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.

Global Technology/Cyclical Sector–Internet and Media

Posted on December 12, 2018February 1, 2019 by Derek Higa

Key Points

After worsening in the first half of 2018, all Old Media industry groups recovered in the second half of the year, and now rank among the top 30 positions in our 197 Industry Groups (IG).

The Media-Radio/Tv (IG Rank 7) and Telecom Svcs-Cable/Satl (IG Rank 15) are now in the top 20 in our IG ranking.

The New Media value chain continues to evolve. Netflix still leads the way in OTT streaming, but the upcoming launches of comparable platforms such as Disney+ in late 2019 will change the competitive landscape.

Internet stocks continue to be under pressure, led by FB (March 20 removal) and GOOGL (November 19 removal). Other Internet names, including YELP, MTCH, GRUB, and ROKU, declined sharply following disappointing earnings results or guidance.

Stocks detailed in this report include: DIS, CMCSA, VZ, NFLX, FB, TWTR, and RCI/B.CA (the latter is on our Focus List). In Asia, Info Edge (

), PVR (

), Studio Dragon (

), and VGI Global Media (

Best Ideas in Media with Derek Higa – December 13, 2018

Posted on December 6, 2018April 12, 2019 by Derek Higa

Will Old Media outperform New Media in 2019? Old Media ideas like DIS and CMCSA have recovered versus new media names like FB, GOOGL, and NFLX in the second half of 2018. In 2019, the launch of peer platforms like Disney+ and Warner Media will change the competitive landscape.

In this week’s webinar, William O’Neil + Co. Senior Equity Analyst Derek Higa reviewed big-cap New Media stocks as well as Old Media names that are setting up constructively. He also discussed ideas in Asia that should be on your radar, especially as emerging markets display improving relative strength.

APAC Weekly Summary

Posted on December 5, 2018February 1, 2019 by Derek Higa

On Tuesday, both Emerging Markets ( EEM ) and MSCI Asia ex. Japan ( AAXJ ) indices pulled back following a sharp decline in the U.S. Despite this, both remain in a short‐term uptrend since bottoming in late October. Indices could very well be on the verge of consolidation in the near term, but we believe action could remain healthy should the 50‐DMA hold. Furthermore, we continue to believe that this is early innings should a bottom begin, and there will be time to get more aggressive should markets stay constructive. A gradual approach to allocating capital is still recommended.

In emerging Asian markets, we recommend focusing on India. We believe the BSE Sensex continues to be one of the most
constructive indices in APAC. Looking back at recent corrections from 2015 to present, the most recent correction in India does not seem out of the ordinary, that is, if the index continues to hold above its 40‐WMA going forward. If it does, this could be a good time to add to or initiate positions. Since November, we’ve added seven Indian ideas to our Focus List. In Health Care, generic drugs remain a theme to overweight. Actionable ideas include Dr. Reddy’s ( DRR.IN; DRRD:IN ) and Torrent ( TRR.IN; TRP:IN ).

APAC Weekly Summary

Posted on November 28, 2018February 1, 2019 by Derek Higa

Over recent weeks, both the MSCI Emerging Index ( EEM ) and the MSCI Asia ex. Japan Index ( AAXJ ) have held above October lows and risen above their 50-DMA. This is after both indices reached extreme levels of underperformance relative to the S&P 500. This begs the question of whether we have finally seen a bottom in Emerging and Asian markets. Although we remain encouraged by recent general market action, it is still early. Thus we think there is time to be more aggressive should the markets remain constructive. Our recommendation is a gradual approach in allocating capital, as most stocks are still in early consolidation or building the right side of bases. We will increase our conviction if stocks and market action remain constructive.
On November 15, we upgraded Hong Kong to Confirmed Uptrend. With the Hang Seng now trading above the 50-DMA, we screened again for leading stocks setting up the best entry points. We also reiterated our patient view on Tencent ( TCNT.HK, 700: HK ). Lastly, we highlighted a new addition to our Focus List, Vitasoy International ( VITA.HK, 345: HK ).

FAANG Capitulation

Posted on November 20, 2018February 1, 2019 by Derek Higa

Highlights:

We recommend continuing to reduce exposure to all FAANG stocks (FB, AAPL, AMZN, NFLX, GOOGL) as we believe risk of further share price decline is still high.

The First Trust DJ Internet Index (

), which includes all FAANG names except Apple, is living below the 40-WMA for the first time since 2016. The index is trading more than 20% off 52-week highs and in bear territory. If ~$115 support is undercut, the next price support is unclear.

Additionally, all FAANG stocks are trading below their 40-WMA for the first time.

We believe the FAANG selloff could worsen due to capitulation of passive investments in the near term.

See Datagraphs in our note for next price support levels.

