Author: Heetae Kim

Heetae Kim is a Senior Equity Analyst at William O’Neil + Co., a registered investment advisor serving 400 top-performing institutional portfolio managers worldwide. The firm employs 150 associates in Los Angeles, New York, Boston, San Francisco, and London. Heetae lends his expertise in growth investing to the U.S. Equities Committee and currently focuses on generating ideas for the firm’s Global Laggards product. He also covers the Americas region and the Retail sector. Heetae has also served on the Global Focus List Committee, which approves all equity recommendations for developed, emerging, and frontier markets. His deep knowledge of technical and quantitative analysis has allowed him to work extensively with alpha capture programs, generating positive alpha returns based on client-specified strategies. Mr. Kim joined the firm in 2006, after graduating from the University of California, San Diego with a dual major in economics and political science, with an emphasis on international relations. He also holds a Series 65 license. He enjoys traveling, reading and is an avid sports fan. When time permits, he plays basketball and likes watching basketball, football, and baseball.

Global Laggards

Posted on March 7, 2019March 27, 2019 by Heetae Kim

Highlighted Charts

U.S.: Pan American Silver Corporation ( PAAS ), Proto Labs ( PRLB ), News Corporation ( NWSA ), Lancaster Colony Corp ( LANC ), EQT Corporation ( EQT ), M B Financial ( MBFI ), Resmed ( RMD ), Cars.com ( CARS ), Qurate Retail ( QRTEA ), Juniper Networks ( JNPR ), Fifty One Job ( JOBS ), Jetblue Airways Corporation ( JBLU )

Developed: Nippon Steel and Sumitomo Metal ( NSSM.JP; 5401 JP ), Mitsubishi Electric ( UM@N.JP; 6503 JP ), Singapore Telecom ( TELC.SG; ST SP ), NH Foods ( FY@N.JP; 2282 JP ), Caltex Australia ( CTX.AU; CTX AU ), Orix ( ORIX.JP; 8591 JP ), Cosmos Pharmaceutical ( CSMS.JP; 3349 JP ), Hitachi Metals ( HM@N.JP; 5486 JP ), NTT Data ( COMM.JP; 9613 JP ), Nippon Express ( NX@N.JP; 9062 JP ), Credit Agricole ( CRDA.FR; ACA FP )

Emerging: Discovery ( DSYJ.ZA; DSY SJ )

Stocks worth focusing on in this week’s Global Laggards:

U.S.

Proto Labs Inc ( PRLB ) – Capital Equipment; $2.9B market cap – manufactures custom prototypes and short-run production parts through advanced 3D printing, computer numerical control (

) machining, sheet metal fabrication, and injection molding processes. 80% of revenues are derived from the U.S., while the remainder primarily are from Europe.

O’Neil Methodology

PRLB gapped down substantially on February 7 and closed at a 12-month low after reporting disappointing Q4 2018 results and issuing below-consensus Q1 2019 guidance. While the stock has seen a small rebound over the past month, it continues to trade below its key moving averages.
A/D Rating remains at D- and RS line is sitting near its trailing 12-month low.

Commentary

In Q4, sales of $113M were near the low end of management’s previous guidance of $112M–117M, while EPS of $0.74 was below guidance of $0.77–0.83.
More importantly, the Company provided Q1 2019 guidance that was far below consensus expectations, raised concerns about its growth trajectory. The Company expected to post mid-teens sales and EPS growth from 2019–2020. Revenue guidance of $113M–119M was below consensus of $120M, with the midpoint representing 7.5% y/y growth. EPS guidance of $0.65–0.73 was below consensus of $0.80, with the midpoint representing a 2% y/y decline.
Management noted that the company’s recently-acquired sheet metal business had unperformed its expectations and was the primary driver the company’s weak quarter.

