Brokerages Picked the Names... Stocks to Watch When the Market Is Stagnant

[Financial News] As the domestic market continues to fluctuate, analysts said that in a flat market, sectors such as cosmetics, insurance, and capital goods are worth watching, as companies with improving earnings are likely to deliver excess returns. In a report on the 19th, Lee Sang-hyun, a researcher at Meritz Securities, said, "In an upward-moving index, semiconductors and IT hardware prove their leadership. But when the index is moving sideways, it is still easier to seek alpha in sectors where earnings expectations remain low."
Semiconductors and IT hardware already account for a large share of market earnings, so the room for additional earnings surprises is relatively limited. By contrast, in sectors where expectations had been low, results that beat forecasts could serve as a catalyst for share price gains, the researcher said.
In fact, among stocks that beat expectations after second-quarter earnings announcements, LG Household & Health Care was included in the cosmetics sector. The company posted second-quarter operating profit of 103 billion won, 36.7% above the market forecast of 75 billion won. Net profit also came in at 74 billion won, 47.2% higher than the expected 50 billion won.
In the insurance sector, Hanwha Life, DB Insurance, and Hyundai Marine & Fire Insurance all far exceeded earnings estimates. Hanwha Life's second-quarter operating profit was 198.5% above the forecast. Operating profit at DB Insurance and Hyundai Marine & Fire Insurance also beat estimates by 77.7% and 43.3%, respectively.
In the capital goods sector, Hanwha Aerospace, LG Group, and Hanwha Systems all surpassed second-quarter operating profit forecasts. Hanwha Aerospace's operating profit was 37.1% above estimates, while LG Group beat them by 42.0% and Hanwha Systems by 76.2%.
Lee added, "Rather than money concentrating on a specific theme, there has also been a flow of funds into index products such as the KOSPI 200 Index and the KOSDAQ 150 Index." He said this was "a sign that the rally is spreading across the broader market rather than being concentrated in semiconductors."
[email protected] Han Young-joon Reporter