China – Electrical Equipment theme (Jan 7, 2021)

Let’s start with a sector leadership comparison in China (Jan 7, 2021):

The highlighted sectors are the ones where leadership continues to stay and would have resulted in great gains for the investors. I highlighted one such theme (Beverages) in November 2020 – link here.

There has been a sector rotation in the last 3 months and hence new leaders have emerged in the picture. With reflation and economic growth narrative, it’s reasonable to see Metals and Paper jump into the mix of sectors.

In this note, I’ll cover a few names in Electrical Equipment theme, most of these names can also be subclassified into battery/alternate energy.

  • You’ll notice that all stocks are extended, so it would be prudent to wait for a collective intermediate-term pull back from recent bounces to start accumulating.
  • Short-term traders can still potentially reap quick returns as they can manage their risk when the market turns.

Theme: Electrical equipment (Jan 7, 2021)

Eve Energy (300014.SZ): The company is primarily in the business of producing Lithium batteries. It went parabolic recently, worth keeping an eye on.

  • Decent ROIC @ 10-20% in last 10 years

Contemporary Amperex Technology (300750.SZ): It produces EV battery and energy storage battery systems. Fundamentally, undoubtedly impressive revenue and net income growth over the years. Declining ROE and ROIC might potentially cap future returns. Nonetheless, a good one to keep on watchlist if the sector consolidates a bit.

Sungrow Power (300274.SZ): It sells renewable solar and wind-powered products in China. Looking at the financials, it is no surprise why it is an investor favorite in this space. Very extended short term, another name for watchlist to buy on consolidation.

Ginlong Tech (300763.SZ): Involved in sales and service of core inverters for distributed photovoltaic power generation systems.

  • Youngest company in this article (IPO’d last year); much higher growth rate for revenues and income
  • TTM ROIC @ 27%

Charts sourced from aastocks.comFundamentals from morningstar.com

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Disclaimer: This is not investment advice, please do your research before committing capital.

Year-end thoughts and positioning for 2021

2020 was a year of the “unprecedented”. Pandemic, Unemployment, market volatility, multi-baggers, income disparity, geopolitics etc. I am glad this year is coming to an end and wishing for a better and rather boring 2021.

In terms of trading and investing, what worked?
– Almost anything related to Healthcare, Software, Innovation, Chemicals in the 1st 9 months of 2020.
– Then came reflation and economic growth related flows in the last two months propelling banks and energy among other sectors. It’s exciting to note that these few months could be a potential turning point against a multi-year downtrend in the energy sector.

Going forward, which sectors are investors focusing on implicitly from recent flows and overall strength? I have done this analysis based on
1) where the stocks within each industry are relative to the overall market (i.e. their relative strength) and
2) to themselves (compared with 50 day volume weighted avg price).

Below is a table showing this for 5 major countries I follow: Japan, HK, China, India, US.

Note: Shaded sectors show an overlap across 2 timeframes in the same country.

One can amend or incline their portfolios in the market’s direction or choose to be a contrarian. Neither is wrong, I prefer the former.

Feel free to reach out for a discussion on companies in the listed sectors.

Happy holidays!

China – Beverages (Nov 6, 2020)

I highlighted this theme on LinkedIn about 2 months back. It has played out quite well since then and it looks like the party isn’t over yet.

Here are few rocketships:

LUZHOU LAOJIAO (000568.SZ): Paused for a month or so in Sep to mid-Oct and then blasted away. Few observations looking at financials:
– Positive trending revenues and EPS
– Positive free cash flow
– ROIC = 23.57%

Shanxi Fen Wine (600809.SH): Price action on this stock says it all. Stocks like these can make an year’s worth of returns in few months. Fundamentally, it looks even better:
– Increasing revenues and EPS yoy
– Positive cash flow
– ROIC = 32%!

Jiugui Liquor (000799.SZ): Significantly small compared to the previous two companies in terms of revenues and cash flow. ROIC not that great either.

Stock price explosion, however, tells there is something going on here. One on my watchlist for sure!

Charts sourced from aastocks.com; Fundamentals from morningstar.com

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Disclaimer: This is not investment advice, please do your research before committing capital.

China – stock ideas (Sep 29, 2020)

Few stocks that are potentially setting up for a move higher:

Yangjie Technology (300373.SZ): consolidating on tight volume (SL @ 39.5)

Sanquan Food (002216.SZ): undercut 50DMA recently, consolidating on low volume, low risk entry with SL @ 31.86

Chongqing Brewery (600132.SS): This one already seems to be an investor favorite. Notice how it barely came out of short term trend couple of times and bounced back quickly.

Longi Green (601012.SS): Another investor favorite! SL @ 69.76

China Life Insurance (601628.SS): consolidating nicely, buy the break of 47.78, SL @ 44.53

China Tourism-A (601888.SS): interesting to see a Travel services name pop up on my list. Been consolidating for a couple of months, good to buy between 220-230 with SL @ 213

Charts sourced from aastocks.com

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Disclaimer: This is not investment advice, please do your research before committing capital. Stop loss levels mentioned are indicative for the risk I would be willing to commit on these trades with my trading style. Everyone’s different, commit what you can stomach losing.