Recent weakness provides accumulation opportunities (9 Sep 20)

Dear all

Based on Table 1 below, U.S. indices have fallen between 5.5% – 10% from the close of 2 Sep to 8 Sep. Nasdaq led the decline with a 10% drop.

These are interesting times indeed! Why do I say so? Read on below.

Table 1: Performance of various indices from 2 Sep to *8 Sep 20

Table 1_Performance of various indices from 2 Sep to 8 Sep 20

Source: Ernest’s compilations (*STI and Hang Seng are based on 9 Sep closing prices)

In my personal opinion, this recent U.S. market weakness provides accumulation opportunities for the well prepared and for those who have been waiting on the side-lines to accumulate blue chip stocks.

Below are some of my chart observations on the U.S. and Asian indices.


Nasdaq chart

Based on Chart 1 below, there is a good chance that Nasdaq may see a reduction in selling pressure in the near-term as

a) It forms a bullish inverted hammer on 8 Sep after three consecutive days of decline and

b) It is resting on a confluence of supports around 10,799 – 10,888.

Chart 1: Nasdaq forms an inverted hammer after an ugly 10% slide in three days

Nasdaq chart 8 Sep 20

Source: InvestingNote 8 Sep 20


STI and Hang Seng charts

Previously, on 31 Aug 20, I have mentioned the following to my clients “The U.S. market is relatively high, compared to its historical averages. For those clients who definitely need to be invested (such as due to investment mandates / market outlook / portfolio constraints), they can consider switching some out from U.S. portfolios to Hong Kong and Singapore market”

It is noteworthy that our STI and Hang Seng fare better during the recent sell off as they only dropped 1.6% and 2.6% respectively. Barring unforeseen circumstances and continuous large market slides in U.S. indices,

a) STI 2,478 & 2,488 remain good levels of supports;

b) Hang Seng 23,700 – 24,200 is a good support region.


Personal compilation of stocks sorted by total potential return

I have generated two tables below and have appended the top ten and bottom ten stocks for readers. Table 2 lists the top ten stocks sorted by highest total potential return. These top ten stocks offer a total potential return of between 54% – 145%, based on the closing prices as of 8 Sep 20. (Most importantly, please refer to the criteria and caveats below). [My clients will receive the entire list of my compilation of 118 stocks sorted by total potential return.]

Table 2: Top ten stocks sorted by total potential return

Stocks with market cap more than $200m, sorted by total potential return 8 Sep 20

Source: Bloomberg (8 Sep 20)

Table 3 lists the bottom ten stocks sorted by total potential return. These bottom ten stocks offer a total potential return of around -1% to -39%, based on the closing prices as of 8 Sep 20.

Table 3: Bottom ten stocks sorted by total potential return

Stocks with market cap more than $200m, sorted by lowest total potential return 8 Sep 20

Source: Bloomberg (8 Sep 20)


Criteria in generating the above tables

1) Mkt cap >= S$200m;

2) Presence of analyst target price.


Very important notes

1) This compilation is just a first level stock screening, sorted purely by my simple criteria above. It does not necessary mean that First Reit is better than Riverstone in terms of stock selection. Readers are still required to do their own due diligence and form their own independent investment decisions;

2) Even though I put “ave analyst target price”, some stocks may only be covered by one analyst hence may be subject to sharp changes. Also, analysts may suddenly drop coverage. Furthermore, Bloomberg may not have captured all the analysts’ target prices and some of these target prices may not be the most updated figures;

3) Analyst target prices and estimated dividend yield may be subject to change anytime, especially after results announcement, or after significant news announcements;

4) The above data is compiled using Bloomberg information as of 8 Sep 20 (closing prices).


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