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 May 24, 2018February 1, 2019 by Heetae Kim

U.S.

Arch Coal (

)—Energy ($1.6B market cap) – Coal producer with operations in West Virginia, Virginia, Kentucky, and Wyoming generates two-thirds of revenues from the U.S. and one-third from overseas, mostly in Europe/Asia.

After emerging from bankruptcy in Q3 2016 with a big reduction in debt and operations that were once again profitable, the Company reported five quarters of solid growth.
From Q4 2016 to Q4 2017, it averaged 16% sales growth and 40% EPS growth. It also beat consensus EPS estimates by double digits in four of the five quarters.
Q1 2018 EPS missed the consensus by 33% as sales declined 4% and missed the consensus by high-single digits. It was hit with a trifecta of lower volumes, lower realized prices, and higher cash costs in the quarter.
The Company also lowered full-year 2018 guidance for coking and thermal coal volumes and raised cash cost guidance by high-single digits.
Consensus now expects sales and EPS to decline an average of 4% and 13%, respectively, for the next eight quarters. Full-year 2018 consensus EPS estimates have come down 25% since the Q1 miss.
Despite pledges by the Trump administration to keep the coal industry alive, competition from natural gas in the U.S. and the combination of natural gas and other renewables in overseas markets will likely continue to erode industry revenues.
U.S. natural gas production is at an all-time high and supply is expected to continue growing along with domestic demand for the next two decades.
Coal production increased in 2017 for first time in three years, but remains 35% below a 2008 peak. However, demand did not increase and is expected to fall by single digits annually going forward. Supply is expected to fall this year but flatline thereafter, which could put more pressure on prices.
Shares fell 15% on volume that was 700% above average after the Q1 earnings miss, breaking through the 200-DMA. Volume to the upside has since been weak, and shares are hitting resistance at the 21-DMA. This is a new short opportunity.
Despite the cheap valuation (7x trailing Q4 EPS), declining earnings for the next few years could create a value trap.

Global Laggards

Posted on May 17, 2018February 1, 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.

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

U.S.

Teradyne Inc (TER ) – Technology ($7.1B market cap) – Teradyne is a global supplier of automation equipment for test and industrial applications. The Company is engaged in the development and manufacturing of systems used to test semiconductors, wireless products, data storage, and complex electronics systems in the consumer electronics, wireless, automotive, industrial, computing, communications, and aerospace/defense industries.

On April 24, the Company guided for Q2 2018 revenues of $505M at the midpoint (-4% q/q), which was well below consensus estimates of $694M at that time, as demand for mobile testing systems materially weakened during Q1 2018. Slower-than-expected node transition by Apple (from 10nm to 7nm processing technology) is the main reason for the soft outlook.
Going forward, revenue growth is expected to decelerate. In the SoC Test market (smartphone-related), TER expects 2018 revenue of $2.2B-2.4B (-13% y/y at midpoint), versus previous expectations of $2.4B-2.8B (-2% y/y at midpoint). Given the lower SoC Test market estimate, TER expects H1 2018 revenues to be similar to H2 2018, compared with prior expectations that revenues will be back-end-loaded in 2018. This cautious outlook has resulted in downward revisions to 2018 and 2019 EPS consensus forecasts.
Shares sharply breached their 40-WMA on above average volume following the disappointing outlook. Shares have been unable to rebound to original levels since August 2016.
TER has a poor RS Rating of 30 and Datagraph Rating of 48.
Shares are trading 25% off highs after topping in March 2018.
Per consensus estimates, EPS growth is expected to decline 19% in 2018 and increase 36% in 2019; both figures were recently revised down.
We anticipate shares will roll over after hitting resistance near the 40-WMA and may retest prior lows of ~$32.

Developed

Olympus Corp. (OLYC.JP ) – Health Care ($12B market cap) – The Company is engaged in medical, life science, industrial, and imaging businesses. The medical segment makes up 78% of total revenue.

The Company reported Q4 FY 2018 results this week. Revenue was flat y/y, while net profit declined 44%. Management indicated that the targets from their five-year plan announced in 2016 will be postponed for two to three years. They revised revenue growth 10% lower and operating profit 9% lower than previously expected. The Company cited factors that led to expected under-delivery of products, including a more stringent regulatory environment and a faster-than-expected research budget decline in both the U.S. and Europe.
The stock gapped down 3% on the results and is now trading below both its 10- and 40-WMA. The stock’s RS line is hitting a five-year low with an RS Rating of just 14. Its A/D Rating declined from C to D+ this week.
We believe shares will continue to hit resistance along the 200-DMA and lag the Japanese market. Potential near-term downside is to August 2017 lows of ¥3,600 (-8%).

