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.

APAC Market Update

Posted on by Derek Higa

Key points:

  • We are downgrading India to a Downtrend from an Uptrend Under Pressure as coronavirus fears escalate. We recommend raising cash if possible or maintaining a defensive approach.
  • Including today’s market condition changes, 11 of 13 APAC markets are in a Downtrend.
  • Earlier this week, we shifted Australia, Hong Kong, Japan, South Korea, Singapore, and Taiwan to a Downtrend. Today, we shifted China to an Uptrend Under Pressure from a Confirmed Uptrend as the CSI 300 declined below its 50- and 100-DMA on above average volume.
  • We are bearish on APAC markets. We recommend avoiding buys if possible until a follow-through day occurs.
  • Vulnerable ideas on our list include HDFC Bank ( HFC.IN ) and HDFC ( HDF.IN ). Reduce positions.
  • Ideas with RS near highs include Asian Paints ( API.IN ), Pidilite ( PID.IN ), Dabur ( DAB.IN ), Unilever ( HDL.IN ), and Avenue Supermarts ( AS.IN ). Continue to hold.

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 is testing support at the 200-DMA. If this fails, the next level of support is 5% lower. The market condition remains negative overall amid rising coronavirus fears outside China.
  • This week, we downgraded Hong Kong, Japan, and South Korea to a Downtrend following a breach of key moving averages. We also shifted Australia and New Zealand to an Uptrend Under Pressure from a Confirmed Uptrend.
  • Out of 13 markets, seven are in a Downtrend (including the Philippines), five are in an Uptrend Under Pressure, and one (China) is in a Confirmed Uptrend. Average distribution days remain elevated at 6.5.
  • In Japan, Industry Group Rank of Alcoholic Beverages, Leisure Services, Travel Booking, Retail-Auto Parts, Retail-Jewelry, and Steel Producers has declined significantly over the last eight weeks. Refer to page 3 for a list of ideas in these groups.
  • Refer to page 6 for a list of Japanese ideas with beta of less than one that are trading near pivot.
  • Highlighted Focus List idea: Hoya ( HQ@N.JP ). Refer to page 5 for an annotated chart.
  • Refer to page 7 for actionable ideas in APAC.

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.
  • We are raising caution about APAC markets amid the increasing number of coronavirus cases outside China. We recommend raising cash if possible or maintaining a defensive approach.
  • Ideas to trim include Samsung SDI ( SCT.KR ), Samsung Electronics ( SGL.KR ), and Zte ( ZTEC.HK ).
  • See the attached note for other ideas to trim as well as those with high Negative Alerts.

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.

 

  • Large-cap stocks continue to outperform in APAC. We have yet to see the rotation into mid- and small-cap stocks. We expect strength to broaden if large-cap stocks continue to rally.
  • The MSCI Asia ex Japan large-cap index is trading 6% above its 200-DMA while both mid- and small-cap indices are trading only 1% above.
  • This week, the MSCI Asia ex Japan is consolidating in a sideways range, holding near its 50-DMA.
  • Average distribution days remain elevated at five. Seven distribution days are slated to expire by next week.
  • We upgraded China to a Confirmed Uptrend from a Rally Attempt on February 17.
  • Highlighted Focus List idea: Shandong Weigao ( SDW.HK ). Refer to page 6 for annotated chart.
  • Refer to page 7 for APAC actionable 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 reclaimed its 50-DMA. We would like it to hold above this level to remain constructive.
  • Despite positive price action, we remain patient, waiting for markets to provide more confirmation. A follow-through day in China’s A-share market could be a risk-on indicator for the region should coronavirus fears subside.
  • The average number of distribution days is 4.9 and still elevated. Four days will expire over the next week across APAC markets.
  • Health Care and Technology stocks continue to outperform in APAC, while Transportation, Energy, Utility, Consumer Staple, and Financials are currently underperforming. Refer to page 6 for APAC’s Sector Rotation Chart.
  • Japan’s Nikkei is holding near multi-year highs with support at the 50-DMA. REITs have led the recent improvement in the Financial sector. Refer to pages 7 and 8 for an annotated chart of the Nikkei and Japan’s Sector Rotation Chart, respectively.
  • Refer to page 5 for an annotated chart of Tencent Holdings ( TCNT.HK ).
  • Refer to pages 9 and 10 for outperforming and underperforming stocks in APAC.
  • Refer to page 11 for APAC actionable ideas.

