A place to learn how to analyse financial statements and find good companies for investment – using time tested strategies of great investors and traders like Benjamin Graham, Warren Buffet, Joel Greenblatt and William O'Neil
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.
In this post, I am going to explore few themes that became dominant over the last 3 months in HK equity market.
Technology related sectors (Software, Semis, Internet marketing etc.) dominated the returns in almost all markets globally for a good part of last decade, and had monstrous returns post the Feb-Mar sell off. However, a lot of Tech companies are either consolidating their earlier gains right now or downright breaking down from an uptrend. It is of utmost importance to recognize the shift in investor sentiment.
I won’t talk about banks, airlines and hotels coming back to life as everyone sees these sectors as the direct beneficiaries of re-opening and vaccine related optimism.
Below is a list of select sectors and companies that have been exerting their dominance over the last 3 months. I invite active traders to take a look at graphs of these companies. Try to identify the points where one could’ve/should’ve noticed the changes in market sentiment. For fundamental analysts, this could be a useful exercise to recognize the catalysts which were not accounted for.
That said, this post in no way implies the demise of tech sector. It will probably come back and sooner than most people would expect it to. Aim of this analysis is to maximize the returns one can make at any given time.
Would you rather sit on an investment with say negative to +2% monthly return (given ongoing consolidation in your favorite companies) or find a way to make that capital work for a relatively higher return?
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.