Global Laggards

Posted on February 28, 2019March 27, 2019 by Heetae Kim

Highlighted Charts

U.S.: Pan American Silver ( PAAS ), Adtalem Global Education ( ATGE ), Helen of Troy ( HELE ), Edgewell Personal Care ( EPC ), EQT Corporation ( EQT ), Interactive Brokers ( IBKR ), Encompass Health ( EHC ), Kar Auction Services ( KAR ), Domino’s Pizza ( DPZ ), Interdigital ( IDCC ), Allscripts Healthcare ( MDRX ), Jetblue Airways ( JBLU )

Developed: Henkel Ag ( HEN3X.DE; HEN3 GR ), Denso ( DE@N.JP; 6902: JP ), Fancl ( FANC.JP; 4921 JP ), Orkla ( ORK.NO; ORK NO ) Imperial Oil ( IMO.CA; IMO CN ), Hargreaves Lansdown ( HL.GB; HL LN ) Cochlear ( COH.AU; COH:AU ), Ferguson ( FERG.GB; FERG LN ), Hitachi Metals ( HM@N.JP; 5486 JP ), NTT Data ( COMM.JP;9613 JP )

Stocks worth focusing on in this week’s Global Laggards:

U.S.

Edgewell Personal Care ( EPC ) – Consumer Staple; $2.4B market cap – U.S.-based consumer products company with brands including Edge and Skintimate (shaving gels), Stay free and Carefree (feminine products), Playtex (infant care), and Bull Dog (skin care).

O’Neil Methodology

Shares are reverting from resistance at the down-sloping 200-DMA. Shares are trading 25% off 52-week high.
Poor RS Rating at 34 and down-sloping RS line.
Sharp deterioration in Group Rank at 166, compared to 70 on February 22.

Commentary

Edgewell faces heavy competition in the U.S. where it derives about 55% of its revenue. As of Q1 FY 2019, its market share in the shaving gels segment lost 120bps y/y, owing to stiff competition from P&G’s Gillette.
The Company’s Q1 FY 2019 revenue declined 2.4% y/y, better than consensus estimates of a 5% decrease. Organic net sales dropped 3.5% y/y owing to a fall in revenue from North America wet shave, feminine care, and infant care segments due to concentrated market competition.
Moreover for FY 2019, it expects a low single digit y/y decrease in net revenue and adjusted EPS of $3.30–3.6 (versus consensus estimates of $3.44). However, it reduced GAAP EPS estimates to $2.09–2.39 (versus its previous guidance of $2.2–2.5), as it considers certain expenses, including restructuring charges and integration costs.
Further, the U.S. Consumer Staples sector is currently under pressure owing to lower than expected earnings reported by most companies in the recent earnings season.

Global Laggards

Posted on February 21, 2019March 27, 2019 by Heetae Kim

This report has been curated by our sector analysts to find stocks showing technical weakness. We believe these stocks are laggards relative to their own domestic markets. We recommend that they be underweighted as they may be vulnerable to further downside risk and underperformance.

Highlighted Charts

U.S.: Teck Resources (

), Proto Labs (

), Dish Network (

), Constellation Brands (

), Marathon Petroleum (

), Rayonier Reit (

), Teva Pharmaceuticals (

), Urban outfitters (

), Juniper Networks (

), Bottomline Technologies (

), American Airlines (

Developed: Kuraray (RK@N.JP; 3405 JP), Siemens (SIEX.DE; SIE GR), ITV (ITV.GB; ITV LN), Imperial Oil (IMO.CA; IMO CN), Resona (DBHI.JP; 8308 JP), Hisamitsu Pharmaceutical (HSMP.JP,4530 JP), Ain (DCL.JP; 9627 JP), Hitachi Metals (HM@N.JP; 5486 JP), NTT Data (COMM.JP; 9613 JP), Swedbank SA (SWED.SA).

Emerging: Hyundai Motor (HDR.KR; 005380 KS).

Stocks worth focusing on in this week’s Global Laggards:

Swedbank SA (SWED.SE) – Swedbank offers financial services in Sweden, Estonia, Latvia, and Lithuania. Its main offerings are mortgages, asset management, and card services.

