US Trades Monthly Update: DIS, GME, T, AAOI – Hold, SYF, NKE – Take Profit December 5, 2017

Investment Summary

We issued 2 Buy Trades in November 2017, Applied Optoelectronics Inc and GameStop Corp. Our previous call on Synchrony Financial and Nike Inc have hit our target prices and hence we have taken profit in those positions. Our average return for closed positions in 2017 is 11.59%

Walt Disney Co. (DIS): Since we released our trading buy on DIS, the shares have traded down. After the release of the latest earnings results, DIS share price has recovered and as of today, our position in DIS is now in the black. Our view on DIS remains unchanged, as we are upbeat on DIS’s ability to capitalize on their strong IPs as a strength. Looking forward, DIS has announced plans to release their streaming services, both for their ESPN content as well as their Disney (Marvel, Star Wars and Pixar) on a Netflix like service. As such, we continue to remain optimistic about DIS’s Future.

GameStop Corp. (GME):  This is our second time taking a position in GME, the first trading buy was released in April 2017, which hit its target price of USD23.96 in May 2017. Since then, the share price had tumbled to levels we find attractive. Following the latest results, GME has enjoyed a significant recovery and is approaching our target price. We continue to believe in the strength of new Video Game Consoles, Nintendo Switch and Xbox One X, especially as we head into the holiday season and believe that this should provide a boost to GME sales.

AT&T Inc (T): When we first released our call on T, its merger with Time Warner seemed set for approval. Unfortunately, the Department of Justice came out against the merger. At this moment, T will have to go to trial to argue its case, with the trial set to take place next year, the DOJ proposed date of 7 May 2017, while T has requested 20 Feb 2017. T also offered a 7- year ban on blacking out distributors from its programming as a concession to the DOJ. The news sent shares down before recovering in the last 2 weeks of November. We will continue to monitor and update our views as the situation develops.

Worth noting that T will likely be affected by the Federal Communications Commissions (FCC)’s vote on Net Neutrality that is set to take place on 14 Dec 2017. The vote, which looks set to pass, would roll back regulations on Internet Service Providers. Current regulation in the US forces ISPs to treat the access to the internet as a utility and mandated that ISPs provide fair and equal access to all sites. If the vote passes, ISPs would no longer be required to treat access to the internet as a utility and could start giving certain websites faster or priority speeds. We will also continue to monitor and update our views. For now, we remain optimistic about T’s future and believe that it is undervalued at current levels.

Applied Optoelectronics Inc. (AAOI): Since our trading buy on AAOI, the stock has traded sideways. We continue to believe that the stock is undervalued as the market overreacts to the decrease in orders from Amazon. AAOI also showed in its latest earnings that it has the ability to grow its non-Amazon revenue. We continue to be positive on AAOI’s ability to grow and that it is undervalued at current levels.

Figure 1: Summary of Open Trade Positions

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Figure 2: Summary of Closed Trade Positions

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Note: We do not release individual reports when position close, (either take profit or stop loss). Unless otherwise stated, positions will be closed at the price levels stated in the initial report.

Further updates will be prepared during the month end.

Figure 3: Monthly Index Performance

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About the author

Profile photo of Ho Kang Wei

Ho Kang Wei
Investment Analyst
Phillip Securities Research Pte Ltd

Ho Kang Wei graduated with a Bachelor of Commerce, majoring in Accounting and Finance, from Monash University.

He started analysing and investing in US equity markets since 2008. Joining Phillip Securities Research in 2015, he is the analyst in charge of US markets.

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