"Highly Volatile KOSPI... In a Downturn, Only Earnings Can Be Trusted"

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[Asia Economy Reporter Lee Myunghwan] In the recent volatile market, securities experts advised focusing on stocks that deliver solid earnings. The key to finding the best stocks in a down market is earnings surprises, they analyzed.

On the 9th, Shinhan Financial Investment advised that due to increased volatility in the stock market, strategies that follow trends no longer work. They analyzed that negative factors such as concerns over a 'big step' where the U.S. Federal Reserve (Fed) could raise the benchmark interest rate by more than 0.5 percentage points at once, rapid increases in market interest rates, and cost burdens from inflation are holding back stock price gains.

In such a phase, Shinhan Financial Investment advised that earnings are the only reliable factor. They emphasized focusing on individual stocks with a high possibility of earnings surprises. They also recommended quarterly monitoring of earnings as a key variable to discover stocks. Researcher Lee Jungbin of Shinhan Financial Investment said, "A high probability of a surprise means there is a possibility that earnings will exceed the market consensus for the first quarter."

They presented surprise probability, earnings per share (EPS) changes, and institutional demand and supply as key earnings variables. They advised examining stocks based on these factors. According to their analysis, even when the KOSPI index turned downward in the second half of last year, the cumulative absolute returns of portfolios composed using these variables steadily increased.

As of the end of last month, the top 10 stocks by score using these variables included Simtek, Hyundai Glovis, Hite Jinro, BH, Inox Advanced Materials, Netmarble, Daeduck Electronics, Ligno Industrial, L&F, and Samsung Engineering.

Researcher Lee predicted, "Even in this volatile period caused by macro issues, the stock price rises of solid individual stocks based on earnings will not stop."