Global Laggards

Posted on May 10, 2018February 1, 2019 by Heetae Kim

U.S.

Cambrex Corp – Health Care ($1.6B market cap) – Cambrex develops active pharmaceutical ingredients used in the manufacture of drug products. As of December 2017, Gilead Sciences accounted for 35% of consolidated sales.

Though revenue from Gilead is expected to decline consistently over the next four years, it is still expected to make up 29% of total revenue in 2018. Of this, 26% is expected to come from Gilead’s hepatitis C drugs which continue to decline after the Company found a cure just a few years ago. Gilead announced a large sales reduction in its hepatitis C products in its recent Q1 results. This substantial decline in revenue from Gilead will need to be replaced over the next few years.
The Company reported Q1 2018 results that missed expectations. The Company reported its first y/y decline in EPS and revenue growth in the last 15 quarters.
The stock gapped down 10.5% on the results. We believe the stock will lag the general market uptrend and stay trapped below resistance along the 10- and 40-WMA, with potential downside to November lows of ~$43. We recommend cutting losses should the stock close above the 200-DMA at $52.

Developed

BE Semiconductor ( BESI.NL ) – Technology ($3.0B market cap) – BE Semiconductor (BESI) develops equipment for leadframe, substrate, and wafer level packaging applications in various end markets, including electronics, computer, automotive, industrial, LED, and solar energy. Customers include Toshiba, Samsung, NXP, Renesas, Micron, Skyworks, Sony, and Infineon.

On April 26, the Company announced Q1 2018 results that were largely in line with consensus forecasts, but it gave Q2 guidance that was significantly below consensus. As a result, shares fell 17% on 5x the average daily volume, and broke below the 40-WMA for the first time since July 2015. Shares have been unable to rebound anywhere near original levels since breaking below long-term support at the 40-WMA.
BESI expects Q2 revenue to grow 10-15% sequentially (€170-178M), below consensus of ~30% sequential growth. EBIT guidance was also below consensus. On a y/y basis, sales growth is expected to decelerate from a high of 69% in Q3 2017 and 41% in Q1 2018, to 17% in H1 2018. This cautious outlook has resulted in downward revisions to 2018 and 2019 EPS consensus forecasts.
BESI has a poor RS Rating of 50 and Datagraph Rating of 57.
Shares are trading 29% off highs after topping in March 2018.
Per consensus estimates, EPS growth is expected to decelerate from 167% in 2017 to 3% in 2018.
We anticipate shares will roll over after hitting resistance near the 40-WMA. The last time shares broke below the 40-WMA, BESI corrected more than 60% from its peak.

Global Laggards

Posted on May 3, 2018February 1, 2019 by Heetae Kim

National Beverage ( FIZZ ) – Consumer Staples ( $4B market cap ) – Manufactures and distributes multi-flavored soft drinks, juice, flavored carbonated, and spring water products.

The stock’s RS line is hitting new 52-week lows as the stock is finding resistance along the 10-WMA. It has a weak RS Rating of 14. We believe the stock will likely fall to near-term support in the low ~$80s and see potential for an eventual drop to the last breakout range at ~$63.
The Company reported Q3 FY 2018 revenue of $227.5M, below consensus expectations for $232.1M. The stock sold off 8% on the miss on March 9 on a very strong day for the market.
Revenue growth rate has peaked and is expected to decelerate over the next two fiscal years.
Growth has been driven by the Company’s LaCroix sparkling water and competition is increasing in the sparkling water space with larger players making pushes to take market share. Pepsi recently launched Bubly, Nestle has been rolling out sparkling water brands, and Coca-Cola bought Topo Chico last year.

Moneysupermarket.com Group ( MONY.GB ) – Technology ($2.2B market cap) – Moneysupermarket.com provides online money saving and personal finance services through brands such as MoneySuperMarket.com, MoneySavingExpert.com, and TravelSupermarket.com. Under its Money segment, the Company offers customers the ability to search for and compare products, including credit cards, accounts, mortgages, loans, debt solutions, savings accounts, and business finance.

