China Specialist, Auto and Industrial Specialist

Victoria Li

Equity Bottom-Up

With the start of the delivery of local produced Model Y, sales NIO ES6 and EC6 might decline  in short term, in our view. Model Y's sales prices were announced at Rmb339.9k and above, on 1st Jan 2021, which is lower than NIO's corresponding models, but with better features. Also, Tesla has the best electric control system and battery quality among all the peers based on users' feedback.We also noticed some NIO customers who ordered EC6 were seeking for order cancellation on the same day and switching to Model Y. It would be a tough year for NIO.We suggest to sell NIO

With the start of the delivery of local produced Model Y, sales NIO ES6 and EC6 might decline  in short term, in our view. Model Y's sales prices were announced at Rmb339.9k and above, on 1st Jan 2021, which is lower than NIO's corresponding models, but with better features. Also, Tesla has the best electric control system and battery quality among all the peers based on users' feedback.We also noticed some NIO customers who ordered EC6 were seeking for order cancellation on the same day and switching to Model Y. It would be a tough year for NIO.We suggest to sell NIO

NIO: Will It Survive the Fight with Tesla?

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Myoung Shin Industrial Co.,Ltd / Equity Bottom-Up

Myoungshin Industrial (009900 KS) has been one of the hottest IPOs in Korea in 2020. It completed its IPO on 7 December at the IPO price of 6,500 won.  The stock price has surged nearly 7x in 11 trading days to 51,800 won as of 21 December. Its market cap has exploded to 2.1 trillion won ($1.9 billion). This surge is mostly driven by retail money and it reflects a retail madness of crowds in terms of FOMO (fear of missing out). Tesla's inclusion date for S&amp;P 500 index is on 21 December. We believe this is a significant date for Tesla as well as many of its suppliers such as Myoungshin Industrial as well as for the entire overall EV value chain. Although we do not claim to foretell how Tesla will perform post this date, we do believe there have been a big chunk of investors who have been positioning to buy Tesla and its related suppliers leading into this S&amp;P 500 index inclusion and selling them after the inclusion. Our high end case for Myoungshin Industrial assumed a net profit estimate of 45.7 billion won (an average of 2020 and 2021) and applied a 12.2x P/E (which is about 33% premium to the average P/E of the comps in 2020). At the current market cap of 2.1 trillion won, Myoungshin Industrial is trading at a 46x P/E using the high end of our net profit estimate of 45.7 billion won. Although Myoungshin Industrial has a solid technology for hot stamping products, is this really that special to warrant this very high valuation multiples? We do not believe so.

Myoungshin Industrial (009900 KS) has been one of the hottest IPOs in Korea in 2020. It completed its IPO on 7 December at the IPO price of 6,500 won.  The stock price has surged nearly 7x in 11 trading days to 51,800 won as of 21 December. Its market cap has exploded to 2.1 trillion won ($1.9 billion). This surge is mostly driven by retail money and it reflects a retail madness of crowds in terms of FOMO (fear of missing out). Tesla's inclusion date for S&amp;P 500 index is on 21 December. We believe this is a significant date for Tesla as well as many of its suppliers such as Myoungshin Industrial as well as for the entire overall EV value chain. Although we do not claim to foretell how Tesla will perform post this date, we do believe there have been a big chunk of investors who have been positioning to buy Tesla and its related suppliers leading into this S&amp;P 500 index inclusion and selling them after the inclusion. Our high end case for Myoungshin Industrial assumed a net profit estimate of 45.7 billion won (an average of 2020 and 2021) and applied a 12.2x P/E (which is about 33% premium to the average P/E of the comps in 2020). At the current market cap of 2.1 trillion won, Myoungshin Industrial is trading at a 46x P/E using the high end of our net profit estimate of 45.7 billion won. Although Myoungshin Industrial has a solid technology for hot stamping products, is this really that special to warrant this very high valuation multiples? We do not believe so. 

Myoungshin Industrial - Best Performing IPO in Korea in 2020 (Retail FOMO Madness of Crowds)

Semiconductor & Technology Specialist, Ingenuity

William Keating

Semiconductor & Technology Specialist

Ingenuity

Our focus is exclusively on in-depth research & consulting in the broader semiconductor industry. We focus on the key players, namely Intel, Micron, Qualcomm, Apple, Samsung, NVIDIA, AMD, TSMC & Global Foundries - as well as some of the lesser known, but nonetheless critical, companies such as ASML (for EUV), Mellanox, Cavium, Xilinx etc. We specialise in their products, roadmaps, process technologies, competitive advantages & threats etc. We also help our clients understand the implications of new and emerging technologies, e.g. 3D X-Point, 3D NAND, Carbon Nanotubes, Autonomous Driving, Graphene, Silicon Photonics, Wafer-Level Optics, Artificial Intelligence, FPGA, GPU, ASIC etc. 

