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Koreans Buy Tesla, GameStop as Foreign Stock Buying Hits Record

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Heejin Kim
Updated ·1 min read
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Koreans Buy Tesla, GameStop as Foreign Stock Buying Hits Record

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(Bloomberg) -- South Korean traders piled into U.S. stocks like GameStop Corp. and Tesla Inc. in January, driving their buying of overseas equities to a record high in January.

Korean individual and institutional investors bought a net $5 billion of foreign stocks in January, their most-ever monthly tally since 2011, when the Korea Securities Depository began collecting data.

Their positions now include $9.8 billion in Tesla Inc. shares -- the largest for any stock -- as well as about $557 million in GameStop Corp., KSD’s data show. GameStop, an unprofitable videogame retailer, has drawn day traders globally, including from India and China.

With U.S. stocks representing some 80% of their holdings, Korean retail investors are “highly exposed” to U.S. market risks, Goldman Sachs senior Asia economist Goohoon Kwon said in a note on Sunday.

“With their heavy buying during a global equity rally in late 2020, a 10% market correction for example could put one-third of their holdings in the red,” Kwon wrote.

GameStop’s Wild Ride Has Indian Retail Traders Joining In

Korea’s retail investors, having buoyed their domestic markets, turned to the U.S. and especially tech stocks like Tesla and Apple Inc. for returns last year.

The benchmark Kospi surged 31% in 2020, making the Korean bourse the world’s best performer after that of Nigeria’s.

Regulators in Seoul have been warning retail investors, and especially those indulging in “reckless borrowing” to be cautious about investing overseas.

(Updates the value of Koreans’ holding of Tesla and GameStop shares in third paragraph)

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©2021 Bloomberg L.P.

Originally published

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    (Bloomberg) -- Carson Block, the activist short-seller famous for targeting Chinese frauds, recognizes familiar behavior in the rally of shares such as GameStop Corp. To him, the parabolic moves look less like the product of Reddit-driven retail orders than a short squeeze by hedge funds targeting other hedge funds.“I’ve wondered, is there coordination with these hedge funds?” Block said in an interview on Bloomberg Television. “What constitutes coordination? Did they cross the line? That could be interesting.”For the moment, it’s an unproven theory. But if Block is right, what seemed like a history-making retail uprising last week was just as much a convenient smokescreen for internecine hedge-fund warfare.The list of casualties in that fight is growing from the severely wounded, such as Melvin Capital Management and Maplelane Capital, to include funds run by firms ranging from David Einhorn’s Greenlight Capital to Renaissance Technologies. What’s not clear yet is who profited on the other side.Block said his firm, Muddy Waters Capital, was the victim of what he thinks was a short squeeze by hedge funds in shares of GSX Techedu Inc. in the weeks leading up to the GameStop frenzy. As a result of that and similar situations, he had to hire a full-time trader to monitor the stock-options markets and adjust positions to more actively manage risk.“It’s a trading game, it’s flows-driven, it’s technical,” he said. “We’re going to do what we need to do to survive.”Unlike many short-sellers, Block is decidedly public with the names of companies he believes are scams and which he’s betting against. He typically publishes the research underpinning his short thesis and makes it available on Twitter. More recently, he started releasing videos on zer0es.tv.As he sees it, that effort to expose wrongdoing has a “social utility” and should set him apart from the short-sellers under attack on Reddit. He scoffs at the suggestion that he’s part of a Wall Street establishment. If he were such an insider, he asked, why would Goldman Sachs Group Inc. and Credit Suisse Group AG have turned down his business?“When we get tagged as establishment, you can’t be more inaccurate than that,” he said. “It’s almost funny if it weren’t for the fact that I now have all these people trying to troll me.”What Block agrees with is the growing sense that financial markets are overvalued and predominantly small investors will be hurt when the bubble finally bursts. He faults the Federal Reserve for pumping in too much liquidity, allowing for too much credit extension and too much leverage.“We need a combination of monetary and fiscal policy that makes sense or else we’re just stuck in this building a bigger powder keg to explode again,” he said. “It always transfers wealth from the many to the few.”For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.

