Pre-Market Plan [10/17]: TSM Bullishness Cancels out ASML Bearishness
Good Morning to the Public ☀️ -
As discussed on 10/15, the highlight of this week was definitely going to be ASML and TSM earnings. TSM gave very robust results last night, and markets have washed out ASML’s earnings driven selloff.
ASML’s large massive miss pushed me to do some sector homework on its related impact on the rest of the semiconductor sector.
Our initial conclusion was that it was pre-mature to think ASML’s poor guidance would translate into poor results for AI driven names.
For this reason, upon seeing market stability yesterday, we followed up with the following note that AI related names AMD/NVDA/MU/AVGO would likely see relative outperformance.
We needed a catalyst for my line of thinking to work. TSM is that catalyst.
The market’s rotational structure is constantly shifting opportunities back and forth, and our goal is to participate in some of them (just like Pokemon, we can’t catch them all) once the setup appears to be ready.
On a side note, I will be out of the office starting next week, so members will get my updates mainly directly on our Whatsapp group. Once China is ready to find a bottoming sequence, I’ll discuss with them directly.
Join us!
Have a great day folks!
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Disclaimer on H-Shares:
A note of caution for H-Shares (or China ADRs). They are extremely, extremely volatile during macro policy changes, and as a sector, exhibit the highest forms of volatility compared to other sectors I’ve studied. Holding H-Shares or China ADRs is only one notch below holding Crypto/AltCoins in terms of volatility. Only folks with the highest risk tolerance and highest ability to manage volatility should look at H-Shares. H-Shares can swing 20-30% in the span of days on the upside or downside. It can make Nasdaq-100 stocks (my core coverage) look slow.
As an example, Meituan which was a left for dead stock was trading at $60HKD just a few months ago. Shares have nearly tripled to around $180HKD, with the bulk of the advance coming from the past few weeks.
My DCF Model approach, which members know have powerful degree of forecasting power in my core coverage because of my familiarity with the companies, is NOT going to work as well on H-Shares. Any commentary that I give on H-Shares relies much more on macro observation and technical analysis, which may or may not be a full picture of a company’s fair value. For this reason, there is a speculative type of element when it comes to H-Shares. Investing in H-Shares is completely different from investing in U.S. stocks.