Gus Cosio says so

Ideas on the Philippine Stock Market

Not bad for a blue chip

7:00   Thursday   11 March 2010    Philippine Stock Exchange Index   3119.63  (+0.395)  yesterday’s close

What we are seeing is a market that is truly following value.  We see value turnover at a healthy level which means that there is a lot of comfort among investors among the actively traded stocks.  TEL seems to have reached its level and is just waiting for the stock price to adjust.  Remember that it will be paying Php 141 for ex-dividend date on Friday, March 12.  My take on the stock is that if it falls below 2540, then it is a good buy.  Of course the closer it is to 2500, the better.  My strategy in TEL is to play the range between 2500 and 2700.  We could see it potentially doing the move 3 times for the balance of the year.  This means that one can potentially make 300 to 600 pesos per share trading the range.  Not bad for a strong blue chip.

In my observation, the highlight of today’s trade were the power companies again.  I was skeptical about them because of El Nino but it seems that investors are looking farther down the road for the value of these stocks.  For example, one fund manager tells me that he thinks AP should be worth at least 15; this means we still have a lot to go with this stock.  Having said that, its parent – holding company AEV – should also be moving in tandem.  The trio of EDC, FGEN and FPH should be singing the same tune because they have managed to wind down debt levels while increasing capacity.  What is just becoming apparent now is that the grandparent of FGEN and EDC which is the parent of FPH and ABS should now be reaping some benefits from the good performance of its portfolio of companies.  I noticed that BPC has been showing some volume lately and its price has been clawing its way steadily higher.  It could be worth a look.

On the property side, I noticed volume to be steadily higher for LND after the company showed its plans to step up its business again.  It could be speculative yet, but I am less fearful when a company is actually operating and showing some cash-flow.  Other speculative plays could be anticipated for CYBR now that it is trading at the lower end of its range.  From what I learned, RSA is very serious about his plans in the power business and is building his network.  CYBR apparently will be the holding company.

There may also be some accumulation going on in LC as I notice a loaded bid level with very little trade going on.  I think we are seeing the bottom of this stock although it could take some time before it does a lot better.  There is also a worthwhile wait for a stock like SMDC which historically has been a slow stock, but it has been showing some life because of the high-profile of its property developments.

A stock I am truly impressed is URC as an analyst was telling me that this is probably the company that will benefit the most this year from any surge in consumer spending.  For those who follow JGS in relation to URC and RLC, you’ve probably figured out how the play between these 3 stocks would go, in spite of the relative illiquid flow of JGS.

A stock that I think is worth selling at these levels is AC.  I reckon that we are close to the top of our range for the PSEi, and these large caps will be among the first to be sold off.  I think the same will happen for BPI, ALI, MBT, SM and MER.  However, when these stock go to lower levels, that will be a good opportunity to buy particularly MBT should it go to 43 or lower.

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March 10, 2010 - Posted by | Financial markets in Asia

30 Comments »

  1. Hi Gus,

    Our investments are in mutual funds whose NAVs have not yet recovered up to now. Should we continue with peso cost averaging or just stop and wait for better NAVs to recover?

    Thank you very much for your suggestions for TEL and MBT buy price ranges.

    Comment by Bobby | March 11, 2010 | Reply

    • Bobby,
      If your NAV has not yet recovered in spite of last year’s run, please have a word with your mutual fund’s manager. I believe in Peso cost averaging but it should be with a market responsive manager. To learn more on cost averaging, please click on the link on Mutual Funds in the Philippine on the right hand side of this page.

      Comment by Gus Cosio | March 11, 2010 | Reply

  2. Hi Sir Gus,

    A comment on mututal funds (UITF). Ive invested a small amount about 2 years ago from one of the major banks and I noticed up to now the value has not recovered. Ive decided since to pull it out, take a small loss and invest directly to a common stock. Ive recovered that loss. In short, Im not so sure now about UITF.

