Gus Cosio says so

Ideas on the Philippine Stock Market

Mining for cheap stocks

9:30am  Thursday   3 December 2009  Philippine Stock Exchange Index  3119.96 (before the open)

There is scuttlebutt in the market that a block sale of PX will cross the tape at today’s open at a price of 21.  This will cause a lot of excitement on other mining shares, I think.  Actually with gold trading at historical highs, any mineral source should command exceptional value.  Copper mines always yield gold as by product and copper prices have also been bouyant.  There may even be further racheting of PX prices and the rumor mill is projecting a price of 30.  The way our market works is that many are willing to trade on rumors.  I don’t blame them.  PX has a very strong earnings track record and some parties may just be willing to pay a lot of money to own it simply because mineral resources are finite and mineral extraction skill and experience are quite rare and tough to find.  They are also expensive.

In the coming days, investors will be mining tha market for cheap stocks.  Headline stocks are no longer that cheap, but there are few investment alternatives that offer yield at all.  With this in mind, I will continue to harp on LC/LCB because it PX is worth so much, LC/LCB with all its mining claims and extraction experience should at least catch up in value.  The same argument would work for MA/MAB and AT because they have operating mines.

If we work on the theory that the cheap stocks will eventually catch up in value in spite of their limited liquidity, we should be looking at some of the cement stock out of which I favor CMT because it is trading aounr 5.5X trailing P/E.  If  JGS which is very illiquid can go from 1.38 to above 6 and the similarly illiquid PSB can go from 40 to 57, then CMT can provide a better promise.  Nevertheless, because of its relative low liquidity, I wouldn’t bet the house.  I’d bet only in fractions of the daily value turnover which average only around Php 2.8 million.

Among the blue chips, I think that AC may be a good buy at 292.50 or lower.  Stocks like AP and MBT are also worth accumulating today for 2010 earnings.  The market may be dipping a bit today, but we should really be looking at 2010 already.

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December 3, 2009 - Posted by | Financial markets in Asia

6 Comments »

  1. hello sir, i am a very avid reader of your blog and my day is never complete without checking out your site for new posts. i actually put it in igoogle so that i can be notified if there is a new post.

    anyway, first of all i would like to thank you for the insights that you always give. your insight gives a broader perspective to our market and allow us to see our market from a bird’s eye view.

    sir, may i ask your thoughts on ANI?

    thanks in advance

    pierre

    Comment by pierre | December 3, 2009 | Reply

    • Pierre,
      Im afraid because ANI came as a listing by introduction, noy much research has been written on it. It also means that there is not much stock out in the market and that is why existing holders can ratchet the price higher. They are only obliged to offer stock to the public after one year. Whatever trading that is going on in this stock is just among friends. I’ll wait until some research is made on this stock before I recommend trading it. I’m not saying that this stock will tank. It’s just that, I’m not yet comfortable with a stock whose supply in the market is completely dictated by a few holders. Would you think that a situation like that offers a safe bet?

      Comment by Gus Cosio | December 6, 2009 | Reply

  2. nice thoughts again, sir gus.

    apparently, my online broker released a report that said there should be little excitement about PX anymore since there wouldn’t be any tender offer after news broke out about the sale to MVP’s group, also stating that the FMV of PX is at 6.90 for them.

    anyway, i agree with you about looking on to 2010 already, as well as LC and AP. Got some other friends who are very positive on those two stocks as well.

    thanks for constantly educating us on these things sir.

    Comment by J | December 3, 2009 | Reply

  3. i forgot to ask, sir gus.
    what do you think would happen to PNB now since its merger with Allied has finally cleared the last hurdle, perhaps?

    Comment by J | December 3, 2009 | Reply

    • J,
      I haven’t heard that they cleared the last hurdle which is the divestment of Allied’s share in a U.S. incorporated bank. what I am waiting for is for this to happen because that will make the merger happen more quickly and I hold the view that the combined bank is a case where the sum is greater than the parts. I’m very positive on PNB. I actually added to my position yesterday. I may have bought too soon but my view on the stock extends to next year.

      Comment by Gus Cosio | December 3, 2009 | Reply

      • Oh I see. I read the article again, and you’re right. i just misunderstood the article at first reading. it merely said that “a US-based investor has OFFERED to buy Allied Bank’s 28-percent stake in California-incorporated Oceanic Holdings”

        thanks again! im also trying to follow CMT and HLCM closely now.

        Comment by J | December 3, 2009


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