Gus Cosio says so

Ideas on the Philippine Stock Market

When is too much cash lying around?

9:30am  Wednesday    Philippine Stock Exchange Index  2593.52

I am struggling with the other kind of fear.  When we speak of fear and greed in markets, greed normally connotes that you are buying stocks with abandon because you are sure that you will make a lot of money.  On the other hand, fear implies that you are selling your portfolio without consideration for value because you are afraid that you will lose everything.  It takes a different sort to move against psychology like this, and that is why we have great investors like Franklin Templeton and John D. Rockefeller who gave substance to their word when they said “buy when there is blood on the streets,” and we all know they made tons of money.  The other side of this adage is – “when things look great, it is too late.”

With all these ideas being processed in my mind, I am afraid of being frozen to inertia in this slowly moving rally.  I seem to be trying to veil this procrastination with the thought that I am just being patient.  However, when the market is slowly moving away from you, it may be pretty risky to simply wait for the correction. This is the fear that I am facing these days – the fear of not doing anything.

I think that it is time to look at longer term trend in both prices and earnings.  It will be quite timely because 2nd quarter earnings will soon be reported.  If I look back on how prices behaved over the last 3 months, there were in fact several consolidating moves in prices.  This was in mid and late April as well as in the 3rd week of June.  There was also a mild pull-back at the end of June into the beginning of July.  Unfortunately, I was looking for a deeper correction which is not likely to happen yet because the great majority of investors appear to be very light in their positions and have yet to load up on their portfolios.

With this in perspective, my gut feel tells me that headline stocks such as Ayala Corp. (AC), PLDT (TEL), and Globetelecom (GLO) are still cheap today compared to its own long term trend in price.  Consumer stocks like GMA7 or GMAP, Splash (SPH) and Pepsi (PIP) are also worth the bet at these prices.  Banks like Metrobank (MBT) and PNB will likely show higher earnings down the road because of low interest rates and steady earnings from OFW remittances.  Jollibee (JFC) which is usually expensive will likely maintain its value and move better as the year wears on.

I think the appropriate strategy the next few days is to add to positions with stocks that are showing firmness in price at these levels.  It appears to me that investors are steadily putting these stocks to their bottom drawers which means that support will be rather strong should prices even go down. Very few investors have the inclination to sell or pare down portfolios because interest rates are very low and there is no point in having all that cash lying around.

I had said in earlier posts that the trend is your friend.  It is useless to fear when friends are around.  Well, friends should really stick together.  In my case, I will stand by this friend because market signals are showing that this trend will be around for quite sometime.

Yo bro!

http://www.condron.us

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July 21, 2009 - Posted by | Financial markets in Asia

4 Comments »

  1. I’m a newbie in investing. Your advice would be a great help. If I’m going to buy SPH, at what price should I unload? You think it can reach at least 4 per share come December? I have same question with VLL.

    Thanks! Please keep posting!

    Comment by Marie | July 26, 2009 | Reply

    • I personally like SPH because it has very stable earnings. I attended their Annual Shareholders meeting and the President said that if they did not have the restriction on their floating rate note, they could have paid a bigger dividend. He also said that the plan to acquire new brands is progressing. I think when this happens, revenues would go up 50%. Personally, I’m holding on to the stock with a target of at least 4 pesos. Also I’m willing to hold SPH for a year. I just bought it 2 months ago. I think VLL will go further. A foreign stock analyst told me that foreign fund managers like the stock and I think they will benefit from low interest rates.

      Comment by Gus Cosio | July 26, 2009 | Reply

    • I always thought that investing in local operations of multinational brands will be fairly successful. In India, these globally branded Indian subs of multinationals have made a lot of money for the local investors.

      Comment by Gus Cosio | July 28, 2009 | Reply

  2. Hi, Sir Gus! Excellent call on PIP! After its breakout today to P1.88, it’s more than likely to rise to P2.28 in the next couple of days barring any hiccups in the market. And if what I’ve heard pushes through, that Pepsico (US) has been buying pepsi bottlers around the world, a P3.50/share may be very much in sight.

    Good luck, sir, and I hope you continue blogging!

    Jet

    Comment by Jet | July 28, 2009 | Reply


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