O’Neil Methodology

The shares are reacting negatively over the last two sessions and are clearly trading below key support levels.
Poor fundamental ratings: EPS Rank of 68, Composite Rating of 42, SMR Rating of B.
Technical ratings: RS Rating of 35 (near all-time low), A/D Rating of B-.
The Bank-Money Center Industry Group of Sweden has sharply declined in rank over the last few weeks. The group is now ranked 75, down from 37 eight weeks ago.

Commentary

In the Danske Bank scandal, Swedbank is the latest Nordic bank to be linked to alleged money laundering.

Per Bloomberg, Nordic and Baltic banks were helping the former Soviet Union channel illegal funds to the West.
On Wednesday, Swedbank’s CEO said she couldn’t deny allegations from a Swedish media report that claimed Swedbank handled approximately $4B linked to Danske Bank’s suspicious activities.
The Estonian Financial Supervisory Authorities (FSA) announced it would start investigating immediately, with the Swedish FSA joining efforts. The Bank of Lithuania will also support the investigation.
Bill Browder, a London-based investor, said he intends to file criminal complaints against Swedbank over the allegations.
Browder claims he has sufficient evidence to show that Russian money launderers used the Nordic banking system to move funds illegally.
We believe the latest reports will bring continuous selling pressure to the stock, which will remain under pressure.

There may be downside support at the SEK 153 level, about 8% downside. But given how Danske Bank shares are trading, Swedbank shares may trend below this support level. We advise covering the short at the 200-DMA as a stop-loss.

Global Laggards

Posted on February 14, 2019March 27, 2019 by Heetae Kim

Highlighted Charts

U.S.: Bunge ( BG ), Dish Network ( DISH ), Hsbro ( HAS ), Delek US Holdings Inc ( DK ), Markel ( MKL ), Healthcare Svcs ( HCSG ), Central Garden Pet ( CENTA ), Penske Automotive Group ( PAG ), Netgear ( NTGR ), Amdocs ( DOX ).

Developed: Henkel ( HEN3X.DE; HEN3 GR ), Mitsubishi Chemical ( MCHC.JP; 4188 JP ), NGK Insulators ( KI@N.JP; 5333 JP ), Calbee ( CALB.JP; 2229 JP ), Subsea 7 ( SUBC.NO; SUBC NO ), Hargreaves Lansdown ( HL.GB; HL/LN ), Daiichi Sankyo ( D@SA.JP; 4568 JP ), Ain Holdings ( DCL.JP; 9627:JP ), Isetan Mitsukoshi Holdings ( ZW@N.JP; 3099:JP ), Hitachi Metals (HM@N.JP; 5486 JP), Nomura Research (NMRS.JP; 4307 JP), Nippon Yusen KK (NY@N.JP; 9101 JP).

Emerging: Sociedad Quimica y Minera De Chile ( SQB.CL; SQM/B CI ), Maruti Suzuki India ( MUD.IN; MSIL IN ).

Stocks worth focusing on in this week’s Global Laggards:

U.S.

Markel Corp ( MKL ) – Insurance-Property/Casualty/Title; $14B market cap – is a financial holding company offering insurance products primarily focused on specialty insurance.

O’Neil Methodology

The stock is facing strong resistance along its declining 50-DMA.
Poor fundamental ratings: EPS Rank of 26, Composite Rating of 20, SMR Rating of D.
Technical ratings: RS Rating of 27 (near all-time low), A/D Rating of D-.
Pretax margin and ROE have deteriorated over the last four years, and currently stand at 0% and -1%, respectively.
The Insurance-Property/Casualty/Title industry group has sharply declined in rank over the last few weeks. The group is now ranked 97, down from 26 eight weeks ago.

Worsening Combined Ratio During the Last Two Years

The combined ratio of the Company has significantly deteriorated over the last few years. In 2018, it managed to improve, but it remains higher than the industry median of 92%.

