Author: Cornelio Ash

Cornelio Ash is a senior equity analyst and member of the U.S. Focus List and the Global Focus List Committees, which approves all equity recommendations for developed, emerging, and frontier markets. He is also a lead for the Technology sector and specializes in the Americas region. Cornelio joined the firm in 2005 and received his B.A. in Finance from California State University, Northridge. He holds a Series 65 securities license.

Global Sector Commentary

Posted on by Cornelio Ash

Key points:

The Vanguard Total World Stock ETF is on pace for a seventh consecutive week of gains. Developed and emerging market indices are broadly back in uptrends, and the breadth of growth stock leadership has improved significantly. However, there are still major hurdles to overcome in terms of the technical health of the global index. Looking back to the long correction from mid-2015 to mid-2016 could give some clues as to how the challenges could play out. As we can see from the comparison, only the first step of rallying off lows has been completed.

Downside

2015–2016

  • 22% drop from May 2015 highs to ultimate lows in February 2016. It took nine months to establish the lows.
  • 16% below 40-WMA at worst, three weeks before ultimate lows.

2018–2019

  • 22% drop from January 2018 highs to lows in December 2019. It took 11 months to establish the lows.
  • 15% below 40-WMA at worst, the week of December lows.

Upside

2015–2016

  • 10-/40-WMA began trending higher together for the first time in June 2016, 13 months after highs and four months after lows.
  • After a break above the 40-WMA, three major areas of resistance before eventual new highs.
  • New highs established 12 months after lows and 21 months after prior highs.

2018–2019

  • 10-WMA now trending higher; 40-WMA still trending lower 12 months after highs.
  • First resistance at 40-WMA approaching. Above that, major overhead supply for another 5–6%.
  • Still just two months from lows and 13 months from highs.

Looking at the number of weekly breakouts across the world is also useful to compare the time periods. Breakouts are only counted when a stock emerges from a properly built, consolidative period (ie: flat base, cup consolidation, etc).

2015–2016

  • Trough number of breakouts was below 120 in August 2015 and again in January 2016.
  • First big spike the week of was March 4, 2016, four weeks after lows. More consistently above average breakouts in May/June/July.

2018–2019

  • Trough number of breakouts was 121 in December 2018.
  • First big spike the week of February 1, 2019, six weeks after lows. Still needs several more above average weeks to become a trend.

Best in Breed in AI and Cybersecurity with Cornelio Ash — February 7, 2019

Posted on by Cornelio Ash

After pulling back 20% in late 2018, the North American Software Index and its constituents are under heavy accumulation and poised to move even higher. Underlying secular drivers such as AI, machine learning, and enterprise cloud adoption remain intact as the software benchmark index trades at a median 5.5x EV/S (FY 2020) and 23x EV/EBITDA (FY 2020). In this webinar, join William O’Neil + Co. Senior Equity Analyst Cornelio Ash to uncover the best of breed in AI and cybersecurity.

Global Technology Sector— Software

Posted on by Cornelio Ash

Some highlights from this report:

Software is setting up to move higher. Since the October 2018 sell-off, the North America Software Index ( IGV ) has consolidated and is poised to move higher as valuations have improved.

Analytics and cyber security spending are driving AI growth, with the analytics addressable market poised to increase by a five-year CAGR of 18% (see chart below).

Spending on cyber security software is expected to increase 9% in 2019 to $124B (see chart below).

Multiple factors drive cyber security spending, including the secular shift to the cloud, accelerating growth of unstructured data/IoT, and increasing regulation ( GDPR ).

Global Technology Sector— Software

Posted on by Cornelio Ash

Are software stocks buyable after a 15% pullback off highs? In this report, Senior Equity Analyst Cornelio Ash details why he is cautious on software even though long-term growth drivers such as the transition to the cloud and AI remain intact after another strong earnings season.

Some highlights from this report:

After rising for 22 consecutive months, the North American Software Index ( IGV ) broke its uptrend in October 2018. The gaming industry is an area of concern, especially due to China’s recent censorship and gaming approval reform. Cloud and AI services are driving secular growth, benefiting companies that specialize in IaaS and Saas. Watch Cornelio Ash share his expertise in his Software Webinar on Thursday November 29 at 8am PT/11am ET.

Software

Posted on by Cornelio Ash

Highlights:

The North American Software Index ( IGV ) remains under heavy distribution while trading below its 200-DMA. In October the IGV broke below a key level of support after trending higher for 22 consecutive months since January 2017.

Today we removed four key IGV constituents – ADBE, CRM, NOW, and PAYC – from the U.S. Focus List due to technical deterioration.

Global Technology Sector

Posted on by Cornelio Ash

Key Points:

U.S.:

Although the semiconductor industry will continue to experience growth on an absolute basis this year, it is expected to grow at a more moderate pace than in 2017. Global semiconductor revenue is forecast to hit $451B in 2018, an increase of 7.5% y/y.

The SOXX benchmark significantly outperformed the S&P 500 in 2016 and 2017, but the outperformance has narrowed this year: the SOXX is up 10% YTD, versus 5.6% in the S&P 500. As we noted in the last sector report, we believe that the exceptional performance recorded by the SOXX in the last two years is likely not to be repeated in 2018.

Our top picks in the U.S. include Focus List-rated Monolithic Power Systems ( MPWR ), Pure Storage ( PSTG ), and Nvidia ( NVDA ).

Other stocks of interest outside our Focus List include: Qorvo ( QRVO ), Vishay ( VSH ), Cypress Semiconductor ( CY ), Advanced Micro Devices ( AMD ), and Interxion Holding ( INXN ).

EMEA:

European equities in the overall Technology sector continue to show strong momentum. YTD, the Technology sector in Europe, measured by the MSCI Europe Technology Index, is up about 11%, compared to a 0.2% gain in the STOXX Europe 600 benchmark.

Europe-based semiconductor/hardware companies on our Focus List include ASML Holding ( ASML.NL; ASML:NA; ADR: ASML ) and Logitech ( LOGN.CH; LOGN:SW: ADR: LOGI ).

Other European stocks of interest include S&T ( SANTX.DE; SANT:GR ) and Barco ( BAR.BE; BAR:BB ).

APAC:

Due to concerns regarding the U.S.-China trade war, flattening demand for smartphones, and overall decelerating growth in the global semiconductor industry, we remain cautious on the outlook of the industry in the APAC region.

Focus List-rated companies in the APAC region include: Samsung Electro-Mechanics ( SEM.KR; 009150:KS ), Samsung SDI ( SCT.KR; 006400:KS ), and Koh Young ( KYX.KR; 098460:KS ).