Semiconductor Analysis & Research

<a href="https://www.smartkarma.com/entities/intel-corp" target="_blank" data-smartkarma-citation="entities:16764:1" rel="noopener">Intel'</a>s share price is currently down some 26% from its 52 week high, almost exactly where it was three years ago. Meanwhile, competitors <a href="https://www.smartkarma.com/entities/advanced-micro-devices-inc" target="_blank" data-smartkarma-citation="entities:19009:1" rel="noopener">Advanced Micro Devices</a> and <a href="https://www.smartkarma.com/entities/nvidia-corp" target="_blank" data-smartkarma-citation="entities:5891:1" rel="noopener">NVIDIA'</a>s share prices have more than doubled over the same time period. Paradoxically, demand for Intel's products has never been stronger and the company will likely deliver 5% YoY revenue growth compared to the 2% forecasted back in January. How did Intel find itself in this situation and where is the company heading from here? Here's our thoughts on the matter...

Intel's share price is currently down some 26% from its 52 week high, almost exactly where it was three years ago. Meanwhile, competitors Advanced Micro Devices and NVIDIA's share prices have more than doubled over the same time period. Paradoxically, demand for Intel's products has never been stronger and the company will likely deliver 5% YoY revenue growth compared to the 2% forecasted back in January. How did Intel find itself in this situation and where is the company heading from here? Here's our thoughts on the matter...

Intel. How Did We Get Here And Where Are We Going?

Covering IPOs, Healthcare and Technology Stocks

Andrei Zakharov

Algosun Global

In December Root shares fell ~22% after insurtech unicorn reported its first quarterly earnings as a public company. As of Q3-20 GAAP net loss reached $85 million and GAAP revenue collapsed to $51 million due to changing of reinsurance structure starting July 2020. During the reported quarter ceded earned premium grew to ~$110 million, 354% YoY growth and was 71% as percentage of direct earned premium while net earned premium significantly fell to $45 million and dropped ~41% YoY. New reinsurance program caused a reduction in GAAP revenue versus prior quarters.In October 2020 Root completed its IPO and received net proceeds of $1.1 billion after deducting offering costs of ~$53 million. Car insurance company priced IPO above range at $27 per share. Now stock is trading around $15 a share and fell ~45% since IPO. We believe that worst-case scenario for Root stock may be priced in and shares have limited downside potential. Consensus estimates for 2021 revenue look pessimistic and assume YoY contraction in revenue. In our insight we will focus on key drivers and catalysts that may support shares and discuss why Root should establish partnership with automaker or EV manufacturer to grow its business and customer base going forward.

In December Root shares fell ~22% after insurtech unicorn reported its first quarterly earnings as a public company. As of Q3-20 GAAP net loss reached $85 million and GAAP revenue collapsed to $51 million due to changing of reinsurance structure starting July 2020. During the reported quarter ceded earned premium grew to ~$110 million, 354% YoY growth and was 71% as percentage of direct earned premium while net earned premium significantly fell to $45 million and dropped ~41% YoY. New reinsurance program caused a reduction in GAAP revenue versus prior quarters.In October 2020 Root completed its IPO and received net proceeds of $1.1 billion after deducting offering costs of ~$53 million. Car insurance company priced IPO above range at $27 per share. Now stock is trading around $15 a share and fell ~45% since IPO. We believe that worst-case scenario for Root stock may be priced in and shares have limited downside potential. Consensus estimates for 2021 revenue look pessimistic and assume YoY contraction in revenue. In our insight we will focus on key drivers and catalysts that may support shares and discuss why Root should establish partnership with automaker or EV manufacturer to grow its business and customer base going forward.

Root Stock Is Showing Signs Of Bottoming Out

Asset Allocation & Fund Positioning, Copley Fund Research

Steven Holden

Asset Allocation & Fund Positioning

Copley Fund Research

Copley Fund Research provide research and data on asset allocation among Global and Emerging Market equity funds.  The analysis details absolute and relative positioning across countries, sectors and industries together with highly granular data on single stock and single fund allocations.  The data is updated monthly with time series going back to January 2011.

Global Research - Analysis of 165 prominent Global equity funds, combined AUM $335bn
GEM Research - Analysis of 127 prominent global EM equity funds, combined AUM $250bn