Global Laggards

Posted on February 7, 2019March 27, 2019 by Heetae Kim

Highlighted Charts

U.S: Bunge ( BG ), Embraer ( ERJ ), Proto Labs ( PRLB ), Gentex ( GNTX ), Archer Daniels Midland ( ADM ), Delek US ( DK ), T Rowe Price ( TROW ), Gilead Sciences ( GILD ), Caleres ( CAL ), Evolent Health ( EVH ), Hawaiian Holdings ( HA )

Developed: Sumitomo Chemical ( SC@N.JP; 4005 JP ), Siemens ( SIEX.DE; SIE GR ), Honda Motor ( HO@N.JP; 7267 JP ), Nichirei Corporations ( RZ@N.JP; 2871 JP ), Subsea 7 ( SUBC.NO; SUBC NO ), Sumitomo Mitsui Financial ( SMFI.JP; 8316 JP ), Santen Pharma ( XY@N.JP; 4536 JP ), Isetan Mitsukoshi ( ZW@N.JP; 3099 JP ), Hitachi Metals ( HM@N.JP; 5486 JP ), Nomura Research ( NMRS.JP; 4307 JP )

Emerging: Vale ( VA3.BR; VALE3 BZ ), Fubon Financial ( FUB.TW; 2881 TT )

Stocks worth focusing on in this week’s Global Laggards:

Proto Labs ( PRLB ) – Capital Equipment; $2.8B market cap – develops and manufactures custom prototypes and short-run production parts through advanced 3D printing, computer numerical control ( CNC ) machining, sheet metal fabrication, and injection molding processes. 80% of revenues are derived from the U.S., while the remainder primarily come from Europe.

PRLB gapped down substantially on February 7 after reporting disappointing Q418 results and issuing below-consensus Q119 guidance. The stock is now sitting below its trailing twelve-month low of $101, while it’s A/D Rating has declined to D-.

Sales of $113M were near the low end of management’s previous guidance of $112M–117M, while EPS of $0.74 was below guidance of $0.77–0.83.

More importantly, the company provided guidance for Q119 that was far below consensus expectations and raised concerns about the growth trajectory of a company that has long been expected to post mid-teens sales and EPS growth from 2019–2020. Revenue guidance of $113M–119M was below consensus of $120M, and the midpoint of this range represents 7.5% y/y growth. EPS guidance of $0.65–0.73 was below consensus of $0.80, and the midpoint of this range represents a 2% y/y decline.

Management noted that the company’s recently acquired sheet metal business had underperformed expectations and was the primary driver of the weak quarter.

Global Laggards

Posted on January 31, 2019February 1, 2019 by Heetae Kim

Highlighted Charts

U.S.: AAR ( AIR ), Unifirst ( UNF ), Boston Beer Company ( SAM ), T Rowe Price ( TROW ), Henry Schein ( HSIC ), Party City Holdco ( PRTY ), Carmax ( KMX ), Juniper Networks ( JNPR ), Autohome ( ATHM ), Hawaiian Holdings ( HA ).

Developed: Henkel AG ( HEN3X.DE; HEN3 GR ), Suez ( SEV.FR; SEV FP ), Nissan Motor ( NR@N.JP; 7201 JP ), Beiersdorf ( BEIX.DE; BEI GR ), Nintendo ( NNDO.JP; 7974 JP ), Park24 ( PARR.JP; 4666 JP ), Morphosys ( MORX.DE ), Isetan Mitsukoshi Holdings ( ZW@N.JP; 3099 JP ).

Emerging: Petronas Chemicals (PCHE.MY; PCHEM MK ), Bajaj Auto ( BHG.IN; BJAUT IN ), Tenaga Nasional ( TENN.MY; TNB MK ), L&T Finance ( LFH.IN; LTFH IN ).

Stocks worth focusing on in this week’s Global Laggards:

U.S.

Autohome ( ATHM ) — Technology;($8B market cap)— is the leading platform in China providing automobile listing information to consumers. In 2017, 101 automakers used the company’s platform for advertising and 27,167 dealers used the platform’s lead generation service. The website’s user forum had more than 58.6M registered users, the number of average daily unique visitors to the website from mobile was 13.7M, and the number of mobile app daily unique users was 8.8M. The company also provides loans, leasing, insurance, and used car transactions through its website.