    A manila standard report came out few days ago that Cebu PAc earned 2009 3.18 B. Im not sure of the quality of the earnings but if such is accurate then its earnings almost doubled (Sept 09 is 1,78B) and such seems was not factored into the EPS and PE of JGS.

    This is worth watching for I suppose,

    Thanks

    Comment by alexis | March 11, 2010 | Reply

    • Alexis,
      UITFs and mutual funds are not generic. It is important to know the fund manager. In my experience, mutual funds do better than UITFs for the simple reason that they are patronized by non-banking investors. Banking investors tend to dread things that have downward volatility, so UITF managers are more defensive than mutual fund mangers. The good thing that you did was when you pulled out your money, you put the exposure back to equities although this time into shares of stock. It is not bad to have both a portfolio of stocks and a mutual fund. I have both.
      On Cebu Pacific, I think its forthcoming IPO should unlock a lot of value for JGS. Keep on watching JGS when it goes down; then pick it up when it stabilizes.

      Comment by Gus Cosio | March 11, 2010 | Reply

  3. Sir Gus, thank you for being very helpful and objective. I noticed that you say good things about a stock even if it is not in your portfolio. Your suggestions are things we can act upon, prompting us to conduct our own research and seeing that the suggested conclusions are in agreement with your suggestions. Thank you again and more power.

    Comment by Nel | March 11, 2010 | Reply

    • My pleasure Nel. I’m glad you realize that this effort is an advocacy on my part to help develop investors in our local market. Incidentally, there is a growing number of Fil-Ams who are developing an interest since they can now access the Philippine market on-line. That should widen our market base.

      Comment by Gus Cosio | March 11, 2010 | Reply

  4. Hi Sir Gus, Phisix is going up for past 11 months ,while dollar and also euro is going down….Is it Good to Buy dollar when it goes down to 42 0r 41 pesos to a dollar?

    Comment by eric | March 11, 2010 | Reply

    • Definitely, even if it gets to 44 because I don’t think it can fall much lower than that, Eric.

      Comment by Gus Cosio | March 11, 2010 | Reply

  5. Today’s market activity made me realize that I’m impatient, and that it’s extremely difficult to temper one’s greed. To take profit or not to take profit, that is the question.

    You mentioned previously that a bird in one’s hand is better than two birds in the bush… but boy, those two birds sure are appealing. Psigh…

    Comment by Jet | March 11, 2010 | Reply

    • I agree with you Jet. Yesterday I posted selling DMC @12 thinking that it won’t get done since the stock has been having a hard time getting past 11.5 the past week or so. Then suddenly today it rallied. I made a good profit yet I cannot help but feel a sense of loss for the P1 difference between my selling price and current trading price. Greed is one powerful emotion we have to fight.

      Comment by richard | March 11, 2010 | Reply

      • One day at a time… that’s what my friend used to say after he quit smoking. I reckon fighting greed and this bit about controlling emotion will take roughly the same will power.

        With the help of short narratives like yours and those of Sir Gus, I’m sure I’ll get it right.

        Today I experienced the opposite of your DMC with JGS…

        I should have sold yesterday! Haha!

        Such are the follies of greed and a weak hand. 😀

        Comment by Jet | March 11, 2010

      • I experienced both. I shouldn’t have sold DMC at 11 a few days ago and I should have sold JGS between 8.2 and 8.4. Oh and I should have sold FGEN at 10.5 yesterday, pathetic decisions this week hehe

        But I do think that the move of JGS is not yet over, and that DMC will present an opportunity in the coming days. FGEN I have no idea.

        Good luck to everyone.

        Comment by Warren | March 11, 2010

    • Jet,
      the art and science of portfolio management is developed after years of study and exposure to the market. Patience is something you learn in the process. Ever wonder why the very successful fund managers do not get famous until around 15 years of experience? The more you trade, the more you learn. sometimes you even learn to run away to fight another day.

