Author: Raj Gupta

Raj Gupta is Director, Research Analyst. After joining the firm in 2002 as a research analyst, Raj was appointed senior equity analyst in 2006, and lead senior equity analyst in 2014—largely because of his ability to select outperforming stocks. He acts as an expert in the O’Neil Methodology and contributes to the direction of product and service line development. He recommends securities for addition to or removal from the U.S. Focus List, or USFL, and the associated alerts to clients. During his tenure, he was part of the leadership that developed the Global Focus List, which marked the firm’s successful expansion into international equity recommendations. He is also a lead on the IPO Rewind report and contributes to weekly summaries on the performance of the U.S. market. Much of his expertise is delivered as highly customized service to clients. RAj earned his Bachelor’s degree in Economics from the University of California, Santa Barbara. He began working at the firm directly out of college, driven by his passion for investing and stocks. An avid soccer player, he built and managed an adult league in the Los Angeles area, in which he still plays. He also enjoys international travel; he and his wife commit to at least one major adventure a year.

Market View

Posted on by Raj Gupta

The U.S. market is in an Uptrend Under Pressure. The S&P 500 and Nasdaq traded sharply lower Friday, closing
back below their respective 21-DMA. Distribution increased to five and four days, respectively. Two distribution
days will expire on the S&P 500 and one on the Nasdaq next week. The sharply rising 50-DMA (S&P 500:
3,211; Nasdaq: 8,940) is the next level of support on both indices.
Market breadth has significantly narrowed over the last two weeks. Four of 11 sectors, 75 of 197 industry

groups, and 46% of S&P 500 stocks are trading above their respective 50-DMA. This is down from all 11 sec-
tors, 173 of 197 industry groups, and 82% of S&P 500 stocks two weeks ago. Outside of Software, the best per-
forming groups over the last week are all defensive. Utilities, REIT, Insurance, and Miners are all holding up well,

while Software continues to hold up near highs on the back of positive earnings results. Health Care has pulled

back sharply over the last two weeks with multiple previously leading groups coming under severe selling pres-
sure, including Managed Care and Biotech. Other weakening groups include Oil & Gas, Data Storage, Travel

Booking, and Semiconductors.

Market View

Posted on by Raj Gupta

U.S. Market

The U.S. market remains in a Confirmed Uptrend. The S&P 500 and Nasdaq staged downside reversals Friday,
closing at their respective 10-DMA. Distribution rose on the Nasdaq to three days, matching the S&P 500. We
are now looking for indices to find support at their respective 21-DMA (S&P 500: 3,271; Nasdaq: 9,179) should
weakness persist early next week. We will likely shift the market status to Uptrend Under Pressure should this
level break as the next level of support is the 50-DMA, which is 3–5% below current levels.
Breadth is beginning to narrow. Nine of 11 sectors, 155 of 197 industry groups, and 64% of S&P 500 stocks are
trading above their respective 50-DMA. This is down from all 11 sectors, 173 of 197 industry groups, and 82%
of S&P 500 stocks last week. Energy and Basic Material remain the two weakest sectors, while extended sectors
such as Technology and Heath Care staged downside reversals off all-time highs to close the week.

Market View

Posted on by Raj Gupta

U.S. Market

The U.S. market remains in a Confirmed Uptrend. The S&P 500 and Nasdaq continue to trend into higher highs
with just two distribution days each. Near-term support remains the sharply rising 10- and 21-DMA.
All 11 sectors, 173 of 197 industry groups, and 82% of S&P 500 stocks are trading above their respective 50-
DMA. Technology is now trading ~17% above its 200-DMA, the largest spread in the last decade. Health Care
is trading ~13% above its 200-DMA, the largest spread since 2015. While these two sectors have been trending
higher for the last few months, Utility, Transportation, and Consumer Staple just broke to new highs this week.
Leading industry groups over the past week include Wholesale Drugs ( MCK ), Transportation Logistics ( XPO ), Mobile Homes ( THO ), Building Products/Services ( IBP ), Home Builders ( PHM ), Semiconductors ( QCOM ), and Utilities ( SO ).

