Gus Cosio says so

Ideas on the Philippine Stock Market

High Anxiety

11:00 am  Tuesday  30 November 2010

I think the local market is become very edgy, not so much because fundamentals among locally listed companies have changed but because the consolidation mood has taken hold.  I am quite sure that many portfolios are paring down positions to protect the gains this year.  If I were a fund manager and have given superior returns to my fund holders, I will not hesitate to lock in my gains now.  We are approaching year-end which is a time of traditional book squaring by both position traders and portfolio managers.  It is not unusual that markets become less liquid this time of the year.  While, theoretically, there are about 19 trading days left in the local market, some of those days are very low in terms of volume because there are not enough orders coming from end customers.

There had been quite a number of questions on whether or not to run with positions on ORE and SLI due to some changes in assumptions.  For ORE, the assumption was for a shipment to be made in December.  Unfortunately, the company made a disclosure that due to heavy rains in Palawan, shipment will have to be postponed to 1Q2011.  I cannot but help be anxious about this development.  I would suggest for those who have weak holding power for this stock to reduce holdings for the time being and re-establish it as a time when the shipments are more certain.  Investing in a mining company that has very little track record, I believe that one must be prudent in managing risk.  If you have profits in the ORE position, I suggest that you bank some for the time being.

I feel somewhat anxious as well in SLI because of talks that there will be no follow on offering.  An analyst told me, however, that based on the latest disclosure, the follow on offering will go through except perhaps the target offering price may be lowered somewhat.  I have no clue as to where the new shares would be priced but the lingering anxiety will likely cause punters to shed some positions.  I will probably do the same although I do not think I will wind down positions completely; I will simply reduce to comfortable levels.

As far as the strong stocks are concerned, I think I am comfortable accumulating MER at these levels.  I feel the same way about MPI, DMC and AP.  I would try to follow some of the banks that should be slightly cheaper compared to the past month such as MBT and UBP.  In short, I think it would be good to raise some cash and use it to reposition in the strongly performing stocks notably those that have strong prospects or recurring earnings in 2011.  Having said that I would add that the mining stories of NIKL and PX are worth a bet for the coming months due to what I feel to be a recovery in the U.S. economy.

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November 30, 2010 - Posted by | Financial markets in Asia

60 Comments »

  1. hi sir gus,

    i recently read an article about LPZ slashing its capital deficit by 6.7B to clean up its balance sheet..what does this really mean? or what does it say about their business?

    TIA!

    Comment by cliffhanger | November 30, 2010 | Reply

    • Cliff,
      i believe that most stock prices will be soft the next few days. I would not want to be a hero. I’ll accumulate or buy slowly, if I were you. I do not think LPZ will out perform the market. I’d rather wait for good levels for MER or MPI.

      Comment by Gus Cosio | November 30, 2010 | Reply

      • i was asking about the business, not the market..thanks anyway sir gus..

        Comment by cliffhanger | November 30, 2010

  2. Hi Sir Gus,
    Do you think the current 2.9 is a good entry point for VLL or should I wait a little more? Thanks!

    Comment by hoover | November 30, 2010 | Reply

    • Hoover,
      I averaged down on VLL at 2.97 yesterday. I bought initially last week at 3.12.

      Comment by Gus Cosio | December 2, 2010 | Reply

  3. good thing i wasable to start buying MER this month but due to this market correction, my AEP is still quite high.
    there is 80M shares block sale of my favorite FOOD @1.56! something’s up soon! got lots of this.
    excluding PX, all in my portfolio are in the red zone (you may check my blog, i’m promoting. haha!)wondering until when will this correction be or are we heading into having a bull market already? please share your thoughts sir Gus. thanks…

    Comment by RmR | November 30, 2010 | Reply

    • sorry, it should have been are we having a bear market already?

      Comment by RmR | November 30, 2010 | Reply

      • no a bear market… correct me if im wrong… is if the market has dropped twenty percent from the start of the year

        Comment by Norman Go | November 30, 2010

      • but i guess the individual stocks are having a bear market already. like mer -27%, urc -25, jgs -25%, dmc 23%, meg -18%, vll -23% mpi -26%, pnb -23%, jfc -28%, ore -26%, mbt %20.

