The big market break that we have all been anticipating is finally upon us. The remarkable speed at which this correction is occurring has already ripped stocks back to where they were a month ago, with overstretched tech leading the slide.
S&P 500 has plummeted 7% since September 2nd, while the tech-driven Nasdaq 100 has lost over 10% of its value.
Analysts have been speculating that this day of reckoning would occur, and the correction would be more significant the further valuations were pushed. Now the froth has finally being blown off the top.
The overzealous "pandemic traders," as I like to call them, have brought with them valuation-neglecting optimism about the stock market that drove us to unsustainable levels over the last few weeks. The historically low volume last few weeks of summer vacation allowed the flooding cash from the retail investing/trading to push the market into the very frothy territory we were at on September 3rd.
This new wave of retail investors/traders has been buying up innovation-driven stocks, creating a level of frothiness in this sector that needed to be blown off. The split surge from both Apple (AAPL) and Tesla (TSLA) was the tipping point.
These two revolutionary equities surged into their respective stock splits on August 31st, bringing the whole market with them. On September 3rd the Street decided it had gone past a reasonable risk/reward ratio. Since, there has been a massive correction in both AAPL and TSLA, which I believe catalyzed this broader market plunge.
Do not let the speed at which we are correcting scare you away. This recent sell-off should be seen as an opportunity to take advantage of.
Tech Opportunity In The East
There is no question that technology-driven stocks will be the driver of returns, and this pullback has created a ripening buying opportunity for my favorite foreign tech names.
The Nasdaq 100 just bounced off its 50-day moving average, the first time this index has made it down to this level since mid-April. The 11,070 level for the Nasdaq 100 looks like it has become the index's new support.
It may be time to start putting sidelined cash to work in some of the hottest innovation-powered blue chips of the East.
Asian economies are digitalizing rapidly with the pandemic catalyzing the proliferation of the space. The pandemic's recovery has been swift in this region, and foreign equities are becoming ripe for the picking, especially as uncertainty about the election looms domestically. It is time to diversify your tech holdings.
Below are 3 well-positioned Asian stocks that are poised to soar in the roaring 20s, and this domestic market correction has created a great buying opportunity.
My Foreign Equity Watchlist
Sea Limited (SE)
Sea is pioneering the digital revolution in South East Asia. This is a region that is moving online at a prolific rate. Sea Limited's market control of its ecommerce and digital entertainment segments and its growing authority of the digital payment space puts SE at the center of excitement in this region.
This enterprise has been a revenue machine, with its past 8 quarters illustrating year-over-year growth in the triple-digit percentages. SE is a powerhouse of change, and its future is bright, to say the least.
Despite the business not yet turning a profit, it is trading at 7 times sales, which is reasonable considering its growth outlay. Analysts anticipate Sea Limited to turn an operational profit by next year and remain free-cash-flow positive from this past quarter onward.
I am looking to buy this stock at any price at or below $130.
Alibaba is leading the proliferating digital revolution in Asia. Alibaba controls the e-commerce space (80% market share) and its cloud-computing category (roughly 50% market share) of the most populous and soon-to-be largest economy in the world. The pandemic has only strengthened its grip on the nascent online economy in Asia.
The fact that the Amazon of the East has not taken off to the same extent as its western counterpart is baffling to me. Alibaba is valued at less than half of Amazon's (AMZN) market cap despite producing substantially wider margins, illustrating more robust profitability, and having a sizably larger topline growth outlook for the next few years.
As a long-term investor, I like this stock at any price below $275, but if you're trying to time your buys for the best possible results like I am, wait for it to dip below $260 towards its 50-day moving average (approximately $258 today).
Taiwan Semiconductor Manufacturing Co. (TSM)
TSMC is leading the fourth industrial revolution from behind the scenes. TSMC is the largest semiconductor manufacturer globally (54% market share) with a market positioning that is multiples ahead of its competitors.
This is a stock that I have been hyping as an excellent buy since last summer. This stock had been trading below $50 as recently as the end of May, and it has finally broken out.
Building for The Future
TSMC creates 85% of the world's semiconductor prototypes. Its Open Innovation Platform supports start-ups and enterprises alike by reducing design barriers and improving first-time integrated circuit (IC) success.
TSMC has seen more semiconductors than any other company in the world. They are not only working at the largest scale but also with the most state-of-the-art technology to improve a firm's "design time, time-to-volume, time-to-market, and ultimately, time-to-revenue," according to the TSMC investor relations site.
The most trusted tech names in the world turn to the most trusted semiconductor foundry on the globe for their manufacturing and innovative needs. TSMC's customers include innovation-drivers like Intel (INTC), Nvidia (NVDA), Broadcom (AVGO), Qualcomm (QCOM), and even Apple (AAPL).
More and more tech companies are turning to foundries for their IC production needs as the technology required to compete becomes impossible to produce in-house. For example, Samsung and TSMC recently teamed up in the development of 3-nanometer transistors, which would give it the ability to put 30 billion transistors onto a chip the size of your fingernail.
This company has an enormous amount of growth ahead of it. Its realized economies of scale have rippled through the company's financials, positioning it to reap the benefits from the next wave of hyperscaling, AI development, as well as the implementation of 5G technology.
These shares have stayed relatively buoyant throughout the sell-off the past few days. I like this stock because it's been an unstoppable powerhouse of consistent returns. TSM has gained almost 300% over the past with relatively low volatility while at the same time returning a healthy dividend yield, which currently sits at 1.7%.
I like this stock at any price below $75.
These foreign equities will provide an excellent hedge for your domestically driven portfolio, not to mention a massive amount of capital gains potential. The Asian tech market is red hot, and this domestic correction has created an excellent opportunity to pick off some of the best positioned digital behemoths of the region.
With the US election on the horizon, it is time to claim your stake in these well-positioned Asian enterprises while they are reasonably priced.
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>
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Taiwan Semiconductor Manufacturing Company Ltd. (TSM) : Free Stock Analysis Report
Tesla, Inc. (TSLA) : Free Stock Analysis Report
Sea Limited Sponsored ADR (SE) : Free Stock Analysis Report
QUALCOMM Incorporated (QCOM) : Free Stock Analysis Report
NVIDIA Corporation (NVDA) : Free Stock Analysis Report
Intel Corporation (INTC) : Free Stock Analysis Report
Alibaba Group Holding Limited (BABA) : Free Stock Analysis Report
Broadcom Inc. (AVGO) : Free Stock Analysis Report
Amazon.com, Inc. (AMZN) : Free Stock Analysis Report
Apple Inc. (AAPL) : Free Stock Analysis Report
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