Asset Allocation - Global and GEM Equity

<ul>
<li>The percentage of US active funds invested in Tesla has risen sharply over the course of the year.  A total of 18%, or 88 out of the 496 funds in our US analysis hold a position in Telsa.  Average fund weights across all funds is 0.42%, across Telsa holders is 2.34%.  </li>
<li>Total dollar holdings are at peak levels among the funds in our analysis, with combined AUM in <a href="https://www.smartkarma.com/entities/tesla-motors-inc" target="_blank" data-smartkarma-citation="entities:20279:1" rel="noopener">Tesla Motors (TSLA US)</a> of $37.6bn among the 88 holders.  </li>
<li>Current holders have tended to sell in to strength this year, with $4.4bn in outflows as managers keep Telsa from dominating portfolios if left unchecked.</li>
<li>At current levels, <a href="https://www.smartkarma.com/entities/tesla-motors-inc" target="_blank" data-smartkarma-citation="entities:20279:1" rel="noopener">Tesla Motors (TSLA US)</a> will join the ranks as one of the top underweight holdings among active US managers, currently led by <a href="https://www.smartkarma.com/entities/apple-inc" target="_blank" data-smartkarma-citation="entities:666:1" rel="noopener">Apple Inc (AAPL US)</a> and <a href="https://www.smartkarma.com/entities/microsoft-corp" target="_blank" data-smartkarma-citation="entities:15273:1" rel="noopener">Microsoft Corp (MSFT US)</a> .  If no further buying occurs, Tesla will likely slot in to 4th place behind <a href="https://www.smartkarma.com/entities/amazon-com-inc" target="_blank" data-smartkarma-citation="entities:409:1" rel="noopener">Amazon.com Inc (AMZN US</a> (assuming an inclusion weight of ~1.5%).</li>
<li>We expect buying pressure from benchmark aligned funds who are currently not invested in the stock.  Estimates of $5.8bn when analysing previous index inclusions <a href="https://www.smartkarma.com/entities/facebook-inc-a" target="_blank" data-smartkarma-citation="entities:665:1" rel="noopener">Facebook Inc A (FB US)</a> and <a href="https://www.smartkarma.com/entities/berkshire-hathaway-inc-cl-b" target="_blank" data-smartkarma-citation="entities:8635:1" rel="noopener">Berkshire Hathaway Inc Cl B (BRK/B US)</a> .</li>
<li>Potential $37bn of selling from active US funds, though current holders are long-term holders and not guaranteed to sell in to the rebalance.  We see an imbalance of buying from passive funds who may need to push prices significantly higher to entice these long-term holders to sell.</li>
</ul>Analysis taken from our US research, covering 496 active US equity funds with a combined AUM of $3.4tr.


The percentage of US active funds invested in Tesla has risen sharply over the course of the year.  A total of 18%, or 88 out of the 496 funds in our US analysis hold a position in Telsa.  Average fund weights across all funds is 0.42%, across Telsa holders is 2.34%.  
Total dollar holdings are at peak levels among the funds in our analysis, with combined AUM in Tesla Motors (TSLA US) of $37.6bn among the 88 holders.  
Current holders have tended to sell in to strength this year, with $4.4bn in outflows as managers keep Telsa from dominating portfolios if left unchecked.
At current levels, Tesla Motors (TSLA US) will join the ranks as one of the top underweight holdings among active US managers, currently led by Apple Inc (AAPL US) and Microsoft Corp (MSFT US) .  If no further buying occurs, Tesla will likely slot in to 4th place behind Amazon.com Inc (AMZN US (assuming an inclusion weight of ~1.5%).
We expect buying pressure from benchmark aligned funds who are currently not invested in the stock.  Estimates of $5.8bn when analysing previous index inclusions Facebook Inc A (FB US) and Berkshire Hathaway Inc Cl B (BRK/B US) .
Potential $37bn of selling from active US funds, though current holders are long-term holders and not guaranteed to sell in to the rebalance.  We see an imbalance of buying from passive funds who may need to push prices significantly higher to entice these long-term holders to sell.
Analysis taken from our US research, covering 496 active US equity funds with a combined AUM of $3.4tr.

Tesla Inclusion.  What Will Active US Funds Do?

United States

Tesla Inc. operates as a multinational automotive and clean energy company. The Company designs and manufactures electric vehicles, battery energy storage from home to grid-scale, solar panels and solar roof tiles, and related products and services. Tesla owns its sales and service network and sells electric power train components to other automobile manufacturers.

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Tesla (TSLA US)

NIO: Will It Survive the Fight with Tesla?

With the start of the delivery of local produced Model Y, sales NIO ES6 and EC6 might decline in short term, in our view. Model Y's sales prices...

Victoria Li

Myoungshin Industrial - Best Performing IPO in Korea in 2020 (Retail FOMO Madness of Crowds)

Myoungshin Industrial has been the best performing IPO in Korea in 2020, driven by its supplier relationship to Tesla. This surge reflects a major...

Douglas Kim

Intel. How Did We Get Here And Where Are We Going?

Despite unprecedented demand for their products and record revenues, Intel's share price is bouncing off its March pandemic lows, close to where it...

William Keating

Root Stock Is Showing Signs Of Bottoming Out

Our analysis suggests that Root shares show signs of bottoming out as worst-case scenario for Root stock may be priced in and investors should...

Andrei Zakharov

Tesla Inclusion. What Will Active US Funds Do?

What are the current levels of ownership in Tesla Motors? We analyse 496 US active funds with a combined AUM of $3.4tr to find out.

Steven Holden

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