Gus Cosio says so

Ideas on the Philippine Stock Market

Some things are just too good to ignore

7:00 am    Friday   5  March  2010      Philippine Stock Exchange Index   3034.13  (-1.15%)

Market action Thursday seems to reinforce my view that the trading range is quite intact.  The large cap index stocks are the ones showing the most resistance to the top of the range.  TEL, AC, ALI, BPI, FPH, SM, BDO and MER all moved down today due to what I think as market’s perception that they have touched the high-end of their prices.  Even other large caps such as AP, MBT, FGEN and EDC are holding their own, but if there were buyers for these stocks, they were not aggressively buying.  I think that index stocks will continue to take a breather into the weekend as there is no impetus for new buying.

What is interesting are the second liners, some of which are showing some strength.  Stocks like ACR, BEL, APC, EEI, MPI and PIP bucked the trend today showing decent gains.  I think good stories behind these counters are attracting punters and even serious investors.  MPI for one has consolidated its position in MER and while they are still in the process of raising money, there seems very little trouble in doing that.

The story on ACR is coming closer to fruition as apparently there is a timetable that Xtrata is keeping to determine the ownership of the Tampakan mineral reserve.  With BEL and APC, people are still in the price discovery stage as to what the deal with Chevron is really worth, but for some players, it looks to be a really solid enterprise.  As for PIP, I learned that Coke who is the market leader in the cola space will be raising prices which will enable PIP to follow suit.  With its solid financial base, a price increase with further nourish PIP’s bottom line and given that they had been quite generous with dividends, we can expect good yields from PIP.  Of course there is also that speculative view of PepsiCo of the U.S. buying some of its bottlers as part of its business rationalization strategy.  At this point in time, PIP just has so many things going its way that it is too good to ignore.

Among the large cap stocks, I sense that SMPH is getting ripe for a run.  Looking back recently, its sister SM saw a very good run even as the market was weak at the time.  Recall that even as the Greek crisis was unfolding, SM rallied from a low of 310 to a high of 370 in mid-February.  SMPH has been lingering in the low nines that it has already formed a base from which it could take off.  The other large cap to keep an eye on is EDC which is approaching oversold levels.  The price of EDC at 4.60 is decent valuations-wise and it is at the bottom of its trading range.

There are more second liners that could prove profitable such as LND and FLI due to revival in the property sector.  Again, it seems to me that people are looking to be involved which is a constructive condition in the market.  I guess investors and players alike are able to look beyond this month to a possibility of a post-election rally.  I can’t help but recall  a quotation from Jack Bogle of Vanguard, one of the largest fund managers in the world:  “When reward is at its pinnacle, risk is near at hand.”  The market today is about picking the right stocks.

Overnight, we saw strength in the U.S. markets in spite of weakness in the European and Asian markets Thursday.  What encouraged investors was the improvement in employment numbers as jobless claims fell by 29,000 and planned lay-offs fell to its lowest level in 4 years.  These numbers came in the back of a 7.6 % decline in pending home sales which was expected due to severe storms in the northeastern United states.

I think there is no external negatives for the Philippine market today.  Traders are likely to take cautious positions on stocks that have seen some consolidation.

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March 5, 2010 - Posted by | Financial markets in Asia

16 Comments »

  1. Hi Sir Gus! What a nice update before I head to work. What concerns me is EDC. I think the big players are getting out with the NFS that we had in the past fews days. But still, this is one of my favorite stocks and I believe the it is a good stock to hold this 2010.

    Comment by jolly | March 5, 2010 | Reply

    • Jolly,
      What is “NFS”?
      On EDC, I agree with you about holding this stock throughout 2010. The power generators especially EDC which has geothermal will really add value this year.

      Comment by Gus Cosio | March 5, 2010 | Reply

  2. Thank you for sending me this useful write up! It’s very helpful for me since I am a Senior Financial Adviser with Manulife. Please do not grow tired of sending me your articles if you have any new ones coming up.

    Comment by Chiqui Brosas-Hahn | March 5, 2010 | Reply

    • Hi Chiqui,
      You’re most welcome. May I suggest that you bookmark this site so you can just click on it whenever you are on-line. I try to give a market update on a daily basis. I can’t help missing a day or so when I am on the road. Normally, I try to generate ideas as often as I can for people like you who have interest in the market.

      Comment by Gus Cosio | March 5, 2010 | Reply

  3. Hi Gus,

    TEL, AC, ALI, BPI, FPH, SM, BDO and MER all moved down yesterday.. and I am still waiting for good buys to start my trading activity . Your articles have inspired me to invest my extra money in stocks and I am going to give it try… If it is not asking too much, could you please suggest good buying prices for the above stocks? Please include PNB, MPI, DMC and SMPH. Thank you very much.

    Comment by Bobby | March 5, 2010 | Reply

  4. Good morning Sir Gus.

    I was just wondering, how come the previous close of the PSEi is indicated as 3,005.01? at least based on my two online accounts under different brokers…

    But didn’t the market close at 3030+ yesterday? Is there something wrong here?

    Comment by Finch | March 5, 2010 | Reply

    • Hey Finch,
      The PSE was down for some reason I still do not know. It’s sad when something like this happens on a day when I thought it was good to be more involved in the market. Unfortunately, these things happen.

      Comment by Gus Cosio | March 5, 2010 | Reply

  5. The PSE was having technical problems at the start but opened around 10:45am, what’s sad is firstmetro’s system is down! WHICH IS A REAL BUMMER!

    Comment by antivirus | March 5, 2010 | Reply

    • Hi antivirus,
      I could not access my firstmetro account as well. I called and they told me that for some ungodly reason, their connection to the PSE was the only one that could not be reconnected by whatever glitch that occured. I share your misery, but I’m in this game for the long haul so I won’t make one day ruin my outlook for the rest of this year. A trader’s attitude should be, “everyday is a new day.” Monday will still be there. Warren Buffett said that the good investor does not have to be very intelligent, but he has to be patient. There is a lesson that we are learning today even as our trading channel is down. Learning patience can be very constructive for investors like us.

      Comment by Gus Cosio | March 5, 2010 | Reply

  6. I just want to ask what can you say about ORE? Thank you.

    Comment by jm | March 5, 2010 | Reply

    • Hi JM,
      One thing ORE has going for it is that it has an operating nickel mine I think. I do not have more details about the company except that the value of its holdings are much higher than what the price reflects. I do not have anything to substantiate it except that I have been looking at its IPO prospectus when it came out in 2007. Everything else is rumor which is supposed to help the stock go higher. At this point, it is rather speculative.

      Comment by Gus Cosio | March 5, 2010 | Reply

  7. hello sir gus,

    what can you say about smdc? is it still a good buy?

    Comment by jenica lim | March 5, 2010 | Reply

    • Hi Jenica,
      SMDC does not trade as well as its sister companies. I think a better portfolio move is to sell SMDC and buy either SMPH or SM. Both these stocks respond to market movement and have sufficient liquidity. Personally, I find no advantage is holding SMDC if I like the market.

      Comment by Gus Cosio | March 5, 2010 | Reply

      • From a technical perspective, there is a potential momentum play in SMDC if it breaks out above 6 and closes at a new all-time high. It could make a run similar to AP or PX. Value-wise, I think RLC and MEG are cheaper than SMDC.

        Comment by melvin | March 8, 2010

      • Melvin,
        I like technical analysis but I am not a strict adherent. For one, SMDC has intermittent volumes of trade so it is difficult to gauge sentiment objectively from the charts.

        Comment by Gus Cosio | March 8, 2010

    • thank you sir Gus…

      Comment by jenica lim | March 8, 2010 | Reply


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