On February 22, the Company announced 2017 results that were slightly below forecasts and warned that, in 2018, the Company plans to step up costs to improve site optimization. It noted that revenue is likely to increase at a slower pace in 2018 (~ +4% versus consensus expectations of ~ +7%). Adjusted EBITDA is expected to be flat versus 2017. This cautious outlook has resulted in downward revisions to 2018 and 2019 EPS consensus forecasts.
Shares sharply breached their 40-WMA on above average volume following the disappointing outlook. Shares have been unable to rebound to their original levels since breaking below long-term support at the 40-WMA.
MONY has a poor RS Rating of 16 and Datagraph Rating of 40.
Shares are now trading 17% off highs after topping in January.
Per consensus estimates, EPS growth is expected to decelerate from 16% in 2018 to 9% in 2019, both figures were recently revised downward.
We anticipate shares will roll over after hitting resistance near the 40-WMA and may retest prior lows of ~240p.

Global Laggards

Posted on April 26, 2018February 1, 2019 by Heetae Kim

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

U.S.

Vishay Intertechnology (VSH) – Technology ($2.4B market cap) Manufacturer of discrete semiconductors (diodes, rectifiers, MOSFETs, optoelectronics, and selected ICs) and passive electronic components (resistors, inductors, and capacitors) used in virtually all types of electronic devices and equipment.

On February 6, the Company guided for Q1 2018 revenue growth of 1-2% q/q and lower-than-expected gross margin of 26.5-27.5%, below consensus expectations of 28%. Following the disappointing guidance, shares breached their 40-WMA on heavy volume for the first time since early 2016.
The Company is running out of capacity in several key product areas where lead times are extended, including MOSFETs, diodes, and resistors. Despite impending capacity additions, the Company is behind schedule due to constraints at equipment suppliers.
Shares have been unable to rebound to original levels since breaking below long-term support at their 40-WMA, and they have a poor RS Rating of 24 and A/D Rating of D+. Shares are now trading 24% off highs after topping in mid-January.
Per consensus estimates, revenue growth is expected to decelerate from 12% in 2017 to 7% in 2018 and 5% next year.
The Electronic-Parts Industry Group’s Rank has fallen to 131 from 87 six weeks ago (with 197 being the worst).

Hortonworks Inc (HDP) – Technology ($1.3B market cap) Distributor of Hadoop solutions, an open-source big data platform. The Company’s enterprise-ready solutions enable organizations to govern, secure, and manage large data sets.

The stock broke below its 40-WMA and is testing longer-term support at ~$15.60. The next level of support is at ~$14.
After a strong uptrend in 2017, the stock has consolidated since December 2017 in a wide and loose range. Most recently, its RS line has turned lower and selling pressure has increased and its A/D Rating has fallen to a D.
Selling pressure increased after another Hadoop distributor, Cloudera (

), reported revenue guidance below consensus. Revenue growth that is below expectations for

suggests a slower turn to profitability and could be a read through for other Hadoop distributors like HDP.
Annual EPS estimates for 2018 and 2019 have been revised lower recently. HDP reports Q1 2018 results on May 8.

Developed

Just Eat (JE.GB; JE/:LN) – Technology ($7.1B market cap) U.K.-based operator of a digital marketplace for takeaway food delivery. Also operates in Australia, New Zealand, Mexico and other European countries.

Shares are trading at resistance near their 10- and 40-WMA. We believe the stock will trend back to April lows, or ~660p, and continue to lag the U.K. market.
The stock’s A/D Rating remains poor at D- despite recovering from April lows. Relative Strength has been in a downtrend since thestock peaked in March.
Shares first displayed weakness in March after the Company announced plans to invest £50M in its own delivery service to take on rising competition from peers like UberEats, Deliveroo, and Amazon in the U.K.
Investments will weigh heavily on profitability in 2018. Underlying EBITDA of £165M-185M is below consensus expectations of £226M. The Company expects 2018 EBITDA margin of 25-26%.

Global Laggards

Posted on April 19, 2018February 1, 2019 by Heetae Kim

his 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.

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

U.S.

Advanced Energy Industries ( AEIS ) – Technology ( $2.5B market cap) – AEIS designs and manufactures power conversion products that enable thin film manufacturing processes such as deposition and etch for various semiconductor and industrial products. Two semiconductor equipment manufacturers, Applied Materials ( AMAT ) and Lam Research ( LRCX ), jointly accounted for 57% of 2017 total revenue.