      Comment by Gus Cosio | March 11, 2010 | Reply

  6. Hi Gus,

    What’s your take on DMC’s market activity today? Of all the stocks that I monitor, it’s the only one that’s up today. I posted a sell yesterday for P12 thinking it might be a long shot already given the trouble it seemed to encounter at P11.5 the last few days then suddenly today happened. Are there any news accompanying this move? I also checked the historical chart of DMC and I noticed that its previous all time high was P11.75 set September of 2007, right at the peak of the great bull run. Do you think its ascent is sustainable in the short-medium term?

    Thanks!

    Comment by richard | March 11, 2010 | Reply

    • Richard,
      DMC is a very good stock. Will it go further? I am willing to bet that it will. You can keep watching the stock and catch some of the dips. Will it fall 12? I hope so because I want to add to my position around the 11.50 – 11.75 level.

      Comment by Gus Cosio | March 12, 2010 | Reply

  7. how does zijin’s takeover on indophil affect acr?

    Comment by peter | March 11, 2010 | Reply

    • Very much, Peter.

      Comment by Gus Cosio | March 11, 2010 | Reply

  8. Gus, what do you think is the buying price range for JFC? since its a good stock i wanna have it but i want to have it at the right price, tnx gus 🙂

    Comment by JimBoy | March 11, 2010 | Reply

    • Jim,
      You’re absolutely right. JFC is such a solid stock. I do not have a clue what is a good price except that whenever there is a sell-off, it is normally a cheap time to come in. This is a stock that you don’t trade much; you buy it for longer term exposure to the market.

      Comment by Gus Cosio | March 11, 2010 | Reply

  9. I took the same action in DMC yesterday, tried to sell it at 11.50, luckily, it didnt push through… :).. today i was able to download it at 12.50 and 12.75… was a bit early to pull the trigger since the stock managed to run up to 13.25… nevertheless, i was happy with the decision i took… One thing we really have to control is our emotion…

    By the way Gus,, is LC a good buy @ .2200 and MPI @ 2.80?

    Comment by mike | March 11, 2010 | Reply

    • Mike,
      I noticed that there is accumulation at 0.22 but whether LC will fly soon after, I doubt yet. If you’re willing to wait a few months, I think the stock could go to 0.35, but I think that is way down the road. MPI, I think 2.80 is okay, but I’m willing to wait till 2.70. It’s range is pretty narrow so one must be patient.

      Comment by Gus Cosio | March 11, 2010 | Reply

      • theres good activity in LC today.. hope the move happens sooner..

        Comment by mike | March 12, 2010

  10. We cant really predict the future whats important is we should never loose money, protect that capital and take profit. Thats what the experts are always saying…cheers!

    Comment by Ryan | March 11, 2010 | Reply

    • you’re right, ryan. Money management should always be top of mind. Know how to cut losses and ride winners.

      Comment by Gus Cosio | March 11, 2010 | Reply

  11. Gus, Are you insured(life insurance)? do you think its worth getting one?

    Comment by JimBoy | March 11, 2010 | Reply

    • Yes Jim, I believe in life insurance. It is something that i started in an early age.

      Comment by Gus Cosio | March 11, 2010 | Reply

      • what type of life insurance did you avail? just the plain “life insurance” or did you avail additional riders? such as Death due to dreaded diseases, Accident riders etc.? tnx gus the financial genius!

        Comment by JimBoy | March 12, 2010

      • I go for the cheapest which is term-life.

        Comment by Gus Cosio | March 13, 2010

  12. Hi Gus,

    Thanks for the tips on mutual funds. We also have UITF placements and they too have not recovered yet. Which bank/ institution has good fund managers we can rely on? What do you think of Citibank/ING funds?

    We are starting to diversify to shares of stocks after reading your articles.. we are learning and still relying on your suggestions..

    We hope you are in good health…

    Comment by Bobby | March 12, 2010 | Reply

    • Thanks, Bobby.
      For mutual funds, you can check out http://www.firstmetrofunds.com.ph which manages the Save and Learn series of funds. Its equity funds has a very good 4 year track record. It was started four and a half years ago. You can also click on the Mutual Funds in the Philippines link on the links menu of this page.

      Comment by Gus Cosio | March 12, 2010 | Reply


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