        Comment by jovy | November 30, 2010

      • > but i guess the individual stocks are having a bear market already.

        I own some of this stocks and my pov is a little bit different. mpi (+5%), vll(+19%), dmc(+24%).

        I think this is the advantage when you don’t trade much and tend to hold on to the stocks you bought at a low entry price. You have a significant margin of safety.

        Although, my ‘profits’ collapsed from +40% to just under +20%..

        Comment by jasper | November 30, 2010

      • or they are simply correcting because they are quite overpriced?

        Comment by Samael | November 30, 2010

      • Ang measurement is from the start of the year not from the peak this year

        Comment by Gsy | December 1, 2010

      • Using Norman Go’s definition URC was 16.25 at the start of the year, so how can it be -25%? I think you are using 1 year peaks instead

        Comment by Gsy | December 1, 2010

      • they are not overpriced. VLL and MPI are below book value, while DMC is now trading at about 12xpe.. i think.

        at any other time, i would buy them over and over again

        Comment by jasper | December 1, 2010

      • same here, i’ll try to add more when my salary comes! yipeedooo!!! bargain bargain bargain!

        Comment by RmR | December 1, 2010

  4. Hello gus,

    I’m glad you mentioned UBP and that stock has not escaped your radar :)… hoping for it to go up sooner than later. It is fundamentally a strong stock i believe

    norman

    Comment by Norman Go | November 30, 2010 | Reply

  5. Another strong down move. Nearly 100pts. Isn’t this technically a downtrend already, Sir Gus? Do you think people should sell and avoid the market for the meantime?

    Comment by abitrade | November 30, 2010 | Reply

    • Friend,
      I believe Gus is right in his advise that those with gains should reduce their positions. This will put cash in their pocket; available cash that can be utilized in the next “up” signal. You are right in observing that this is now a technical downtrend in the market. However, avoiding the market due to the technical downtrend may be a mistake as this is the best period to invest in fundamentally strong companies whose stock prices are either fair or cheap. This is the period where we separate the men from the boys. Men look for ways to earn in a downtrend. Boys look for ways to avoid any activities in the downtrend.
      As a stock investor for 3 years, I have already survived the recession and made money in the bull run of 2010. My advise to every investor during this lean month is to make a stock wish list. Try forecasting listed companies that made money in 2010 and would continue to do so in 2011. Also, check for popular companies who are thriving in the current market condition. Review the financial situation of these companies and predict their true present P/E ratio. I never went wrong with this “wish list” exercise.
      Happy Holidays everyone

      Comment by Davidoff | November 30, 2010 | Reply

      • Good comments, Davidoff. By the way, Davidoff is my brand of Eau de Toilette.

        Comment by Gus Cosio | December 2, 2010

  6. It was holding steady above 4000 before a big sell-off in the end. It’s probably an end of the month effect to lock in profits for the monthly reports or as Sir Gus said, some managers booking early for the year. The way I see it, if everyone has the same mentality then any December rally will be muted. It also doesn’t help that the instability of the Euro and with commodities back in play, emerging markets are very unattractive right now. Energy stocks are the only good play right now, especially PCOR.

    The talk of oil reaching $100 per barrel is back. And with Petron still having their monopoly with the FPIC pipeline still shut, it’s still a good bet despite its meteoric rise.

    Comment by Mars | November 30, 2010 | Reply

  7. Sir Gus, is it still good to hold on to ALI shares? have been waiting for it to rise with imminent REIT listing and all its new projects. What is your view on ALI

    Comment by bernie | November 30, 2010 | Reply

    • Bernie,
      Unfortunately, ALI has been a laggard and the REIT won’t be implemented for at least another year. If you like property, I expect better performance in RLC or VLL. SLI may be a dark horse.

      Comment by Gus Cosio | December 2, 2010 | Reply

  8. I’m getting antsy about SCC but I just want to hold since it’s a really good company. It’s the dispute between N/S Korea that’s giving me this feeling.