Disney

Posted on by Derek Higa

Key points:

 

  • Following Q1 FY20 results DIS shares are trading along 200-DMA support and are currently trading within a stage-one flat base. We recommend that investors look to add to positions when the stock retakes its 50-DMA (+2%). The idea is a 2020 top pick.
  • Fundamental ratings: EPS Rank of 45, SMR Rating of B, Composite Rating of 74. Higher investments in direct-to-consumer platforms have affected the company’s EPS and margin.
  • Technical ratings: RS Rating of 75 and A/D Rating of B-.
  • Disney+ has added 28.6M paid subscribers as of February.
  • We believe the Disney+ (family programming), ESPN+ (sports programming), and Hulu (adult programming) bundle plan for $12.99 a month, priced on par with Netflix’s standard plan, remains an attractive value to customers.

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 bounced from 200-DMA support. We recommend staying patient and looking for the index to break above the 50-DMA to turn constructive.
  • The average number of distribution days increased to 5.0 from 4.8 last week. If there are no new distribution days in the next week, the average will fall to four.
  • We shifted China to a Downtrend from an Uptrend Under Pressure and India and Taiwan to an Uptrend Under Pressure from a Confirmed Uptrend.
  • Indian stocks had a mixed reaction to the country’s annual budget on February 1. Consumer goods companies are set to gain due to changes in the personal income tax structure. Refer to page 5 for an annotated chart of the Sensex.
  • Highlighted Focus List ideas: Hindustan Unilever ( HDL.IN ) and Asian Paints ( API.IN ).
  • Refer to page 10 for Indian stocks trading near pivot.
  • Refer to page 11 for APAC actionable 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 has declined ~6% in two weeks following rising fears related to the coronavirus. Profit-taking could just be normal in this stage of the rally, but support must hold constructively for the uptrend to remain intact. Continue to trim extended ideas.
  • Four out of 13 markets are in a Confirmed Uptrend, five are in an Uptrend Under Pressure, one is in a Rally Attempt, and three are in a Downtrend. The average number of distribution days has risen to 4.8 from 3.7 last week. The clustering of distribution days has become more concerning.
  • We have yet to remove a significant amount of ideas from our Focus List. A low number of removals amid market volatility could be a good indicator of continuing strength in leading ideas. This would be viewed as a positive signal to market conditions.
  • Rotation into Japanese REIT and Property ideas are notable. See page 13 for ideas.
  • Refer to page 12 for ideas looking weak in direct industries affected by the spread of coronavirus.
  • Highlighted Focus List ideas: Avenue Supermart (AS.IN), Info Edge (IEI.IN), and Bata India (BIN.IN)
  • Refer to page 14 for actionable ideas on our Focus List.

 

Global Media and Internet

Posted on by Derek Higa

Key points from this report:

 

  • Communications Services Select SPDR (XLC), like the S&P 500, is extended at 52-week highs and due for a pullback.
  • Looking across Internet and Media industry group rankings: Telecom groups have the highest rank while internet has improved in the short term. Leisure-Movies remain weakest.
  • OTT landscape continues to widen with the nationwide launch of CMCSA’s Peacock this July. Peacock takes a unique approach by incorporating an advertiser and user-friendly approach.
  • Disney (DIS) remains our top pick: strong box office in 2019; 2020 will be about Disney+ subscriber additions.
  • Conviction Laggard NFLX: we still have doubts about sub growth after mixed Q4 results.
  • Other OTT ideas include Focus List idea TTD, Conviction Laggard ROKU, and Interest List idea CCOI.
  • In social media, political ads will have an impact on ad revenue for those continuing to advertise: Focus List idea FB, Interest list ideas GOOGL, SNAP, and NXST.
  • Other ideas mentioned include Yandex ( YNDX ), Match Group ( MTCH ), Kakao ( DUM.KR ), and Naver ( NHN.KR ).
  • Other Conviction Laggards include Uber ( UBER ) and Yelp ( YELP ).