Gus Cosio says so

Ideas on the Philippine Stock Market

Patience is getting boring!

8:30am  Tuesday   16 March 2010   Philippine Stock Exchange Index 3076.79 (+0.126%)

Yesterday, our market opened strong and surged in the first half hour.   The rally was led by the very strong move of AEV and AP on the back of very good results in AP whose parent is AEV.  Later in the session we saw some selling into strength of these stocks already.  Those who were playing the dividend price arbitrage continued to sell TEL contributing to the pull back of the index.  TEL is now just above the ex dividend equivalent of 2535 (2675 minus 141 = 2536).  I would be a patient buyer of TEL and wait for it to settle closer to 2500.  A softer MER also weighed on prices pulling back.  I am also a patient buyer of MER but it would take more patience than waiting for TEL because I would like to see it closer to 160.

Yesterday’s trading session tells me that strong stocks like MBT, AC, BPI, URC and RLC look like they are not going anywhere for the time being.  We are at the second half of March and Easter holidays are approaching.  This means most international fund managers will not be aggressive with their portfolios.  They will look only into very compelling ideas before making major shifts in their portfolios so I see not reason for sharp directional moves in the index.

Having said that, it appears that non-index stocks are taking the day in terms of price movements.  Property stocks SMDC and VLL and even MEG look to be attracting a lot of interest.  I would not be averse to looking into SINO and LND for speculative or opportunistic trades since they have shown some volume lately.  Some of the stocks that I am waiting to buy are MPI at 2.70, AGI below 5.00, MEGW1 below .50, MBT at 44 or better, DMC at 12 or hopefully lower.

In the neighborhood, Asian stocks dropped while oil and copper declined on prospects China will take more steps to cool its economy. The Shanghai Stock Exchange Composite sank to a five-week low.

In the U.S., property prices are showing support at current levels.  Retails sales in the U.S. is recovering which is good for the Philippines. Philippine January exports of electronics parts are up which is a very good sign.  Remittances for January 2010 are up 8.5% year on year.  That is an excellent indicator for growth in domestic retail sales.

The U.S. market has been quite positive but I feel that no strong surge can be seen there either.  Although the equities market globally is generally in a positive trend due to low interest rates, there are always reasons that arise to bring prices closer to reasonable values.  The problem with recommending that people be patient  is that it gets boring.

Advertisements

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

17 Comments »

  1. Dear Sir,

    I would like to inquire if you can share your rules or criteria in buying the stock of a company.

    Respectfully,

    Ryan

    Comment by Ryan | March 16, 2010 | Reply

    • Ryan,
      My criteria is just like any professional investor. Fundamentals have to be good, meaning profitability and profit growth can be determined with reasonable effort. Then go for valuations, i.e. P/E, price to book value, dividend yield and return on equity. Then do comparisons to itself and to its peers based on the figures. These are all available in reuters, some on the PSE website, some on the company website. Do not expect to make any money without doing your homework. You can be lucky, but as many professionals like myself have discovered, the more diligent I am the luckier I get.

      Comment by Gus Cosio | March 16, 2010 | Reply

  2. Hi Gus,

    Last friday, i bought BPC during run-off @3.20. Since then, the stock has gone down and i’ve also noticed that volume has dwindled. and today, the seller-buyer ratio stands at around 5:1 for the 3 best buying and asking volumes. I know i have to be patient with my positions but i can’t help but be jittery since the 4 technical indicators i look at show practically the same thing. I remember the acronym POP-COLA which is like the golden rule of stock trading. today i sold my position @3.10 to avoid any further losses.

    Would appreciate to hear your take on its recent activity.

    Thanks!

    Comment by richard | March 16, 2010 | Reply

    • richard, what does POP-COLA stand for? hehe i wanna know the golden rule too 😀

      Comment by JimBoy | March 16, 2010 | Reply

      • Prolong
        Our
        Profits

        Cut
        Our
        Losses
        Aggressively

        i encountered it when i first started trading real stocks in 2007. although i was too young then to adhere to it :/ haha

        Comment by richard | March 16, 2010

    • Richard,
      If you are not confident in your position of BPC, I am based on the principle that the sum should at least be equal to the parts. (In actuality, the sum is normally larger than the parts.) If I am wrong then, I’ll just cut my position, but right now, I think the arbitrage between BPC and its holdings is closing up.

      Comment by Gus Cosio | March 16, 2010 | Reply

    • Gentlemen:

      Maybe you would agree that timing the market is quite hard as every body would try to do the same. In contrast, if one understands the business of the company we buy into plus the fact that we are buying at “reasonable” prices, we can sleep well knowing that the stock price normally follows income of the company.

      One thing then is to look for the company that have “entreprenuerial” management mentality. Also those that have started or are making a balance between revenue from Phils and abroad. I remenber I sold some BPC shares last year at around P1.40 a share making around 4% income. If we think that buying into BPC at 3.10 will have an upside, then perhaps that is worth waiting for if the funds are not needed?

      Thanks

      Comment by alexis | March 16, 2010 | Reply

      • Alexis,
        If we base trading on timing alone, it is tantamount to guessing all the time. That is why it is important to get conviction on a stock based on logical appreciation of its investment considerations, i.e, earnings, growth, position in industry, valuations, yields, etc.
        One sure way to lose money is to buy stocks which cannot hold your confidence at any price.

        Comment by Gus Cosio | March 16, 2010

  3. Hi Gus,

    May I ask your opinion if is it still advisable to acquire both AP and AEV(UBP factor) after div Ex-date??? I believe the fundamentals for both are still strong for the long term.. I am planning to average up on AP after ex-date if it’s still prudent.

    Thank you Very Much and More Power!!

    Comment by jay | March 16, 2010 | Reply

    • Jay,
      AP is a stock that you could hold for a year and receive a good return. Same thing for AEV. By all means, average down when you have the chance.

      Comment by Gus Cosio | March 16, 2010 | Reply

  4. gus i think there is there something wrong here “(2575 minus 141 = 2536)” 🙂

    Comment by JimBoy | March 16, 2010 | Reply

    • thanks jim,
      It should be 2675 minus 141. I corrected the post already.

      Comment by Gus Cosio | March 16, 2010 | Reply

  5. Hi Gus,

    Whats your take on today’s PIP activity?, Do u think it would be prudent to wait for it to break the 2.40 resistance before we get on board?

    Comment by mike | March 16, 2010 | Reply

    • Mike,
      If you were to ask me, I think this stock should be worth 3 pesos. I’m holding mine until it gets close to that magic number. Nothing technical here, just a logical view that this company will be taken control of by Pepsico of the U.S. You don’t have to take my word for it because I’m just working it from my own perspective although I have personal knowledge of the PIP’s strong profitability.

      Comment by Gus Cosio | March 16, 2010 | Reply

      • thanks for the insight Gus…. really appreciate it..

        Comment by mike | March 16, 2010

  6. Sir Gus,

    Is it true that PNB will no longer merge with Allied? What is the effect on the future value of PNB? Thanks.

    Comment by Nel | March 17, 2010 | Reply

    • Nel,
      I haven’t heard anything to that extent. The last we got from them was a mid-year target for the merger. Nevetheless, PNB can stand alone without Allied. It has recovered from its “sins of the past” and is a very credible business on its own. There are other compelling reasons to buy PNB apart from the merger story.

      Comment by Gus Cosio | March 17, 2010 | Reply


Leave a Reply

Please log in using one of these methods to post your comment:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: