Gus Cosio says so

Ideas on the Philippine Stock Market

Do I sound like a broken record?

6:40pm  Wednesday   26 August 2009   Philippine Stock Market Index    2863.53   (+0.19%)

When you are trading the markets, everyday should be seen as a new day.  This is why all professional traders mark their positions to market daily.  When I was working in an international securities trading firm, our boss always said that he wanted to know the firm’s losses everyday.   That way, if it crossed his threshold, he kicks the position out.  Alternatively, if he is willing to take the position again, he lets it ride.

I agree totally with this concept.  Some people make the mistake of making a quick turn, thereby missing the long haul.  While I believe that no one loses money by taking a profit, a serious trader will always ride a winner but will cut a loss.

Today, trading was very volatile inside a 23 point range and changing direction around 6 times.   Index heavyweights TEL and Mer were down while SMPH. BPI, PX, AC & BDO were unchanged. Only MBT, SM, ALI &MWC were up among the blue chips.  The rest of the active gainers were second liners – MEG, FLI, VLL, EDC & BPC.

The reason I am making this litany of issues is to drive a point through that the large cap shares are running out of steam.  This is not unusual because they were the index drivers over the last few months since March this year.  Now the bullishness has spread to the mid-cap issues.  Indeed, the market is getting stronger because a large number of investors have tucked away their blue chips into bottom drawers, meaning, it will be some time before these stocks come out again in a big way.  Now, money is spreading deeper into theme plays.  This is good because even if the index dips, people will still be able to make money in the non-index shares.  Life is really becoming a lot more interesting.

What I would like to highlight today are PIP and AGI.  If you go back to previous posts, I’ve always mentioned these two stocks as beneficiaries of consumer plays.  PIP surged again today after a few days of consolidation.  I’ve followed this stock since April because I thought that it had good value.  It has doubled in price since and it would not be a bad idea to take some profits although I still see a little upside left.  The stock that I think would be the next shiner is AGI.  I learned that yesterday, a major international stockbroker brought 60 fund managers to the AGI property across NAIA Terminal 3 to brief them of the prospects of the company.  AGI had recently tied up with the Malaysian company which operates Star Cruises to develop an entertainment and gaming franchise in the country.  I heard that it got all the fund managers very excited.  I think such a development cannot be ignored.  Be sure to watch AGI; this stock has someway to go.

At the risk of sounding  repetitive, I’d like to say that we have just started the long climb to recovery.  Remember, we had a bull market that started in the beginning of 2005 and lasted till the end of 2007.  Rallies in this country usually have a 2 year life.  We’ve only gone for less tha half a year.  How much more do I reckon we can go?  For you who still remember the late Jimi Hendrix, the lyrics of one of his hits go: “Excuse me while I touch the sky.”

I cannot be more explicit.

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August 26, 2009 - Posted by | Financial markets in Asia

7 Comments »

  1. Hello Gus,

    I have been reading some news on CNN and Bloomberg. I am just curious what do you think the possibility of a double dip in the US? Their reason is that their economy grew by leaps and bounds because of speculation and “expectation” not really on current growth. What is your take on this? Would the Philippines or the world economy be greatly affected if this happens?

    Pierre

    Comment by Pierre | August 27, 2009 | Reply

    • Whether or not the U.S. will have a second dip is being priced in the market now. That is one reason why the Dow, S&P and the NASDAQ has started to taper off from its very strong surge.That is also why a lot of global fund managers are expecting a major correction in the markets. We are seeing that correction already in China which had been the strongest economy in this recession. In my view, it is developments in China that will have greater effect on our markets than the U.S. As to strategy, I would sell and bank in some profits already on the index stocks. For my own portfolio, I have reduced blue chip holdings in favor of theme plays such as EEI for infrastructure, AGI because of its tie up with the Genting Group of Malaysia, PNB because of high net interest margins and merger with Allied, and ISM which is a possible M & A. I also like LC as a play on commodities.

      Comment by Gus Cosio | August 27, 2009 | Reply

      • How about the Philippines, when do you believe the correction will come? I see China already hugely corrected but for the Philippines it seems like the bulls are still at it. Is our rally justified or is it just speculation? And when do you believe the PSE will have its correction. Should I wait for the PSE to correct and just buy when it is oversold?

        Comment by pierre | August 27, 2009

  2. I think that the PSE index is still headed north. But the higher it goes, the more difficult it gets to choose what to buy. Right now, I’m avoiding the Blue chips because current expectations are already priced in these headline stocks. Because of the underlying constructiveness in market psychology, players are looking for opportunity in other stocks. That is why money is moving to good small and mid cap shares. This is why stocks like TUNA, PIP, EEI, SECB, UBP, AGI, WEB have come into fashion. There were years that the index was down but some issues did a lot better. That is what I’m anticipating today. So, if you’re limiting your selection to the blue chips, I’d suggest you wait. But evaluate each stock for an entry price. Don’t just base your decision on the level of the index.

    Comment by Gus Cosio | August 27, 2009 | Reply

    • Thanks and I believe that is a sound advice 🙂 I will look at also the secondary stocks on your list I am actually looking at AGI

      Comment by pierre | August 27, 2009 | Reply

  3. You might do quite well with AGI. A lot of fund managers have been through their Newport City project. Investors have gotten hyped up about its gaming and leisure tie up with the Genting Group. Personally, I can’t help but feel bullish about the stock.

    Comment by Gus Cosio | August 27, 2009 | Reply


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