On Tuesday, April 17, shares of LRCX and other stocks in the semiconductor manufacturing ecosystem fell after LRCX gave a disappointing shipments outlook for the rest of 2018. Following this, AEIS broke below its 10-WMA on above average volume. The next support level is near $56 (January 2017 lows).
Shares have been in a steady decline since breaking below long-term support at the 40-WMA on December 1, 2017.
The Electronic-Semiconductor Equipment Industry Group’s Rank has fallen to 110 from 76 eight weeks ago (197 being the worst).
AEIS has a poor RS Rating of 15, and shares are now trading 35% off highs after topping in early November 2017.
The number of funds holding AEIS shares fell to 495 as of March 2018 from a record high of 510 as of December 2017.
Per consensus estimates, revenue growth is expected to decelerate from 39% in 2017 to 13% in 2018 and 5% in 2019.

Toll Brothers ( TOL ) – Consumer Cyclical ($6.3B market cap) – Builds detached and attached homes in luxury residential communities. The Company caters to move-up, empty-nester, active-adult, and second-home buyers in the United States.

The stock is finding resistance along its 10-WMA, which is now crossing below its 40-WMA. We see shares trending toward the lows of the last base formation along ~$37. A failure here could lead to the stock trading in the low $30s. The stock’s RS line is breaking down toward 52-week lows and the stock has a poor A/D Rating of D-.
Shares have been under pressure on growing concerns regarding increasing raw material costs and rising rates impacting affordability.
- Increasing tariffs on lumber and other products are negatively impacting homebuilder sentiment, which fell 1 point to 69 in April. Lumber prices are reaching record highs and the Company will likely have to absorb some of these costs, which would negatively impact margins.
- The industry has also been impacted by a shortage of skilled workers, which has been adding to costs.
We believe homebuilders as a group will continue to lag the U.S. equity market. The industry’s Group Rank has been worsening and is now 182 out of 197.

Global Retail Sector (Excluding Internet)

Posted on April 18, 2018April 18, 2018 by Heetae Kim

Some highlights from the report:

U.S. Retail (excl. Internet)

We have been seeing strength in Retail-Apparel ( IG Rank of 2 ). Focus on Lululemon Athletica ( LULU ), our top pick in Retail.
Bright spots in brick-and-mortar retailers with strong growth and large TAM. Bullish on Five Below ( FIVE ), Ollie’s Bargain Outlet ( OLLI ), Floor & Décor ( FND ), and At Home Group ( HOME ). OLLI is actionable.
Underweight Retail-Automobile group ( G5014 ).
Short Foot Locker ( FL ).

Int’l Retail (excl. Internet)

Retail sector in Europe has been weak. Focus on Amplifon ( AMP.IT ), which has been a strong outperformer.
APAC Retail sector has been strong. Focus on retailers in India. Top picks Avenue Supermarts ( AS.IN ) and Titan Company ( TIT.IN ). TIT.IN is actionable

Global Laggards

Posted on April 12, 2018February 1, 2019 by Heetae Kim

U.S.

Ellie Mae ( ELLI ) – Technology ( $3.1B market cap ) – provides a cloud-based platform to the mortgage finance industry. Solutions are used by lenders to originate and close residential mortgage loans.

The stock sold off 17% on 7/28/2017 after reporting disappointing earnings results and poor guidance. ELLI has been trading sideways since then and the stock has struggled to hold above the declining 40-WMA. Shares are once again breaking back below the 40-WMA on high volume. We believe shares will trend lower to the next level of support along ~$80. If this support level breaks, we see the potential for shares to reach ~$60.
The stock has a weak RS Rating of 27 and an A/D Rating of E.
Fund sponsorship peaked in Q3 2016 and has been in steady decline since.
Mortgage lending volume decreased materially in 2017 versus 2016 and weighed on share performance last year. A rising rate environment is expected to lead to another disappointing year for mortgage originations. A decline in mortgage lending volume would lead to a reduction in closed loan fees and transaction fees received by the Company.
The Company has reported three consecutive quarters of negative adjusted EPS growth. Adjusted EPS is expected to decline 64% In Q1 2018.

Developed

Zenrin ( ZENR.JP; 9474: JP ) – Consumer Cyclical ($1B market cap) – Produces and sells residential maps across Japan for car navigation systems, internet sites and apps, as well as map databases for companies.