Coloplast

Posted on by Raj Gupta

Key points:

 

  • The stock is breaking out of a stage-two flat base into all-time highs. Add to current positions. With its leadership position in ostomy and continence care (35-40% market share), Coloplast has been able to grow ~8% organically over the last eight quarters. The company is expected to grow earnings in the low-double-digit range over the next two years, driven by new product launches and contract wins. Next catalyst: Q1 FY20 results due February 6.
  • Fundamental ratings: EPS Rank 50 (expected to improve), Composite Rating 73, SMR Rating B.
  • Technical ratings: RS line started to rise, RS Rating 7, A/D Rating B-.

Hong Kong Health Care

Posted on by Raj Gupta

Key points from this report:

 

  • We continue to recommend overweighting Hong Kong Health Care. See our October 21 report here.
  • Hong Kong’s Health Care sector has been consolidating for two months and is now beginning to show technical improvement. The industry backdrop remains favorable.
  • Focus List is overweight Health Care, with seven out of 18 Focus List stocks.
  • Hong Kong Health Care Focus List stocks have RS Ratings between 62 and 95.
  • Focus List ideas:
    • Extended leaders: Wuxi Biologics ( WXBO.HK; 2269 HK ), Wuxi Apptec ( WUXA.HK; 2359 HK ).
    • Newly actionable: Shandong Weigao ( SDW.HK; 1066 HK ).
    • Setting up: Hansoh Pharma ( HANP.HK; 3692 HK ), Jinxin Fertility ( JIFG.HK; 1951 HK ), Viva Biotech ( VIVB.HK; 1873 HK ).
    • Basing: Yichang Hec Changjiang Pharma ( YHEC.HK; 1558 HK ).

Health Care Conference

Posted on by Raj Gupta

Key points from this report:

 

  • Ideas are showing positive technical trends, holding above key price and/or moving average support.
  • Ideas also have either positive fundamental ratings and rankings, and/or accelerating annual EPS growth.
  • Included are 36 annotated charts.

 

Market View

Posted on by Raj Gupta

U.S. Market

The U.S. market remains in a Confirmed Uptrend. The S&P 500 and Nasdaq staged downside reversals Friday
but continue to hold trend with a low number of distribution days. Near-term support remains the rising 10- and
21-DMA. Distribution stands at three days on the S&P 500 and two on the Nasdaq, with one day expiring on
each Tuesday.
Ten of 11 sectors, 152 of 197 industry groups, and 73% of S&P 500 stocks are trading above their respective
50-DMA. Leading industry groups over the past week include Software ( CRM ), Internet ( GOOGL ), Medical
Equipment ( ISRG ), Managed Care ( UNH ), Aerospace/Defense ( CAE ), and Payment Processors ( GPN ). Lagging
industry groups over the past week include Transportation Equip Mfg ( TRN ), Oil & Gas ( NBL ), Mining ( AG ), and
Discount Retail ( OLLI ).

Vertex Pharmaceuticals

Posted on by Raj Gupta

Key points from this report:

  • The stock broke above a tight trading range with support off its 50-DMA. Add to positions.
  • Fundamental ratings: EPS Rank 97, best Composite Rating 99, and top SMR Rating A.
  • Technical ratings: RS line near all-time highs, RS Rating 90, A/D Rating B+.

Sartorius

Posted on by Raj Gupta

Key points from this report:

  • The stock broke out of a stage-two cup-with-handle base, turning actionable. Add to positions.
  • Fundamental ratings: EPS Rank 94, best Composite Rating 99, top SMR Rating A.
  • Technical ratings: RS line rising, RS Rating 80, A/D Rating B-.

U.S. Health Care Sector

Posted on by Raj Gupta

Some highlights from this report:

 

  • The Health Care ETF (XLV) broke out from a 13-month consolidation into all-time highs on November 15 and is currently trending higher off 21-DMA support.
  • Health Care is now in the top right quadrant in the sector rotation graphic across all three regions (Americas, EMEA, APAC).
  • In the U.S., Health Care has lagged for over four years versus the S&P 500. However, on a very long-term basis, it has usually competed with Retail for the top-performing spot. As the Relative Strength turn has just begun, we think the outperformance has room to persist and the time is right to overweight the sector once again. Looking at the past performance of stocks on our buy list, Health Care names have the highest average performance in the U.S.
  • In terms of stocks, we currently have 12 U.S. Focus List Health Care ideas. Top picks include BMY, DHR, ISRG, UNH, and VRTX.