    Semirara profits up 146% to P3.21 B due to power business http://www3.mb.com.ph/articles/289866/semirara-profits-146-p321-b-due-power-business

    Comment by Dez | November 30, 2010 | Reply

    • Dez,
      It is good to be sensitive to global political and economic tensions. These disturbances should not scare you into inaction. You must look at the opportunities that these development brings by digging deeper into macroeconomic dynamics.

      Comment by Gus Cosio | December 2, 2010 | Reply

  9. Despite the downtrend going on in our market and the massive selling, something tells me that high times are coming. My portfolio’s down 15% in paper losses but I’m not about to panic just yet. It’s these times that we learn how to be patient. Hopefully, everything’s well come Christmas.

    Comment by Optimistic Trader | November 30, 2010 | Reply

    • Optimistic Trader,
      I would not panic either with a 15% paper loss. I have cut greater losses than that when I was certain that the trend was against me. Right now, I am not convinced that the earlier trend this year has changed.

      Comment by Gus Cosio | December 2, 2010 | Reply

  10. Can you explain the sudden swing in prices of SM and SMPH ten minutes before the close, i believe that ALI and AC were also affected, in the case of SM it went up to 550 only to crash to 485 at the close, is there any sudden development which we should be aware of with regards to the stocks of SY and AYALA ?

    Comment by shanu mathani | November 30, 2010 | Reply

    • No news. Probably just some big players heavily invested in those stocks pulling out their money and locking in their profits. It’s almost the end of the year and without any kind of momentum going into December there’s no reason for them to stick around and lose more of their gains.

      Comment by Mars | December 1, 2010 | Reply

      • Deliberate moves by big funds to lower the phisix……….it was done once a few weeks back on ALI…AC…..the PSE should try to monitor these unwanted activities by such fund to influence the last min closing indices…….

        Comment by mike | December 1, 2010

      • Hi, share your thinking on these. Prices seems to be diving with very little volume. If prices go up with little vol, you say it it not sustainable. How about prices drop with little volume? tks

        Comment by alex | December 1, 2010

  11. sir gus,
    what do you think on the upcoming SRO of MBT? what is the best entry price for this stock>

    Comment by john | November 30, 2010 | Reply

    • John,
      It should be a buy.

      Comment by Gus Cosio | December 2, 2010 | Reply

      • thanks for the reply sir gus…=)

        Comment by john | December 2, 2010

  12. A very Good Clever Businessman started buying Petron 2-3 weeks ago…I think he made a very, very Brilliant move Petron could rally to 18/sh next year…SMC planning to make more PowerPlant that could benefit Pcor…Fpic pipeline prob is just “icing on the cake”…

    Comment by Sophia | November 30, 2010 | Reply

    • one thing u have to know about PCOR, its profit margin is only 3%…

      Comment by cliffhanger | November 30, 2010 | Reply

  13. I’ve just read your current and earlier posts Gus. VLL’s very yummy below 3.0! Bought it today @ 2.90!

    Comment by Neo | November 30, 2010 | Reply

    • I was also surprised a lot upon finding out that VLL’s book value per share is P4.37(Data as of 3Q2010)! Since I bought it at 2.90, I got it at 66% discount!

      Comment by Neo | November 30, 2010 | Reply

    • i like VLL very much too. my portfolio is loaded with VLL and just waiting for the big “push” after the correction.

      Comment by RmR | November 30, 2010 | Reply

      • i hope the push after the correction is up not FURTHER DOWN TO 2.00………..REMEMBER this stock came from .77 cents

        Comment by mike | December 1, 2010

      • and yet, VLL has doubled their income. From a 2009 net of 10B, they are nearing 20B for 2010. From a value standpoint, how can it fall down to such depths.

        I would sell my car and gooble it up if it goes down to 1p..

        Comment by jasper | December 1, 2010

      • haha! are you serious with that one Jasper? if I could sell my FLI at a small profit, i’ll use the proceeds in accumulating more VLL…

        Comment by RmR | December 1, 2010

  14. I am at a quandary with what to do with the portfolio. On one hand, i think its not a good idea to sell when markets are depressed. On the other, I see some other stocks I would like to get into but the only way to do that is to sell some of my holdings.

