The strategy of domestic investors to buy beaten-down U.S. stocks after a price plunge has returned considerable revenue. This is the case of Synopsys (SNPS), the stock most net bought by Korean investors in the past week.
In the early morning of the 19th, Synopsys shares jumped nearly 13% in the U.S. stock market, with the stock price hitting $480. Synopsys shares, which had been around $600, plunged into the $380 range on 10th after an earnings shock (results weaker than expected).
With Synopsys shares surging in a short period, domestic investors who recently focused on buying the stock have entered a range where they can generate revenue.
According to the Korea Securities Depository (KSD) securities information portal Seibro on the 19th, Synopsys was the most net bought foreign stock by domestic investors over the past week (Sept. 12–18). During this period, domestic investors purchased $127.2 million (approximately 176.6 billion won) worth of Synopsys shares.
Synopsys, which provides design solutions needed to design and produce semiconductor chips and electronic systems, is the world's No. 1 company in electronic design automation (EDA). It currently provides technology to semiconductor design firms and foundry companies such as Nvidia, Samsung Electronics, and Intel.
The recent plunge in Synopsys shares was due to weak results. On the 9th (local time), Synopsys said it posted revenue of $1.74 billion (about 2.418 trillion won) for the third quarter of this year (May–July). It was somewhat weaker than the market forecast of $1.77 billion. Adjusted earnings per share (EPS) also came in at $3.39, below the market expectation of $3.80.
As the stock plunged, Korean investors in U.S. stocks started buying Synopsys shares intensively. They judged that concerns about weak results and the resulting stock plunge were excessive and moved to buy the dip.
This strategy appears to have paid off significantly. As of the day, the average rate of return for 4,082 Synopsys investors linked to Naver Pay's "My Assets" service was 12.11%. The average purchase price at which they bought Synopsys shares was 594,606 won, which is about $428 and similar to last week's Synopsys share price trend.
There are also projections in the securities industry that the expected profit for Korean investors who bought the stock on the dip will grow further. One analyst said, "As news broke that Nvidia will invest in Intel, Synopsys, which counts Intel Foundry as a major client, also surged on expectations that performance in the semiconductor intellectual property (IP) institutional sector will increase."
The analyst added, "The previous stock decline was excessive, and a backdrop has been set for a faster recovery in Synopsys' semiconductor IP institutional sector performance, so it appears there is room for further recovery in the stock."