APAC Weekly Summary

Posted on November 14, 2018February 1, 2019 by Derek Higa

APAC markets have retested resistance levels in recent weeks, but none have displayed any progress. For many, including the MSCI Asia, the 50-DMA continues to be impenetrable. Several major markets ( Japan, South Korea, China, India ) had follow-through days recently, which could be an initial indication of a trend change. However, many have failed before, and in recent days, distribution has picked up. Overall, until we see a break above resistance, our conviction will remain low. Our recommendation is to still lean on the side of caution and be selective in allocating capital, focusing on ideas that have already developed constructive technical bases.

This week we look at Hong Kong’s Hang Seng Index, which remains in a Rally Attempt and in bear territory. Although we are still waiting for an official follow-through day, accumulation volume in early November was encouraging. In sector rotation, it is still unclear and possibly too early to get aggressive in our view, as defensive sectors in Hong Kong continue to stand out. On a stock level, we are looking for ideas that have developed constructive stage one bases, in search of nascent leadership. Unfortunately, many stocks are still from defensive areas. We also share our thoughts on Tencent ( TCNT.HK; 700:HK ) following Q3 earnings results and circle back to Asahi Intec ( AS@H.JP; 7747:JP ), which is actionable after reporting a strong Q1.

APAC Weekly Summary

Posted on November 7, 2018February 1, 2019 by Derek Higa

Following our disciplined approach, we upgraded several APAC markets including Mainland China, Japan, India, and South Korea
to a Confirmed Uptrend as follow‐through days occurred last week. Notably, markets including the MSCI Asia have yet to rise
above their major moving averages ( 50‐ or 200‐DMA ). Thus, we recommend gradually allocating capital to actionable growth
ideas, especially those that have held up well during the correction. Our conviction will rise if general market strength continues.
Additionally, there are markets with more severe overhead than others, so if possible we recommend focusing on India and
Japan, which we believe have held up relatively better.
In our note, we take a look at Japan and India sector performance and point out what’s working. We also focus on ideas that we
believe are constructive or setting up well. Lastly, we highlight Nestle India ( NES.IN; NEST: IN ), which was added back to our Focus
List.

APAC Market Update

Posted on November 2, 2018February 1, 2019 by Derek Higa

We are upgrading markets in Mainland China, South Korea, India, and Japan to a Confirmed Uptrend as each staged a follow-through day today. Thus, we are recommending again to gradually begin allocating capital to actionable growth ideas as they break out of sound bases.

We note that several failed follow-through days have occurred in previous months and indices continue to trade below consistent resistance levels, which are ongoing reasons to remain cautious. However, we are encouraged by the above average volume this week, which could be the beginning of strong institutional support should it continue. Nonetheless, we expect markets to remain volatile as headlines about U.S.-China trade negotiations continue through the post-G20 meeting between the two countries’ leaders, scheduled for December 1.

Across APAC sectors, it is still too early for noticeable change. We continue to see outperformance from mostly defensive sectors, including Staples, Healthcare, Retail, and Utilities. Financials have improved, with mostly REITs and insurance groups standing out.

At the stock level, significant technical damage remains. Although many oversold stocks gained this week, it is still early in base development. We continue to recommend patience as stocks begin to find bottoms and build the right sides of bases while significant overhead remains. Should the follow-through days hold, we anticipate that constructive bases in leading stocks to develop over time, which would increase our conviction.

APAC Weekly Summary

Posted on October 31, 2018February 1, 2019 by Derek Higa

All 13 APAC markets continue to trade below their 200-DMA, but many have avoided making new lows over the past three days, which leaves open the possibility of a follow-through day. Considering the amount of overhead supply created over the past week, we remain skeptical and cautious but are sticking to our discipline nonetheless, as follow-through days often happen when least expected and when bearish sentiment is at its hightest.

Like the U.S. market, the MSCI Asia has found support the past two days, but we believe it is still too early to be aggressive overall, especially when it comes to buying growth ideas that have yet to form constructive bases. We recommend staying patient and looking for a follow-through day to provide an initial signal. That being said, we have screened for growth ideas that are trading constructively and could provide leadership should a new rally begin. Lastly, in this note, we highlight two Focus List ideas, Divis Labs ( DVL.IN; DIVI: IN ) and new addition Makalot ( MIK.TW; 1477: TT ).

APAC Market Update

Posted on October 25, 2018February 1, 2019 by Derek Higa

Highlights from the note:

We are downgrading Japan to a Downtrend as the Nikkei 225 failed to hold August/September and July support levels. The index is trading 6% below the 200-DMA, which is now serving as key resistance. Moreover, we are more bearish on the APAC region as all markets are trading below their 200-DMA. Japan was holding up the best relatively, in our view, and its recent breakdown could be a warning of further broad declines, leaving few places to hide. We recommend a defensive approach if raising cash is not possible.