    Basically, I’m looking at
    1. TEL – Mr Easy does it. Since I don’t think this one will go down that much, one is assured of at least 9% (div)
    2. MER – Has significant following so I also think even if it goes down, it will go back up fast. Only thing is because it has a high pe, the highest target price could just be about 220+ (+20%)
    3. CHIB – Mr Easy does it too. The current price makes it tempting. It gives that nice stock and cash dividend.

    So maybe i get out of secb and edc and buy them three. Or maybe just do nothing? One must never confuse activity with progress after all.

    :think:

    Comment by jasper | November 30, 2010 | Reply

  15. http://www.financemanila.net/2010/11/philippine-stock-market-update-nov-30-dbp-daiwa-gets-grizzly-at-the-close/

    Sir Gus,

    I dying to hear your thoughts on the link.

    Regards,

    Warren

    Comment by warren | November 30, 2010 | Reply

    • Well as the article said it could just be window dressing to make their monthly report look good or they could be booking it early this year (hopefully not). That’s unfortunately a common trend in end of month/quarter/year scenarios.

      Comment by Mars | December 1, 2010 | Reply

  16. the market is on green.lol

    Comment by marketbeginner | December 1, 2010 | Reply

  17. What is happening to MPI??

    Comment by Erik | December 1, 2010 | Reply

  18. Hi Gus. What was happening to MPI? It acted like a “falling star”.

    Comment by Redge | December 1, 2010 | Reply

  19. Sir any insight on MPI? I really do like the stocks. Today (wednesday) foreign heavy sell on this stocks. Do you advice to average down? on what level. Thank you sir and more power…

    Comment by jaayem | December 1, 2010 | Reply

    • Same question po as jaayem, sir. Thanks in advance po.

      Comment by aiz | December 1, 2010 | Reply

    • Hi jayeem, i’m a newbie in stocks, can you tell me where we can see the foreign selling of a stock? I’ve checked in the firstmetro site under Quotes, but it seems that they don’t have an indication of the foreign buying and selling

      Comment by Wren | December 1, 2010 | Reply

      • check the buyers and sellers in firstmetro… you should know which broker is local and foreign… check out PSE website list of brokers. there they have mentioned which are local and which are foreign. hope that helps bro.

        Comment by RmR | December 1, 2010

      • Wren, RmR is right, you must know which broker is local and foreign. CLSA, Maquire and UBS are the top seller of MPI today (Wednesday).

        Comment by jaayem | December 1, 2010

      • Actually the foreign buying/selling per stock is found in the PSE website. Download the quotation report for the day and the foreign transactions are found on the last column. Hope this helps.

        Comment by marts | December 2, 2010

    • everytime mpi is falling, it keeps getting cheaper and cheaper..p/bv at 3.46 is already at 1.30…

      Comment by cliffhanger | December 1, 2010 | Reply

  20. this is what i am expecting for ORE, after the shipment delay in November, they move it to Dec. I am thinking that shipment story will not end until early next year, and it happened, ist quarter of 2011. Good that i have released all my ORE otherwise i am in limbo.

    Comment by art | December 1, 2010 | Reply

    • congrats on your decision to release ORE my friend!
      PD: no ORE

      Comment by RmR | December 1, 2010 | Reply

  21. Hi Sir Gus. I like DMC so much. Have been accumulating since it was 20.40, 27, 27.40, 34.65 and this morning, at 32. I believe it will be one of the best stocks that will shoot up once the correction is done. This is indeed one stock I can sleep on no matter how the market goes. More power!

    Comment by Shan | December 1, 2010 | Reply

    • Shan,
      I picked up some DMC at 32.50. I’ll try to buy some more should it go lower.

      Comment by Gus Cosio | December 2, 2010 | Reply

  22. it seems a major major mistakes in forcasting by so called consultants or analysts.. exact opposite predictions for stocks the past 3 weeks.

    Comment by L9 | December 1, 2010 | Reply

    • L9,
      Forecasts are either wrong or right, but they are never mistake. When you buy a lotto ticket, you are actually making a forecast that the number you bet on “might” come out winning. If you lost, that would not be a mistake. It would simply be that you were not lucky.

      Comment by Gus Cosio | December 2, 2010 | Reply


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