU
    • TAL
    • GSX
    • Koolearn Tech (Hong Kong)
    • Just Eat Takeaway.com (U.K.)
    • Delivery Hero (Germany)
  • FB, NFLX, GRUB Weak

APAC Weekly Summary

Posted on by Derek Higa

Key points

  • MSCI Asia Ex Japan continues to be in consolidation awaiting a trend change.
  • One (China) out of 13 markets are in a Confirmed Uptrend, five are in an Uptrend Under Pressure, and seven are in a Rally Attempt.
  • The number of APAC stocks trading above their 50- and 200-DMA has increased in the past week after declining since the start of August.
  • The Health Care sector is gaining strength in Hong Kong. Refer to pages 3 and 4 for sector heat map and Rotation Graph.
  • We are highlighting two recent additions to our Focus List: JCR Pharmaceuticals (JCRE.JP) and Wuxi Apptec (WUXA.HK). Refer to pages 7 and 9 for annotated charts.
  • For fundamentally sound ideas with RS near highs and defensive ideas in APAC refer to pages 10 and 11, respectively.
  • Refer to page 12 for Actionable Focus List ideas.

APAC Market Update

Posted on by Derek Higa

Yesterday we upgraded Mainland China to Confirmed Uptrend after a day 10 follow-through. On Monday, August 19 the CSI 300 rose more than 2% on greater volume after the Chinese government announced interest rate reforms. We see the index’s next resistance near July highs of 3,900-3,950 and would like it to hold above the 50-DMA (~3,700) in the near term to boost our conviction.

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 month lows. During the week, China, India, Japan, and South Korea were moved to a Rally Attempt from a Downtrend, but our conviction is low.
  • Hong Kong remains in a Downtrend and trading near January lows. Relative strength of all sectors, except for Utilities and Technology (surprisingly), has declined. Bellwether stock Tencent Holdings (TCNT.HK) remains under pressure. Refer to page 7 for a detailed annotated chart.
  • China A shares are holding above the 200-DMA, but we recommend waiting for a follow-through day before becoming more constructive on the market.
  • Health Care, Retail, and Technology remain resilient in APAC despite weakness in the broader market.
  • Highlighted Focus List idea: Haidilao Holdings (HAIN.HK). Refer to page 6 for an annotated chart.
  • Refer to page 8 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 Ex Japan is trading near 52-week lows with support at January lows of $61. If this fails, the next level of support is unclear.
  • Of 13 APAC markets, one is in a Confirmed Uptrend, six are in an Uptrend Under Pressure, and six are in a Downtrend. Our market conditions have turned more bearish since last Wednesday.
  • Re-escalation of the U.S.-China trade dispute has led to a clustering of distribution days in the past five sessions. We have downgraded Hong Kong, South Korea, India, Japan, China, and Malaysia to a Downtrend in the last four sessions.
  • Technology and Financial sectors are holding up relatively better despite weak market conditions, with 56% and 47% of liquid APAC stocks (ex. China) trading above the 200-DMA, respectively.
  • Highlighted Focus List ideas: Pidilite Industries ( PID.IN ) and Accton Technology ( ACC.TW ). Refer to pages 6 and 8 for annotated charts.
  • Refer to page 9 for ideas with low beta, three-month RS Rating >80, and near pivot.
  • Refer to page 10 for Actionable Focus List ideas.

APAC Market Update

Posted on by Derek Higa

Key points:

  • We are downgrading China to a Downtrend as the CSI 300 fell below the 50-DMA on Friday and key support of ~3,675 today.
  • The selloff has intensified amid escalating trade tensions between the U.S. and China.
  • Among our China Focus List ideas, Avic Jonhon Optronic Tech ( CAO.CN ), Zhejiang Dingli ( ZDM.CN ), Shennan Circuits ( LZV.CN ), Wuliangye ( YWU.CN ), Topchoice Medical ( ZTI.CN ), and Guangdong Haid Group ( GHG.CN ) are holding up well and trading above their 50-DMA.

APAC Market Update

Posted on by Derek Higa

Key points:

 

  • We are downgrading Hong Kong and South Korea to a Downtrend from an Uptrend Under Pressure and Rally Attempt, respectively.
  • Focus List ideas at risk in Hong Kong include Logan Property Holdings ( LPTY.HK ), AIA Group ( AGP.HK ), and China Tower Corp ( CHTW.HK ).
  • We recommend trimming positions in extended Focus List ideas in Hong Kong that include Yihai International Holding ( YIHA.HK ), Li Ning ( LNIN.HK ), and Haidilao International Holding ( HAIN.HK ).
  • We have shifted China, Taiwan, Thailand, and Singapore to an Uptrend Under Pressure from a Confirmed Uptrend.

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.

 

  • Of 13 APAC markets, eight are in a Confirmed Uptrend, four are in an Uptrend Under Pressure, and one is in a Rally Attempt. The average distribution day count is becoming elevated at 4.2.
  • We shifted Hong Kong to an Uptrend Under Pressure today; the distribution day count has risen to four with three recorded in the last four sessions.
  • Our concern is rising in India. The market is Under Pressure and distribution has risen to elevated levels. We remain cautious as the BSE Sensex 30 and CNX Nifty 50 are testing support at the 200-DMA. Refer to pages 8 and 9 for annotated charts.
  • In India, large caps are outperforming. A majority of Consumer Cyclical, Energy, and Technology sector stocks are trading below their 200-DMA.
  • Highlighted Focus List Idea: Asian Paints ( API.IN ). Refer to page 7 for annotated chart.
  • Refer to page 10 for negative alert ideas in India.
  • Refer to page 11 for constructive ideas in India.
  • Refer to page 12 for APAC Actionable Ideas.

Twitter

Posted on by Derek Higa

Key Points:

 

  • We are reiterating our Buy recommendation after Twitter reported continued acceleration in monetizable daily active users (mDAU). Q2 mDAU grew 14% y/y after a return to double-digit growth in Q1. Shares are breaking out of an early-stage base. We recommend adding to positions. 
  • Twitter has a three- and five-year revenue growth rate of 8% and 24%, respectively. It has a three- and five-year earnings growth rate of 35% and 64%, respectively.
  • Fundamental ratings: EPS Rank 99. Composite Rating 88. SMR Rating A.
  • Technical ratings: RS Rating 66 and A/D Rating C-. Technical ratings are expected to improve given the stock’s strong move after Q2 results.
  • The number of funds holding Twitter shares has increased to 1,228 as of June 2019, from 1,187 in June 2018.