Investment Strategies for Cosmetics, Semiconductors, Defense, and Robotics

Since August, the cosmetics sector has shown a continuous decline. It has fallen about 20% from its peak, and most stocks have dropped below the 20-day moving average.

This is analyzed as a result of profit-taking after the release of August export data. CEO Lee Jung-ho stated, "I ranked this because I thought a technical rebound might start to appear. It has fallen about 20% from its peak, and looking at the charts, most stocks have fallen below the 20-day line, so isn't it time to start looking for a technical rebound?"

The market is diversifying to regions such as the United States, Japan, and Europe.

Distribution channels have also shifted from duty-free shops to local markets, online platforms, and Olive Young stores. Amid these changes, indie brands are thriving, and OEM/ODM companies are growing alongside them.

CEO Lee Jung-ho noted, "In the past, there was a perception that it was somewhat categorized as a Chinese consumption stock, but now it has completely transitioned into an export growth stock. There has been a trend of expansion from China to the U.S., Japan, and Europe. If we consider duty-free shops as dominant in the past, now local and online channels, along with strong distribution, have emerged, with Olive Young establishing itself."

The sector has already passed its weak phase in the second quarter.

The seasonal peak, including Black Friday and various events at year-end, is anticipated. CEO Lee Jung-ho predicted, "I think there is sufficient potential. I believe cosmetics stocks have successfully navigated through the weak second quarter. As we head towards year-end, with events like Black Friday and other year-end promotions, there's a possibility of entering a seasonally strong period, so I expect cosmetics to gain more attention."

DRAM prices have increased by 50%, and NAND prices by 60%.

Despite Middle East war risks and rising bond yields, semiconductor stocks, such as SK Hynix ADR surging 7% and Micron Technology rising 2.7%, show differentiated strength. PB Hwang Dae-geun stated, "Memory prices continue to rise. DRAM, in particular, is up 50%, and NAND is up 60%. In this situation, who can say the semiconductor industry is over? There was also an issue today regarding KRX semiconductor rebalancing."

Passive funds are flowing into the semiconductor front-end sector. Strong trading is observed in top market capitalization stocks such as Hanmi Semiconductor, Jusung Engineering, Wonik IPS, and TES.

Increased wafer utilization is expected to be immediately reflected in the performance of material companies. CEO Lee Jung-ho explained the characteristics of material stocks, saying, "After all, wafers must be continuously put in, and if the utilization rate increases, I think materials are the best way to immediately reflect this in performance."

The semiconductor market is experiencing sector rotation, providing opportunities for PME (parts, materials, equipment) companies. Due to KRX rebalancing issues, trading volume for front-end equipment stocks like TES and Wonik IPS has increased.

Trading is also flowing into back-end PME company Leeno Industrial. PB Hwang Dae-geun explained, "From this month until October, I think it's worth focusing on the front-end. I've often talked about back-end PME, especially Leeno Industrial, and trading is gradually increasing there as well."

The defense sector requires a sector rotation approach due to its insufficient upward momentum compared to market interest. Hanwha Aerospace's entry into Spain serves as an important stepping stone for expanding its market beyond Poland into Europe and the U.S.

Momentum for K-defense is expected to continue amid global military buildup trends. CEO Lee Jung-ho stated, "In a broader sense, I think that is also a part of defense. The biggest recent development directly related to defense was Hanwha Aerospace's entry into the Spanish market."

There is also a possibility of increased additional demand from the U.S.

Supply and demand are confirmed around the three major defense leaders: Hanwha Aerospace, Hyundai Rotem, and LIG Nex1. CEO Lee Jung-ho emphasized, "Entering the U.S. market itself can be seen as Korea's defense industry having risen to another level. In a broad sense, this could act as a significant factor, leading to a continuous increase in requests from the U.S., so we must continue to pay attention to defense."

This enables the establishment of customized defense systems for each country.

Such localization strategies contribute to K-defense establishing itself as a global trend. CEO Lee Jung-ho explained, "It's not just about selling and being done; they are also establishing customized factories and other facilities locally. So, it's not just about importing defense weapons, but also about building indigenous capabilities for each country, which is why K-defense is becoming a global trend."

Consequently, a trading strategy centered on actuator and reducer-related companies is effective.

The robot sector exhibits differentiated beta values in the stock market, making it favorable for portfolio diversification. PB Hwang Dae-geun advised, "The U.S. is currently excluding Chinese robot parts. So, if we look at which robot stocks to watch, I would suggest focusing on actuators and reducers. That could be a more effective trading strategy."

In particular, as the U.S. strengthens regulations on Chinese parts, the Korean stock market shows a significant positive momentum from this spillover effect.

Even in a high-interest rate environment, biotech and robot stocks maintain an upward trend. PB Hwang Dae-geun analyzed, "The conclusion for Physical AI is clear. It's an industry that the government is pushing, and especially if the U.S. imposes regulations, our stock market shows a very strong reflection of this benefit momentum, so I still think there is ample room for further growth."

Adding to positions in robot stocks like Robotis, which have already rebounded by more than half, at their peak is a heavy burden. Instead, a strategy of generating profits in other sectors, such as front-end material stocks, to offset losses is more suitable for the current market situation.

PB Hwang Dae-geun advised, "Honestly, if you bought at the peak, averaging down now might be a bit late. Instead, I think it's more appropriate right now to buy stocks in other sectors, like the front-end material stocks I mentioned earlier, to secure profits and then use those to compensate for the losses from Robotis."

Hanwha Aerospace is expanding its order base beyond Poland to European markets such as Spain. It not only sells weapons but also contributes to job creation through technology transfer and local factory establishment.

Its localization strategy, which meets the demands of importing countries, is successfully taking root, laying the foundation for global defense market expansion. CEO Lee Jung-ho emphasized, "We are not just selling weapons but also selling technology and implementing localization strategies. And it's continuously spreading, so I believe Hanwha Aerospace's current strategy and approach are working well."

This could lead to a re-evaluation of its value due to entry into the U.S. supply chain.

Benefits from weapon inventory gaps due to prolonged war are also expected. CEO Lee Jung-ho explained, "Hanwha Aerospace is implementing a strategy where if we use one product and are satisfied, we can then sell the entire package of other products."

It is currently a period where supply-demand entanglement and digestion of high-point profit-taking volume are needed.

The current market sentiment is assessed as more positive compared to the first half of the year. CEO Lee Jung-ho commented, "Geopolitical risks from ongoing wars seem to be the biggest negative factor for defense companies right now. Once this situation ends quickly, I think there's a possibility for them to be re-evaluated."

Despite positive news related to the U.S., a gradual rather than sharp rise is expected, and a gap-up at the opening bell is unlikely, which can be used as a buying opportunity. CEO Lee Jung-ho said, "In the short term, I think 130,000 won is exactly the resistance level. If it breaks this price, Hanwha Aerospace could challenge a new high again."

There is high interest in material stocks, which show immediate leverage effects on performance.

Unlike front-end equipment stocks, they exhibit a lively buying trend. PB Hwang Dae-geun explained, "Considering performance leverage, equipment stocks take about 6 months to 1 year, so it's worth focusing on material stocks that reflect immediately. Also, in the current market narrative, stocks that haven't moved yet are getting attention one by one."

SNS Tech's downside is expected to be limited at its current price level. A recovery in the KOSDAQ index is anticipated for the second half of the year, starting after September.

It is assessed as an approachable price point with low price burden, making it suitable for engagement now. PB Hwang Dae-geun said, "For SNS Tech, I think it's okay to enter tomorrow, whether it goes up or down. Honestly, I wonder if it can fall any further than this price."