Global Laggards

Posted on January 24, 2019February 1, 2019 by Heetae Kim

Highlighted Charts

U.S.: Barrick Gold ( GOLD ), Leidos ( LDOS ), Delek U.S. Holdings ( DK ), Western Union ( WU ), Livanova ( LIVN ), Autonation ( AN ), Caleres ( CAL ), Williams Sonoma ( WSM ), HP ( HPQ ), GCI Liberty ( GLIBA ), Hawaiian Holdings ( HA ).

Developed: Henkel ( HEN3X.DE; HEN3 GR ), Daikin Industries ( DA@N.JP; 6367 JP ), Reckitt Benckiser ( RB.GB; RB LN ), Omv ( OMV.AT; OMV AV ), Ms&Ad Insurance ( MSAD.JP; 8725 JP ), Astellas Pharma ( YP@N.JP;4503 JP ), Daiichi Sankyo ( D@SA.JP; 4568 JP ), Isetan Mitsukoshi Holdings ( ZW@N.JP; 3099 JP ), Toyota Tsusho ( TYTS.JP; 8015 JP ), Finning ( FTT.CA; FTT CN ).

Emerging: Nissan Motor ( NR@N.JP; 7201 JP ), TVS Motor ( TVS.IN; TVSL IN ), Cathay Financial Holdings ( CFC.TW; 2882 TT ).

Stocks worth focusing on in this week’s Global Laggards:

U.S.

Western Union ( WU ) – Financial ($8B market cap) is a global leader in cross-border, cross-currency money movement. The Company provides money transfer and payment service through its 550K agent locations in 200 countries.

Global Laggards

Posted on January 17, 2019February 1, 2019 by Heetae Kim

Highlighted Charts

U.S.: Eagle Materials Inc ( EXP ), GATX Corp ( GATX ), Liberty Media Corporation ( LSXMA ), Marathon Oil Corp ( MRO ), H&R Block ( HRB ), Bio Rad Labs ( BIO ), Mylan ( MYL ), Nordstrom ( JWN ), Cirrus Logic ( CRUS ), Evolent Health ( EVH ), Saia Inc ( SAIA )

Developed: Daicel ( DC@N.JP; 4202 JP ), Siemens AG ( SIEX.DE; SIE GR ), ITV Plc ( ITV.GB; ITV LN ), Beiersdorf ( BEIX.DE, BEI GR ), Omv ( OMV.AT; OMV AV ), Japan Post Bank ( JBPC.JP; 7182 JP ), Isetan Mitsukoshi Holdings ( ZW@N.JP; 3099 JP ), Hitachi Metal ( HM@N.JP; 5486 JP ), Amadeus ( AMS.ES; AMS:SM )

Emerging: Fubon Financial Holdings ( FUB.TW; 2881 TT ), Lotte Shopping ( LTE.KR; 023530 KS )

Stocks worth focusing on in this week’s Global Laggards:

U.S.

Cirrus Logic ( CRUS ) — (Technology; $2B) — is a leading provider of low-power integrated circuits (IC) for audio and voice signal processing applications. Its products are used in smartphones, tablets, wearables, and emerging smart home applications. Apple is its key customer with 82% revenue contribution in the latest quarter.

Given the 82% exposure to Apple, we believe the company may miss estimates in the coming quarter. Also, guidance for March 2019 could be lower than expected due to Apple’s recent production cut for the March quarter.

On January 2, Apple revised its December quarter revenues to $84B (-5% y/y) versus $89B to $93B previously, mainly due to the lower than anticipated iPhone sales in China.

On January 9, Nikkei Asian Review reported that Apple is planning to cut its March quarter production by 10%. Overall planned production of both old and new iPhones is likely to be in the range of 40–43M units for the March quarter (previously it was 47–48M units).

In December, the Company lowered its December quarter revenue guidance to $300–340M (previously it was $360–400M), due to weakness in the smartphone market.

