In today’s briefing:
- NASDAQ 100 Index Rebalance: 6 Regular Changes + 1 Adhoc Change; US$37bn to Trade
- China Tourism Group (601888 CH, BUY, TP: CNY106): How to Catch a Falling Knife
- GoTo: Thoughts on the New Tokopedia/TikTok Partnership
- Toyota Cross-Shareholding – To Say a Whole Lot Is Left Would Be a US$26bn Understatement
- Li Auto (LI US, 2015 HK): Deliveries Surged, But Overvalued Apart from Comparing with Tesla
- [Counting Beans #1] Robust Soybean Exports Driving Prices Higher Despite Record Harvest
- Las Vegas Sands: Our Case for This as a $70 Stock Is Strong but It Lingers in the 40s
- Lockout Rally Continues; Breakouts Piling Up; SPX Breakout Above 2-Yr Resistance at 4600-4607
- Geo Holdings: Plenty of Money in Old Rope
- Digging Into Cybersecurity Incidents
NASDAQ 100 Index Rebalance: 6 Regular Changes + 1 Adhoc Change; US$37bn to Trade
- There were 6 inclusions and 6 exclusions for the Nasdaq-100 Stock Index (NDX INDEX) at the annual December reconstitution. Then another ad hoc change was added on top of that.
- Impact on the inclusions ranges from 1-8 days of ADV to buy, while the impact on the deletions varies from 0.7-2.6 days of ADV to sell.
- Apart from the constituent changes, there are expected to be inflows in Tesla Motors and Broadcom and outflows from Apple, Microsoft, Amazon.com and NVIDIA.
China Tourism Group (601888 CH, BUY, TP: CNY106): How to Catch a Falling Knife
- China Tourism Group Duty Free Corp Ltd (601888 CH) (CTG) share price has plunged by 63% despite solid 9M23 profits growth and cash flushed balance sheet
- Underlying fundamentals is solid, Chinese people still buying duty free goods, albeit tilting towards value than decadence purchases
- CTG is cheap relative to its own history on all valuation metrics (PE, P/Book, P/FCF) and many technical indicators suggest it is in OVERSOLD territory
GoTo: Thoughts on the New Tokopedia/TikTok Partnership
- GoTo Gojek Tokopedia Tbk PT (GOTO IJ) announced on Monday a partnership with TikTok which would combine former’s e-commerce biz Tokopedia with TikTok Shop Indonesia.
- TikTok was forced to close its e-commerce services in Indonesia following regulations banning online shopping on social media platforms in September citing protection of smaller merchants and data privacy.
- It seems TikTok will certainly be a winner if the deal is approved but surprised at GoTo’s move to retain a minority stake given e-commerce business is nearing profits.
Toyota Cross-Shareholding – To Say a Whole Lot Is Left Would Be a US$26bn Understatement
- With Toyota (7203 JP) having sold some of its stake in Denso, KDDI and Harmonic Drive this year, it has firmly set the ball rolling for unwinding some of its cross-shareholding.
- Toyota has a shareholding in around 60 listed companies, with its combined disposable stake worth over US$26bn.
- In this note, we take a look at its stakes in various companies to see which ones could possibly be candidates for further selldowns.
Li Auto (LI US, 2015 HK): Deliveries Surged, But Overvalued Apart from Comparing with Tesla
- Li Auto’s deliveries and revenues surged by three digits since 3Q23.
- The company is building new factories in Changzhou and Beijing.
- However, we believe the stock is overvalued apart from comparing with Tesla.
[Counting Beans #1] Robust Soybean Exports Driving Prices Higher Despite Record Harvest
- Research shows that El Niño results in milder weather leading to higher precipitation and consequently ~3.5% higher yield leading to depressed bean prices.
- Bean prices have outperformed seasonal trends in November and December. It is surprising given surplus inventory outlook and El Niño effect on production.
- Notifications of large export sales have driven much of the bullishness in prices over the past week. Prices are up 1.7% from last Friday’s settlement prices.
Las Vegas Sands: Our Case for This as a $70 Stock Is Strong but It Lingers in the 40s
- Adelson family interests have sold 10% of their LVS equity to acquire a pro basketball franchise. This triggered am 8.5% decline in the stock when it was actually bullish.
- The market has not yet grasped the magnitude of the Asian gaming recovery arc which points to 2024 reaching baseline 2019 arrivals and GRR pace by mid-2024.
- LVS has the scale and amenities to outperform peers but this is not yet reflected in its trading range dead pooled in the $40s.
Lockout Rally Continues; Breakouts Piling Up; SPX Breakout Above 2-Yr Resistance at 4600-4607
- Since 11/21/23 Compass we have discussed weekly that even a minor 2-5% pullback is far from a guarantee, considering “breakaway gaps” and what appeared to be an ongoing “lockout rally”
- All we got was a 1% peak to trough decline in the S&P 500, while the Nasdaq 100 (QQQ) pulled back 2.9% (though left the 11/14/23 gap unfilled).
- Now, SPX and QQQ are breaking out yet again after a multi-week consolidation period, including SPX breaking above 2-year resistance at 4600-4607. This is what a strong market looks like.
Geo Holdings: Plenty of Money in Old Rope
- Consumption of used products is rising fast as exemplified by the rise of 2nd Street.
- Operated by Geo Holdings (2681 JP), once just a DVD rental business, it is now Japan’s largest used goods retailer.
- Sales are booming in a market increasingly focused on thrift and re-use, allowing 2nd Street to even take on the might of Mercari.
Digging Into Cybersecurity Incidents
- So there we were today, scanning the latest corporate filings to the Securities and Exchange Commission , when we noticed that Johnson Controls ($JCI) had filed its latest earnings report .
- We started reading, and were immediately stopped short by this earnings adjustment, right there in the second bullet point: Fiscal Q4 GAAP EPS of $0.80; Q4 Adjusted EPS of $1.
- Hold up — what cybersecurity incident? When did that happen, and what has Johnson Controls said about it so far?
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