Year-End and New Year Investment Formula 'Performance'... Which Stocks Have Upwardly Revised Operating Profit for Next Year?

[Asia Economy Reporter Ji Yeon-jin] It has been found that selecting stocks based on 'earnings' during year-end and New Year stock investments yields considerable returns. The advice is to invest in companies expected to see significant earnings improvements next year.

On the 8th, Hana Financial Investment analyzed factor-based returns from the second week of December to the end of March over the past four years and found that earnings momentum showed the strongest performance at 34.6% from December to early January. Undervalued stocks based on valuation recorded a return of 20.1%, while price and dividend momentum showed negative returns.

However, from mid-January until just before the first quarter earnings season, the performance of the earnings momentum factor was slightly adjusted, reflecting a cautious approach to checking and responding to first quarter earnings forecasts. Lee Kyung-soo, a researcher at Hana Financial Investment, said, "During this period, the gap left by the ‘earnings’ factor was filled by the ‘undervalued’ and ‘excessive price decline’ factors," adding, "In particular, the low PER factor performed well early this year, likely because domestic corporate earnings in the first half of this year were very strong, mainly in cyclical sectors."

Currently, domestic corporate earnings have been sharply revised downward, but the recent strength of undervalued or sharply declining stocks is analyzed as a seasonal trend that also appears at previous year-ends. Therefore, it is expected that earnings information during the first quarter earnings season will be the key momentum for stock prices. The researcher stated, "In a situation where global and domestic corporate earnings are either flat or declining, stock price reactions to earnings upgrades are high," and emphasized, "Focusing the portfolio solely on ‘earnings’ is the most desirable strategy at this point."

Industries expected to see earnings upgrades next year include food and beverage, airlines, securities, KOSDAQ, hotel and leisure, textiles and apparel, and automobiles. Semiconductor, steel, and chemical sectors are slightly declining.

Hana Financial Investment identified stocks with notably upward earnings projections (OP) for next year, including HFR, Wemade, Korean Air, Taekwang, Seoul Auction, Jusung Engineering, Dexter, Devsisters, HMM, Megastudy Education, Korea Carbon, Dongbu Construction, Hi-Vision System, EO Technics, Hwasung, MCNEX, OCI, SBS, Semtech, LG HelloVision, Korea Circuit, Daeduck Electronics, Lotte Fine Chemical, Chris F&C, Cowintech, LG Innotek, Songwon Industrial, LF, Abico Electronics, Samsung Biologics, LX Semicon, Hyundai Mipo Dockyard, PSK, Youngone Corporation, Gamevil, Hanmi Pharmaceutical, Daewoong Pharmaceutical, POSCO, JS Corporation, ISC, Intec Plus, BH, Hojun Industrial, Inox Advanced Materials, KH Vatec, Golfzon, Isu Petasys, and Emart.