[Click eStock] Stock Pullback Strategy Market... Focus on Rare Stocks with Upward Earnings Revisions Next Year

[Asia Economy Reporter Lee Seon-ae] Since the market is experiencing a stock-by-stock trend, investment advice has been raised that it is wise to seek profits through a stock pullback strategy.

According to Hana Financial Investment on the 10th, the recent performance of the stock pullback strategy (3-month stock overheating + 1-week excessive stock price drop) has been very high. This is precisely since the momentum of domestic corporate earnings slowed down in the second half of this year. The stock pullback strategy recorded +8.4% in the second half of this year alone and +1.8% from October to the present (Q4) based on long-short (40X40). Someone thought the leading stocks were at their peak and formed a pullback, but those stocks tended to rebound from short-term lows and rise further. This market tendency reflects the slowdown in growth of Korean companies, forming a premium on scarce growth value.

Researcher Lee Kyung-soo of Hana Financial Investment said, "The domestic stock market is a typical small and mid-cap market, and this market tendency will continue until signals appear that domestic (large-cap) corporate profits have bottomed out or foreigners' interest in Korean stocks, including emerging markets, rises again." He added, "Considering that there is a negative base effect on earnings until the first half of next year and that foreigners continue to apply discounts to emerging markets, I expect similar market tendencies to continue for the time being."

From 2017 to the present, during a total of 30 months when KOSPI earnings momentum slowed, the cumulative relative return of the mid-cap index compared to large caps was +3.9%p, and the relative return of KOSDAQ150 compared to KOSPI200 was a remarkable +92%p. Also, during the total 38 months when foreigners sold KOSPI, mid-cap relative returns (compared to large caps) outperformed by +4%p, and KOSDAQ relative returns (compared to KOSPI) outperformed by +56%p.

In conclusion, interest in core growth themes such as Metaverse and secondary batteries will inevitably continue until alternatives emerge. The researcher said, "It is necessary to pay attention to the scarce stocks with upward earnings next year and those receiving high scores in the stock pullback strategy." He added, "If we select stocks satisfying the above conditions based on quantitative criteria, they include HL B Life Science, HL B, Hyosung Advanced Materials, Dongjin Semichem, DGB Financial Group, Lotte Fine Chemical, JB Financial Group, Samsung Fire & Marine Insurance, ABL Bio, OCI, BNK Financial Group, Daishin Securities, Dongseo, Mezzion, etc. (This is not a portfolio recommendation but individual stock mentions)."

This content was produced with the assistance of AI translation services.