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India Equity Research Reports, IPO and Stock News
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“Seems like I’m caught up in your trap again, Seems like I'll be wearing
the same old chains, Good will conquer Evil, and the truth will set me
free…and I know some day I will find the key…(Trapped, by Jimmy Cliff,
as sung by Bruce Springsteen)”. The performance gap between our Earnings
Momentum Telco portfolio and our Value Telco portfolio continues to gap out,
with the Earnings Momentum portfolio outperforming the Value portfolio by a
huge 72% YTD (Earnings Momentum portfolio +48%, Value as defined by P/E
-24%, P/BV even worse at -32.5%). We recommend investors don’t buy cheap
telcos…the key to telco outperformance is earnings revisions, in our view.
What’s the market paying for YTD? Telcos = Earnings Momentum. The
region as a whole has more balanced drivers, with Quality, Earnings
Momentum, and Price Momentum all driving significant positive returns. Size
and Price Momentum have been the most positive drivers within the Internet
space, while Earnings Momentum and ROE have driven significant negative
Internet stock returns. Best Telco markets on Earnings Momentum are
Thailand and Japan (best YTD and best shorter term momentum), vs. Korea
and Indonesia. Best Telco stocks with short term earnings momentum are
TNZ, Softbank, ADVANC; Worst are LGU+, RCOM.
Short Term: MTD the Asian region has traded largely on yield, beta, and
quality (investors seeking out high quality names with some level of trough
value (dividend) that have been beaten down in the market sell off). Telcos as
usual, trade differently, with beta actually driving negative performance (higher
beta Telcos outperformed during the market turn, and are now serving as
funding sources), while the normally strong drivers of Earnings Momentum and
Analyst Revisions showed negative returns (again, due to strong outperformance
during the sell off). We’d use this as an entry / short opportunity for high beta
Telcos with good earnings revisions that have underperformed lately – Top Pick
is China Unicom, best to avoids include LGU+.
There are no Internet Stocks: Cross sector correlation in the Chinese internet
space is once again at 90%+, from 40% at the beginning of the year (please see
Figure 28). The sector is trading as one giant mass, rather than as single stocks.
This should create very large opportunities eventually, but we believe the most
important call to make in the Chinese Internet space is when stocks actually
become single fundamental stocks again. We’d be long Gaming (NTES, OW)
and short Advertising (SINA, N) once we can make this call.
Please contact us for tools: We have an interactive factor exposure model
available as well as detailed files showing stock exposure to the factors
(included in this report as Appendices).
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
“Seems like I’m caught up in your trap again, Seems like I'll be wearing
the same old chains, Good will conquer Evil, and the truth will set me
free…and I know some day I will find the key…(Trapped, by Jimmy Cliff,
as sung by Bruce Springsteen)”. The performance gap between our Earnings
Momentum Telco portfolio and our Value Telco portfolio continues to gap out,
with the Earnings Momentum portfolio outperforming the Value portfolio by a
huge 72% YTD (Earnings Momentum portfolio +48%, Value as defined by P/E
-24%, P/BV even worse at -32.5%). We recommend investors don’t buy cheap
telcos…the key to telco outperformance is earnings revisions, in our view.
What’s the market paying for YTD? Telcos = Earnings Momentum. The
region as a whole has more balanced drivers, with Quality, Earnings
Momentum, and Price Momentum all driving significant positive returns. Size
and Price Momentum have been the most positive drivers within the Internet
space, while Earnings Momentum and ROE have driven significant negative
Internet stock returns. Best Telco markets on Earnings Momentum are
Thailand and Japan (best YTD and best shorter term momentum), vs. Korea
and Indonesia. Best Telco stocks with short term earnings momentum are
TNZ, Softbank, ADVANC; Worst are LGU+, RCOM.
Short Term: MTD the Asian region has traded largely on yield, beta, and
quality (investors seeking out high quality names with some level of trough
value (dividend) that have been beaten down in the market sell off). Telcos as
usual, trade differently, with beta actually driving negative performance (higher
beta Telcos outperformed during the market turn, and are now serving as
funding sources), while the normally strong drivers of Earnings Momentum and
Analyst Revisions showed negative returns (again, due to strong outperformance
during the sell off). We’d use this as an entry / short opportunity for high beta
Telcos with good earnings revisions that have underperformed lately – Top Pick
is China Unicom, best to avoids include LGU+.
There are no Internet Stocks: Cross sector correlation in the Chinese internet
space is once again at 90%+, from 40% at the beginning of the year (please see
Figure 28). The sector is trading as one giant mass, rather than as single stocks.
This should create very large opportunities eventually, but we believe the most
important call to make in the Chinese Internet space is when stocks actually
become single fundamental stocks again. We’d be long Gaming (NTES, OW)
and short Advertising (SINA, N) once we can make this call.
Please contact us for tools: We have an interactive factor exposure model
available as well as detailed files showing stock exposure to the factors
(included in this report as Appendices).
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