Gus Cosio says so

Ideas on the Philippine Stock Market

Constructing January

9:10am  Thursday  7 January 2010  Philippine Stock exchange Index 3039.93 (yesterday’s close)

It is very difficult to have a feel for the markets early in the year.  Most investors are still formulating their buy list for the year and their conviction in the market.  The good thing about the Philippine market is that the list of actively traded stocks is short.  On the other hand, the bad thing about the Philippine market is that the list of actively traded stocks is short.  What I’m saying is that unlike the bigger markets like Hong Kong and even Jakarta, almost everybody is looking at the same stocks.  Anyway, as long as we know what we’re up against, we should be able to plan our trading strategies accordingly.

In the last 3 days, we’ve seen the market tank and slowly claw back. After dropping sharply on the first day of trading of 2010, we saw a decent reversal on Tuesday, then a volatile day on Wednesday which ended also in a gain.  I think that the signals in the market are positive.  What I am seeing is caution and deliberate position taking by serious players which is a good thing.  The spivs and the stags are not yet there in a big way so there’s little indication that we could see another big drop of the same magnitude that we saw last Monday- at least not in the short-term.

I think the power sector remains the favorite judging from the performance of FGEN, EDC, MER and AP.  Only FPH is underperforming.  As I mentioned in earlier posts, the power sector is really very promising this year and trading profits can be made in rotating among these stocks.  For example, because FPH is lagging, I think it would be a good bet in the next few days.  One could also look at AP which looks like a strong BUY at 8.50 and to my mind a very safe bet for the year.  One should also have a look at DMC which recently acquired Calaca through SCC.  This stock is similar in portfolio to MPI as they both have power and water utilities as main drivers of earnings.

I also noticed that in the global markets, the financial sector is starting to attract some attention.  Yesterday, BPI broke into the most active list after having been absent for a while due to its being expensive relative to the market.  To my mind, that signals additional weighting coming into the local financial sector. I think MBT is a good bet for this month; at 44 it looks cheap.  Of course, my favorite is PNB and I need not say more.

The Philippine government was able to sell US$1.5 billion in global bonds overnight which should boost local sentiment.  Of course, the budget deficit remains in the back of the minds of many, providing skepticism down the road.  In the meantime, given that the government is not having any difficulty raising money tells me that there is still a lot of money willing to come into the country.  For all that’s worth, it should have positive effect in the equity market.

Anyway, for those who just want to buy the market, I think AC and ALI should be a good buy at these levels.  TEL and GLO should also keep the market engaged since the consumer spending story remains a good theme this year and cell phone loads continue to have a good share of consumer’s wallets.  The other day, a reader asked me about URC which happens to be a good consumer stock.  I think the stock remains to be on the up trend and will likely keep value for the rest of the year.

I feel rather constructive over the next few days.  I think the January effect may be upon us and being early in January, there could still be some money to be made.

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January 7, 2010 - Posted by | Financial markets in Asia

12 Comments »

  1. Hi Sir Gus!

    MPI staged a rally today and ended at 2.90, is this a warning sign to sell already as it nears the 3.00 mark? EEI also spiked to 2.80 today.

    Comment by J | January 7, 2010 | Reply

    • Yes Josh, MPI is a trading stock. My personal trading range is 2.50 buy/3.00 sell. If you were lucky and long, you should be posting at the asked side already.
      As to EEI, it is a slow moving stock that’s very cheap even at 2.80. Personally, I bought this stock when it was still 2.20 but I’m holding on till about 3.50. Our analyst believes it should go to 4.50 but I’m not that greedy.

      Comment by Gus Cosio | January 7, 2010 | Reply

      • thanks Sir Gus. actually, i’ve posted at 3.00 already through GTC – thanks for affirming the move 🙂

        Comment by J | January 7, 2010

  2. Sir Gus,

    What do you think of Piltel? If you look at the 2009 earnings even if you just use three quarters, the PE is as low as 5.3, so doesn’t this make Piltel dirt cheap? Or are its earnings expected to decline going forward? Thanks

    Comment by Warren | January 7, 2010 | Reply

  3. Hi Sir Gus,

    You mentioned PNB is one of your favorites, may I know your target selling price for this.How soon, do you think that price can be reached? Thank you.

    Comment by Nel | January 7, 2010 | Reply

    • Hi Nel,
      I am a long term holder of PNB. I bought it below where it is now and I’m willing to wait for a few months for the merger with Allied to happen. I see PNB at least at 35 when that happens.

      Comment by Gus Cosio | January 7, 2010 | Reply

      • Thanks Sir Gus.

        Comment by Nel | January 7, 2010

  4. Hi Warren,
    If you recall, Piltel was made a vehicle for holding the Meralco shares. It will only earn from its holdings of meralco. The only buyer is PLTL itself under its buy back program and they only buy around 8.40. I see little or no upside in the stock past 8.40.

    Comment by Gus Cosio | January 7, 2010 | Reply

  5. Hi Sir Gus,

    I just like to thank you for sharing your insights. I learn a lot from you sir.

    Comment by Paul Vincent | January 7, 2010 | Reply

    • Hi Paul Vincent,
      I hope you continue to visit the site. More importantly, should you have some views or comments, please feel free to write.
      God bless you.

      Comment by Gus Cosio | January 8, 2010 | Reply

  6. Good day Gus,

    I have been following your posts and really find it informative, analytical and most importantly, easy to understand for newbies like me =D Though, I’d like to get your opinion, whether I should keep my MWC or switch to PNB? MWC is kinda slow tho it gives good dividends. However, PNB could go up as 35 or even 40 in the next few months and that is a 40% gain. Thanks!

    Comment by Raymund | January 7, 2010 | Reply

    • Raymund,
      I like both stocks but you’re likely to get more out of PNB that MWC. I like your idea.

      Comment by Gus Cosio | January 8, 2010 | Reply


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