  • These 3 Stocks Are Top Picks for 2021, Says BMO

    Usually, when markets climb to record levels and stay there, investors start thinking about bubbles. However, Brian Belski, chief investment strategist at BMO Capital, believes that we’re just in the midst of a counter-intuitive time. In a recent note, Belski ruminates at length on the current conditions, and investors’ guesstimates that 1H21 will see a stock bubble. “Widespread speculation of an imminent stock market bubble, not to mention calls for a potential sharp correction in the first half of 2021, only to be followed up by strength during the second half, represents excessively consensus thought by most clients we speak with,” Belski wrote. But here the plot thickens – Belski isn’t sure that the common wisdom has called conditions right: “We believe the first part of 2021 will be much stronger than most investors are imagining.” Belski explains that with the Joe Biden ensconced in the White House, and supported by Democrat majorities in both Houses of Congress, a new corona response stimulus package will likely be larger than expected. Combined with vaccine programs and a solid Q4 earnings season, Belski believes that a cyclical uplift will hit the markets and extend through the year. Against this backdrop, the stock analysts at BMO are taking their cue from Belski, and choosing their top picks for 2021. Using TipRanks’ Stock Comparison tool, we lined up the three alongside each other to get the lowdown on what the near-term holds for these top picks. Tronox, Ltd. (TROX) We will start with Tronox, a mining and specialty metal manufacturing company. Tronox mines titanium ores and zircon, which are used to produce titanium chemicals: titanium dioxide and chemical sands, primarily, which are used in dyes. Tronox products are found in paints, papers, plastics, and other common products. Useful byproducts of the manufacturing process include caustic soda, gypsum, iron sulfate, and various acid compounds. A solid industrial niche, with essential products in a variety of sectors, gives Tronox a firm foundation for growth, and the share value reflects that. The stock rose an impressive 106% over the past 12 months. In Q3, the last reported, Tronox showed $675 million at the top line, up 17% sequentially. Improved market demand, and consequent improved TiO2 (titanium dioxide) sales through the quarter powered the higher revenues. Looking ahead, Tronox has recently issued new Q4 guidance – and these preliminary numbers were far better than expected. For the last quarter of CY20, Tronox is guiding toward revenue of $783 million – which will be a 13.6% year-over-year gain. Based on all that Tronox has going for it, BMO analyst John McNulty tells investors that his bullish thesis remains very much intact. “We listed TROX as one of our top picks for 2021 [based on] our belief that the strength of the cycle would surprise investors in the near term on the volume side and in the intermediate term on the pricing side. The 4Q "blowout" supports our near-term thesis while… recent price hikes give us greater confidence in our intermediate-term thesis as well as our belief that our 2021 and 2022 estimates are solidly too low. We continue to believe TROX offers the most upside of any name in our space looking out through 2021,” McNulty commented. Unsurprisingly, McNulty gives Tronox an Outperform (i.e. Buy) rating, and a $23 price target. This conveys his confidence in TROX's ability to rise 36% over the next twelve months. (To watch McNulty’s track record, click here) What does the rest of the Street think? As it turns out, 3 out of 4 analysts that have published a recent review see the stock as a Buy, making the consensus rating a Strong Buy. Meanwhile, the $19 average price target indicates ~13% upside potential. (See TROX stock analysis on TipRanks) Netflix, Inc. (NFLX) Netflix hardly needs any introduction. It's one of the famous FAANG stocks, a group of tech companies whose sheer size and rate of growth have helped to power the markets over past few years. The FAANGs include Facebook, Amazon, Apple, and Google – so Netflix is in good company, even if its $239 billion market cap puts it in a distant fifth place for size behind its peers. Revenue has grown steadily in every quarter for the past two years, reaching $6.64 billion in 4Q20. That wasn’t the only good news from Q4. The company reported that it had exceeded 200 million paid subscribers in the quarter, and is now looking forward to turning cash flow positive for the first time. On the balance sheet after Q4, Netflix has $15 billion in debt and $8.2 billion in cash on hand. As long as the company turns out hits like ‘The Queen’s Gambit’ and ‘The Midnight Sky,’ which had 68 million and 72 million viewers respectively in their first four weeks, the debt is considered sustainable. Analyst Daniel Salmon, rated 5-stars by TipRanks, rates Netflix as Outperform (i.e. Buy) in his recent note for BMO. Salmon gives the stock a $700 price target, implying an upside of 30% for 2021. (To watch Salmon’s track record, click here) Describing Netflix as a ‘Top Pick’ in his headline, the analyst goes on to say: “We raise our ARPU estimates driven by recent price increases, leading to higher revenue estimates [...] While the pricing increases may slow the subscriber growth somewhat, we do not anticipate similar level of churns as in 2019 and think total subs can surprise to the upside in 2021. We think there is another leg as the FCF generation becomes reality, and we continue to like the lack of antitrust/regulatory overhang versus rest of FANG.” There are plenty of Buy ratings for Netflix amongst Salmon's colleagues – 23, in fact. With the addition of 6 Holds and 3 Sell, the stock has a Moderate Buy consensus rating. The average price target stands at 632.90 and implies ~17% upside for the foreseeable future. (See NFLX stock analysis on TipRanks) Corteva (CTVA) The third stock on BMO's top picks list, Corteva, was once the agricultural unit of the chemical giant Dupont, before being spun off as an independent company in mid-2019. The company currently boasts a market cap of $30.3 billion – making it the world’s largest aggrotech company. Corteva fuels its growth through a diverse product line, including seeds, crop protection, and digital land management, all designed to improve crop yields and acre value. Corteva’s seed lines include such staples as corn, wheat, soy, and sorghum – all of which are either eaten directly, shifted into processed foods, or used as livestock feed. Land management is essential to all aspects of farming, at all scales, from wheat farmers to dairy and meat producers. The third calendar quarter is Corteva’s slowest, and Corteva showed year-over-year declines in earnings and revenue. At the same, the 52-cent EPS and the $1.86 billion reported revenue both beat the analyst forecasts. Watching Corteva for BMO, Joel Jackson writes, “Our favorite idea for 2021 is CTVA… There's a strong pathway if 13-14x multiples keep rolling forward to future years as CTVA continues to penetrate deeper into seed traits… we believe 2021 could be a much stronger year for CTVA, which could deliver 20%+ EBITDA growth (we don’t believe this is fully appreciated by the Street although it’s starting to get there). CTVA’s earnings bridge for 2021E could be leaning closer to bull case scenarios as … higher crop prices provide better seed price opportunities (lower rebates), and crop protection sales fare better than expected.” These comments support an Outperform (i.e. Buy) rating, and Salazar’s $48 price target suggests that CTVA has room for a 18% upside in the coming year. (To watch Jackson’s track record, click here) All in all, Corteva’s Moderate Buy analyst consensus rating is based on 8 reviews, breaking down to 5 Buys and 3 Holds. The $43.90 average price target suggests room for ~8% upside growth from the current trading price of $40.71. (See CTVA stock analysis on TipRanks) To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights. Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

  • 'This is life-changing': Meet the Redditors behind the GameStop saga

    Members of the r/WallStreetBets Reddit community that’s taken Wall Street by storm discuss the GameStop frenzy and what drove them to scoop up shares.