Gus Cosio says so

Ideas on the Philippine Stock Market

Reflecting your trade

9:30am   Tuesday   23 March 2010    Philippine Stock Market Index   3083.89 (pre-open)

On quick look, it appears that the reluctance of investors to take the market past the 3100 level is very pronounced.  I think we can see this in the price behavior of AEV, TEL, MER, AC, FPH and the banks.  Of course, we also see some stalling of momentum in stocks like URC and RLC.  What is impressive though is the relentless ascent of AP and DMC over the past few weeks.  These stocks have imbedded in its earnings the either power, energy or utilities, which in spite of negative effects of El Nino, are not expected to see drags in earnings.

It is very difficult to generate new ideas and views seeing that in a few days, we will be seeing investors winding down for the Easter holidays.  On my way to work both yesterday and today, I have noticed a marked improvement in Metro Manila traffic and I cannot observe any improvement in traffic decorum of motorists who are as chaotic as ever.  There are just less vehicles on the road as classes for some schools have come to a school year-end.  A lot of market participants have their vacations in their minds ahead of their stock market portfolios.  For those who can access the market remotely from their Blackberries or personal communication devices, I think they are more likely to unwind positions the rest of this week rather than increase exposure.

This brings me to the idea of how Filipino investors view risk.  Many Filipinos do not come into the stock market because they think that it is such a risky proposition where you can lose all your money.  Yesterday, I spoke in a bond market seminar attended mostly by people who handle fixed income portfolios and I got the impression that even investment professionals have very limited tools in quantifying risk.  I explained how the excess return over a riskless security expresses to the investor the probability of loss, and it seemed to me that this was the first time they heard the concept.  I do not blame them because I learned the concept ages ago from a seasoned analyst in London who was not very famous.  The concept most likely never got to our shores, but a lot of bond fund managers have learned to use the concept in managing fixed income portfolios.

I think that we can use the same concept although tweaked in some way to assess the risk in the equity markets.  It may be a bit more tricky but it is important to have a risk reward framework when approaching a stock to stock into our portfolios.  In my view, things are risky when you do not understand what is going on.  For example, some people still think that flying is risky, but if you ask a frequent flier, he would probably just shrug his shoulder.  It is because the only risk that he had experienced was the risk of losing his luggage in a busy airport.

People who get immersed in the stock market, get to understand the risk and if they are diligent enough to understand what ought to be done in different situations, they learn to mitigate risk.  On simple adage about common sense risk management is cut your loss and ride your winners.  Unfortunately, many stock market players I know do the opposite; they ride their losers and cut their winners.  I think now that the markets appear to be taking a breather, if you wanted to be a serious investor in the Philippine market, the favor you can do to yourself is to reflect on how you trade and invest in this market.  The result should be a resolve to understand this market more deeply.

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March 23, 2010 - Posted by | Financial markets in Asia

44 Comments »

  1. mr. cosio, what do you think of JGS?

    Comment by Andrea | March 23, 2010 | Reply

    • Hi Andrea,
      JGS may finally be redeeming itself. Judging from the markets reaction to the stock when they announced the Cebu Pacific IPO, it seems that there are new converts to JGS. I’d wait for a little pullback though. It’s gone up too fast and there could be some profit taking. Trend-wise, I think it could go further north.

      Comment by Gus Cosio | March 23, 2010 | Reply

      • Gentlemen, Sir Gus,

        There seems to be news re JGS on bloomberg and reuters. You may take a look. Also kindly see website of United industrial Corp and Singapore Land to get a feel of its other investment.

        Seems a strategic investment with room to expand and penetrate with consonance with RLC if they so deem advisable.

        Thanks

        Comment by alexis | March 23, 2010

  2. sir gus, thank you for your insigths on JGS. bought some at 8pesos. seems price climb isn’t yet over. God bless you sir!i never fail to visit your site every single trading day since i found out about it last month. good health to very kind people like you sir

    Comment by newbie | March 23, 2010 | Reply

    • Thank yuo newbie,
      I hope you have a profitable portfolio from here on in.

      Comment by Gus Cosio | March 23, 2010 | Reply

  3. I like this one “cut your loss and ride your winners”.

    Thanks Gus, have a happy lunch…cheers!

    Comment by Ryan | March 23, 2010 | Reply

    • wonderful mila,
      I think PNB has a way to go yet. It may pull back a little, but don’t let that scare you.

      Comment by Gus Cosio | March 23, 2010 | Reply

    • Ryan,
      If you keep that in mind always, you’ll maximize portfolio returns. Don’t forget, however, to revisit the research on stocks in your portfolio regularly in case it is downgraded by analysts. Those things happen.

      Comment by Gus Cosio | March 23, 2010 | Reply

  4. I’m 100% PNB right now……Thanks sir Gus……Longterm hold..Bought 23/share last week……

    Comment by Mila | March 23, 2010 | Reply

    • Hi Mila,
      don’t be too impatient with PNB. Try to ride this winner.

      Comment by Gus Cosio | March 23, 2010 | Reply

  5. Sold all my property stocks and MPI yesterday…Bought PnB 24.75/sh today……..Gud luck to all PNB holders…

    Comment by rene | March 23, 2010 | Reply

    • Good work Rene. PNB has had a price and volume spike today. It may pull back a little but that would be an opportunity to buy. Also, do not abandon MPI. If it starts to trade below 2.90, it should be a good buy.

      Comment by Gus Cosio | March 23, 2010 | Reply

  6. Hi gus!

    I just saw today a very hugh gain by JGS. 15% in 1 day. I wish I followed my friends advice last week to get this stock when it was still in the 8.5 – 8.8 levels. Whats your take on this stock in the future weeks? Will we still continue seeing it grow? Is it too high to get now? Thanks!

