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NFTRH+; Spotlight on Fanuc

I want to open up an occasional new direction for NFTRH+, where as situations present we deviate from strict chart setups and when I feel I have enough knowledge about a company to at least allow for some fundamental discussion to enter the mix.

NFTRH+, as with other lesser priority updates will only be published at the site and auto emailed to those signed up for email delivery of all posts (as opposed to manually emailed as with priority market updates). As with any trade or stock pick oriented update I wholeheartedly invite you to ignore it because stock picking is not NFTRH’s primary mission, and heck, I could sell it at any time as I simply do not sponsor stocks.

But this kind of update is fun for me to do when I have time, so on with it…

We have have followed the decline of Fanuc (FANUY) to longer-term support in the Charts & Notes segment and last week per the Trade Log, I took a position. This week in NFTRH 515 there were some words about Fanuc’s fundamental situation and I’d like to look into it further, after checking out the daily chart. Understand that this and most long positions are contingent upon global markets and the economy remaining intact (i.e. no market dislocations as yet).

As already noted, the weekly chart shows FANUY at long-term support. The daily shows an attempt to bottom in the 18.50 to 19.50 area after the long decline from 30. MACD had been diverging the negative price activity since May and has finally gone green above 0. RSI, while still sub-50 may be grinding a out an uptrend (note its EMA 20 a hair above 50). AROON went positive and ADX shows downside momentum extinguished with +DI trying to cross above -DI. It’s all TA mumbo jumbo, but it’s not bad. ;-)

What will eventually matter is whether the price can get above the SMA 50, hold above it and then turn that moving average up. If it is to do so, it could be an extended process. At this point it appears constructive to form a bottom, but we are far from conclusive.

fanuy

Now, you may know I have a special place for Fanuc because I used to buy their Robodrills and also equipment by other machine tool manufacturers (mostly Matsuura & Kitamura) that often incorporated Fanuc CNC controllers into their units. Fanuc has always equaled quality.

But more and more the Robotics hype amplified by Wall Street and its financial media got a hold of Fanuc and it became a story stock, a technology stock, due to its leadership in Robotics. Make no mistake, Fanuc is a fairly old (1972) and innovative industrial company, not a newfangled late comer. Importantly, it is changing with the world around it. From this recommended report from Knowledge Leaders Capital

At a June shareholder meeting, Fanuc’s president spelled it out. “Fanuc believes that AI and IoT are indispensable technologies in order for Fanuc to continue developing and launching highly competitive products in the market.”

What I like about the company is the fact that it is applicable to old fashioned industries like auto manufacturing as it is to these new technology industries.

As a side note, the linked article is interesting because it not only illuminates Fanuc, but also ties in the status of another of our more frequently visited topics, Semiconductors. In this case the future of Semis as a GPT or ‘General Purpose Technology’ of our time.

In doing my research I came upon the reason for the big drop and it is not surprising…

Fanuc foresees big earnings drop in China trade war (April 27, 2018)

Reduced exports to the U.S. could discourage Chinese manufacturers from making the kind of labor-saving, quality-boosting factory investments that Fanuc has profited from in recent years.

China is a big and growing export market for Fanuc. If you believe the trade war is going to cook China in the near-term, you probably want to avoid Fanuc. If you think it’s all baked in, you might want to take a closer look. The above linked article from the Nikkei Asian Review notes that this is not the first time Fanuc has issued conservative guidance (I actually like a company like that) with some analysts viewing the situation as not as bad as the company portrays. We’ll see.

To give some perspective on what Fanuc is and is not, it is a machine tool company (CNC volume 3.6 million units in 2016) first and a Robotics company second (Robot volume 500,000 units in 2017, which was increased from 2015’s 400,000 units). The most recent quarterly report is here (June 2018) and financial results (June 2018).

From the latter…

Thus concludes our look at this interesting company. Please do your own DD if interested. The above is what I’ve uncovered in non-intensive research of the company. A fundamental stock analyst should spend more time and dig deep. I however, have got to clean and organize my office, which is what I’ve demanded of myself on Labor Day. ;-)

A reminder that chart based NFTRH+ updates are technical trade setup ideas, which may not be revisited as the buy, sell, stop parameters are already noted. They are meant as a starting point for your further research if interested. I will not personally buy every item highlighted and will sometimes sell (ref. Trade Log) any item that I do buy below target (assuming I’ve not stopped out or sold for some other reason), which is something I often do as a trader. Also please be aware that I am not a fundamental stock analyst. Due diligence is your responsibility.