November and December have been exceptionally challenging for US and global equity, given the increasing weight of concerns from Fed hikes, to trade tensions with China and more recently the growing fear of a recession or at least a serious slowdown in economic expansion. GDP in the US and China are expected to fade in 2019 and 2020.
We have been focused tech, FAANGs and more specifically on Facebook, as a more disciplined approach is necessary for this firm – there seem to be a lot of moving parts inside the Facebook management structure. We have been writing a series of articles and after some deep research and meetings, have put together some detailed audiovisual packages on Facebook and FAANGs.
Historically, we have seen tech as the biggest losers when the S&P 500 falls more than 10 percent, according to CNBC analysis using data from Kensho. And evidence points to some tech names being aggressively oversold – some unfairly so when viewed in an objective manner.
Now we are not telling people to buy or sell as we do recommend trade ideas. However, we are looking at patterns and 2 to 3 months trends. Those of you who know our partners know that there is a constant focus on 1. anything that is oversold, 2. anything that is underperforming versus the index (in the case of single stocks) and 3. anything that can be influenced by external factors such as trade or even Yen. So a sector that has been singled out and beaten down like the tech sector, and has been sold relative to another index and more importantly has names that have been completely dominated by machine driven sellers – these are names that we flag.
As such, how about looking at US tech names, even Facebook and others from that world, as well as similar names or general tech names in Japan? How about looking for a series of 8 to 10 names that you can, with a high degree of confidence, say have suffered from overselling and are trading at the wrong price. These are the names that we want to consider.
Also, is the current level of USDJPY workable? Does 113.00 to 114.00 make more sense? Where are we in the hike cycle? How about exporters? and life companies and importers? Are they ready to support a weaker yen?