Global Laggards

Posted on January 10, 2019February 1, 2019 by Heetae Kim

Highlighted Charts

U.S.: Servicemaster ( SERV ), Liberty Media ( LSXMA ), Booking ( BKNG ), Marathon Oil ( MRO ), CyrusOne ( CONE ), Trustmark ( TRMK ), Realogy ( RLGY ), Insulet ( PODD ), Autonation ( AN ), Jabil ( JBL ), Unifirst ( UNF ), Saia Inc ( SAIA )

Developed: Akzo Nobel ( AKZA.NL; AKZA NA ), Nippon Telegraph and Telephone ( NTT.JP; 9432:JP ), Aeroports de Paris FA ( ADP.FR; ADP FP ), Lundin Petroleum ( LUPE.SE; LUPE SS ), Merlin Properties ( MRLN.ES; MRLM SM ), Diasorin ( DIA.IT; DIA IM ), Domino’s Pizza ( DMP.AU; DMP:AU ), Fujifilm Holdings ( FP@N.JP; 4901 JP ), Amadeus ( AMS.ES; AMS SM )

Emerging: Berli Jucker ( BJCT.TH; BJC TB ), Shinhan Financial ( SHB.KR; 055550 KS )

Stocks worth focusing on in this week’s Global Laggards:

U.S.

Realogy ( RLGY ) – Financial; $2B market cap— is the largest owner and operator of residential real estate brokerages in the U.S. The company franchises its brands to residential and commercial real estate brokerages in the U.S. and internationally, with more than 16,000 affiliated offices (~5% company owned) across 116 countries and territories.

Two key fundamental drivers underpin our negative view on the name:

Slowing housing sales. The company missed Q3 estimates and lowered guidance after transaction volume growth came in at only +1% y/y (versus 3-6% guidance).
Rising commission rates paid to agents. The hiring environment for real estate agents is becoming increasingly competitive, causing brokerages to receive a lower fee split from agents. Websites like Zillow and Trulia and social media platforms like Facebook and Instagram have given agents a greater ability to promote their own brands and attract clients; this dynamic has reduced the appeal to agents of working with large brokerages, which take a larger fee cut from agents than smaller/independent brokerages.

The stock continues to be in a long downtrend, having closed above its 50-DMA only a handful of times over the past eight months. Technical/quantitative ratings are poor, with an RS Rating of 17, an A/D Rating of D, and a Composite Rating of 20. While the stock trades at only 10x 2019 EPS, we believe the its profitability will continue to deteriorate due to secular headwinds.

Global Laggards

Posted on December 13, 2018February 1, 2019 by Heetae Kim

ighlighted Charts

U.S.: Wabco

oldings (

yatt

otels (

), Penske Automotive (

), Lithia Motors (

), Cypress Semiconductor (

), United Parcel Service (

)

Developed: Solvay SA (SOL.BE; SOLB BB), Sandvik (SAND.SE; SAND SS), Cyberagent (

BA.JP; 4751:JP), Greencore Group (GNC.GB; GNC LN), Finecobank Spa (FCBK.IT; FBK:IM), Canadian Tire (CTC/A.CA; CTC CN), Morrison(

)spmkts. (MRW.GB; MRW LN), Fujifilm

oldings (FP@N.JP; 4901 JP)

Emerging: Nan Ya Plastics (NYP.TW; 1303 TT), Cathay Financial

oldings (CFC.TW; 2882:TT)

Stocks worth focusing on in this week’s Global Laggards:

U.S.

yatt

otels (

) — Consumer Cyclical; $7.5B market cap — manages owned and franchised

yatt Branded properties across the world.

Revenues have been declining for the last three quarters and are expected to continue to do so in the upcoming quarter.
Institutional fund ownership has been steadily declining the past year.
The Company operates in the upscale segment. Amidst slowing occupancy growth, in line with our call in August, the Company is far more exposed to a downturn than its peers. Also, its business model is overly dependent on owned and leased properties, with more than 70% of revenues coming from the such properties, giving

yatt little flexibility.
The Company has one of the lowest adjusted EBITDA margins in the industry, which adds to its lack of resilience in a downturn.
The stock’s A/D and RS Ratings have been steadily declining and are currently at E and 38, respectively, indicating increased selling pressure.