Gus Cosio says so

Ideas on the Philippine Stock Market

When it gets hot and dry

6:30pm Tuesday   16 February  2010  Philippine Stock Exchange Index    2967.71  (+0.15%)

Markets in Asia and the U.S. were closed yesterday.  Today, Singapore and Greater China are still off for the lunar new year, so our market had been trading pretty much on its own.  I am trying to make sense of what the market is telling us today.

With TEL leading the most active list, the day looks pretty normal although turnover is not really that impressive.  EDC while being the second most active stock saw value turnover lower compared to the two previous trading days.  CPM was third most active with a volume spike, and this spike had come from a similar spike yesterday.

Then you have IP as fourth most active, and it had not been in the list from since I cannot remember.  You’ve also seen a tremendous volume spike from IP yesterday and today.  That is because they will be listing IP- E-Game Ventures (EG) by introduction on Wednesday the 17th of February.  I guess with price guidance of EG at Php 50 per share, people are imputing quite a bit of value in IP.  I must warn, however, about listings by introduction because of the supply situation on such listings.  Oftentimes, this leads to a something like short squeeze because of the unavailability of shares.  I suspect that EG will skyrocket in the next few days simply because there are no shares available.  That would cause people to gravitate toward IP which owns 14.45% of EG.  IP has gone up sharply already over the last two trading days, and it might be a bit risky to get in now.  Hey, but if you’re feeling lucky, this gives you better odds than a blackjack hand.  Just don’t forget that you should get in and out quickly.  Don’t end up being a long-term holder if you just want to punt it.

The rest of the actively traded stocks were the more familiar large capitalization stocks – AP, URC, SM, MBT, PX, BDO.  Personally, I think that our market is in good shape, and we should remain in the 2800 to 3100 range.  I learned from the fixed income guys that there is an enormous amount of cash in investors hands that are yielding pittance.  Some of that money will be tempted into stocks like TEL or AP which are slow but sure gainers.  Some of the smaller caps did some good moves over the last two days – TUNA, SPH, GMA7/GMAP and PIP.  I would put my bet on PIP which make a mint of profits when very dry and hot vacation season comes.  My analyst friend just came from a meeting with the CFO and it seems that high sugar prices have not been hurting them.  Sales from Gatorade and higher value drinks have been very brisk in the NCR/Calabarzon area.

There should also be some interest among brokers in the new Petron preferreds which will be listed in a few weeks.  I believe it carries a 9.2 % yield which will look very attractive to any investor.  Keep in mind, though, that this is not a common stock but a preferred stock which means the yield is subject to the retained earnings of the company.  Incidentally, banking shares are likely to show good full year results when they disclose earnings next month.  It appears that with the big banks, like MBT and BPI, funding costs have gone down so much with the prevailing low-interest rate scenario. While loan growth is still slow, these banks have been earning quite decent net interest margins on their bond portfolios both corporate and government.  MBT looks quite cheap at 41.50 and could go to 50.

If you were to ask me what the market is telling us today, I think it is showing us a fair risk reward profile.  Unless we see some major disruption like another Greece, we will probably work into better levels with some stocks.

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February 16, 2010 - Posted by | Financial markets in Asia

4 Comments »

  1. Gus, I need your valuable take on CYBR. I bought CYBR today at .72. I then chanced upon a SEC disclosure today that Ramon Ang increased his holdings in CYBR. He bought the shares of Ital-Thai group and Centasia Group Ltd. which is roughly 23% of CYBR. What’s your take on the deal? Is it advisable to buy more CYBR shares in light of Ramon Ang’s acquisition of more CYBR shares? Thanks in advance for your advice.

    Comment by czar | February 17, 2010 | Reply

  2. Hello sir gus, do you think urc’s rally will continue until after the elections? I’ve looked at its prices before and it reached a high of more than 21.5, i’m so confused right now whether to hold on to it or let go. Am I being unreasonable for betting on urc becoming 30? I took into account the increased bvps, the buy.back of shares, and the higher net income

    Comment by Wren | February 17, 2010 | Reply

    • Warren,
      A fund manager friend of mine really likes URC and is continuing to accumulate even at these prices. he started buying URC at 8. If your average cost is way below today’s level, I would hold on and keep this as a core portfolio; after all you can expect regular cash dividends. Consider selling when you think that the market has turned which is not yet in the cards today.

      Comment by Gus Cosio | February 18, 2010 | Reply

  3. Czar,
    If you already have a position, I suggest you buy your next position at a lower price perhaps below .70 since the price eases when there is no activity and then strengthens when the group starts accumulating again. I have no doubt that CYBR will go higher maybe in the next 6 months but not without going down again. If you follow this stock, buy more when it is weak, not when it is strong. It has no fundamentals yet so it is pointless to buy a big position. The big move will likely happen later in the year.

    Comment by Gus Cosio | February 17, 2010 | Reply


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