After reaching a peak in February, shares are finding resistance near the 10-WMA and 40-WMA. The stock is forming a head-and-shoulders formation. The 10-WMA has now crossed the 40-WMA and we believe shares will break neckline support along ¥2100 and trend lower toward ~¥1,820.
Relative strength is turning downward and on the verge of making 52-week lows. A/D Rating has declined over the past week.
FY17 and FY18 consensus EPS estimates have been revised down after the Company reported disappointing Q3 FY17 results. Weakness in its online and smartphone segment (~20% of total revenue) weighed on earnings.

Global Laggards

Posted on April 5, 2018February 1, 2019 by Heetae Kim

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

U.S.

Take-Two Interactive (TTWO) – Technology ($14.5B market cap) – develops video games for video game consoles and PC.

TTWO is forming a head-and-shoulders pattern out of a failed late-stage base. The stock is facing heavy selling pressure along the right shoulder, which is facing resistance along the declining 10-WMA. The stock has broken neckline support at ~$100, which we believe will now serve as an area of resistance. We see potential for the stock to trend lower toward ~$70 (long-term uptrend line support).
The stock has made a weekly close below the 40-WMA for the first time since early 2015. The stock has a poor A/D Rating of E.
Consensus EPS estimates have been revised lower for 2018. Battle royale games, PUBG and Fortnite, have been gaining popularity, which is expected to lead to decreasing engagement for TTWO titles. This would correspond with a decrease in in-game spending.

Developed

Novozymes (NZY.DK; NZYMB:DC) – Basic Materials ($12.4B market cap) – Researches, develops, and sells enzymes for industrial use.

The 10-WMA has crossed below the 40-WMA and both moving averages are serving as resistance. We believe shares will trend lower toward the next level of support in the mid-260s. The stock has a weak RS Rating of 48 and A/D Rating of E.
Consensus expectations are for no revenue growth in 2018.
The Company’s Q4 results came in below consensus expectations with revenue growth of -1% y/y and EBIT of -4% y/y. The household care and agriculture & feed segments were weak and reported organic growth of -3% and -7%, respectively.
- The household care segment accounts for 32% of revenue and has been hampered by enzyme volume reductions by some large global customers. Management expects growth to be slightly higher in 2018.
- The agriculture & feed segment accounts for 15% of revenue. The segment was suffered due to weak end-market demand with tough conditions for farmers.

Highlighted Charts

U.S.: FNV, OSK, CMI, TSLA, SXT, OAS, CM, EPR, HOLX, AMBA, SNAP, TTWO, UPS

Developed: AMG.NL, NZY.DK, PUB.FR, VOBF.SE, CKDC.JP, CCL.GB, ISBF.SE, NON.DK, SOON.CH, ICA.SE, JE.GB, COSC.HK

Emerging: SAPJ.ZA, MNDJ.ZA, GSG.KR, BRM.BR, UTI.IN, PCJ.IN, WST.TW

Global Laggards

Posted on March 28, 2018February 1, 2019 by Heetae Kim

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

U.S.
Equifax ( EFX ) – Financial ( $14.5B market cap ) – Provides personal information to businesses that make credit decisions and verify identity, income, and employment.

* Due to uncertainties related to the aftermath of its cybersecurity breach, the stock has had a hard time breaking above 200-DMA resistance. We believe the 200-DMA will continue to serve as a point of resistance going forward and that shares will trend lower from here. We see the next likely test to be along support at near-term lows of ~$110. If this level fails to hold, we see the possibility of the stock breaking $100.
* EFX spent $164M in 2017 on expenses related to the cybersecurity breach, including costs arising from investigations, remediation, increased, security, and insurance. Costs related to litigation, penalties, and fines are not included. The Company expects an additional $275M in costs to be incurred in 2018.
* The Global Consumer Solutions segment generated no growth in 2017 after EFX temporarily ceased advertising. This is after multiple years of double-digit growth in the segment. The Company guided that it will restart limited advertising for the GCS segment in the second half of 2018, but it is unclear how this will impact growth.
* Other segments had spillover effects as well. The U.S. Information Solutions and Workforce Solutions segments were also impacted, growing only by single digits in 2017.
* According to EFX’s latest financial statements, the Company is certain that its ISO certifications have been suspended and may not be able to be recovered, which will likely impact revenues going forward.
* There may be fines and penalties pending as investigations are being conducted in multiple government jurisdictions including the U.S., Canada, and the U.K., among others.