    Comment by Raymund | March 23, 2010 | Reply

    • Raymund,
      I think JGS as a company is pretty solid with a few dogs and winners in its portfolio. I think there is some juice left in the move, but buying now might be chasing it a bit. I’l wait for a small pull-back.

      Comment by Gus Cosio | March 23, 2010 | Reply

  7. Good day, Sir Gus.
    I was the one who asked you last week about my potential approach for JGS. Having JGS @ 7.90 and 15% of my portfolio, you mentioned that I could still accumulate some more and make it 20% of my holdings. And after some studying, so I did.

    Now, I just want to thank you for that nugget of advice. I have taken good profits earlie and I’m just waiting for a pullback to re-enter the stock with much optimism. I’m also holding on to PNB, which I took notice of because of your blog here.

    Thank you Sir Gus.

    Comment by Finch | March 23, 2010 | Reply

    • Happy to be of help, Finch.

      Comment by Gus Cosio | March 23, 2010 | Reply

  8. Sir, what can you san about MEG? Thank you.

    Comment by jm | March 23, 2010 | Reply

    • JM,
      I like MEG. It is very cheap at these levels.

      Comment by Gus Cosio | March 24, 2010 | Reply

  9. Hello Sir Gus,
    On: “reflect on how you trade and invest in this market”

    That is exactly what I did a couple of days ago and got rid of all my “basura” stocks, as they call it. I ride them for quick profit but I end up getting losses instead.
    Today, I bought EDC, FPH, FGEN to replace basura stocks.To my amazement, I got quick profits today on those blue chips too!

    Sir, what other stocks would you suggest to beef up my portfolio? I have PIP and will buy PNB again.

    Are there other promising picks out there? I am amazed at TEL’s ascent from 200’s to its price today, as you mentioned in your blog. I hope to find a stock like that….

    Your suggestions have been really useful to me, Sir Gus. I read your blogs every day. Thank you very much!

    Comment by charmagne | March 23, 2010 | Reply

    • Charmagne,
      My picks for long term gains are: AEV, DMC, PNB, MPI, LC and SMDC. This is based on current research. I could replace some of these down the road.

      Comment by Gus Cosio | March 24, 2010 | Reply

  10. Hi Mr. Cosio,

    I’m a trader at a brokerage firm.. ever since i started reading your blog i noticed that i’ve been more profitable and have managed to ride the winners better. Since i’m a predominantly technically-oriented trader i find your fundamental insights a gem.

    Looking forward to more 🙂

    Comment by Jack B. Nimble | March 23, 2010 | Reply

    • Jack,
      I also follow technical trading techniques because the method allows you to examine market conditions. I use the method only after I am comfortable with a stock’s fundamental value. In short, when I like a stock’s value, I then try to trade in and out of the stock.

      Comment by Gus Cosio | March 24, 2010 | Reply

      • thanks for the reply Mr. Cosio. combining FA with TA has definitely made trading easier 🙂

        more power to your blog sir!

        Comment by Jack B. Nimble | March 24, 2010

  11. Hello mr. Cosio just asking about LIHC and Nihao mines…My cousin warned about this 2 stocks because they are very speculative(basura stock) ….She tells me to buy instead fgen or ayala corp.

    Comment by andrea | March 23, 2010 | Reply

    • Hi andrea,
      Your cousin is correct. There is enough dynamics in fundamentally sound stocks that you can focus your trading on them. Try to generate a list of 15 good stocks and rotate your trades among them. You can speculate from time to time, but don’t do it when you have to chase prices.

      Comment by Gus Cosio | March 23, 2010 | Reply

  12. i’m the richest man on earth today and forever hehe sir gus “show me the money” thanks alot for these insights may your tribe increase.

    Comment by richest | March 23, 2010 | Reply

    • well richest,
      hang in there. There should be more juice in this market. Just remember to protect your profit from time to time by top-slicing on some of your positions. That way, you have ammunition for more trades.

      Comment by Gus Cosio | March 23, 2010 | Reply

  13. Sir Gus,

    It has been disclosed that the call option will be exercised on March 30, 2010. How do you suggest should this be played, wait for the intrinsic value to be hit and then sell (whether it happens soon or takes a long time) or just sell on news?

    In case the stock doesn’t go up by much, would it be a good idea to add to my position even more?

    Thanks.

    Regards,

    Warren

    Comment by Warren | March 23, 2010 | Reply

    • Warren,
      I suppose you’re refering to the MER trade between MPI and FPH. Judging from the prices of both stocks, the play is already going on and a lot of it is being seen in the price of FPH. MPI is still lagging. So is BPC. Both these stocks will benefit but it is only today that people are realizing it on BPC. MER’s bottom line is very positive in the last 2 months. You decide which ones among the stocks I mentioned. My bet is presently on a long shot which is BPC with the hope that just like the horses, the long shot will have a good pay out. After all, BPC is still a very viable enterprise. It just has the Bayantel stigma which is probably way behind them already.

      Comment by Gus Cosio | March 24, 2010 | Reply

      • I guess BPC would have a bigger pay off than FPH if it materializes because people were scared (much like JGS), although FPH would be a safer bet with a net cash position of around 7.4 billion (?) after the sale. So I guess its a risk profile thing.

        Thanks!

        Comment by Warren | March 24, 2010

  14. Hi sir Gus! Thanks for your honest and good advice…..To all newbies in the market please read this book MONEY AND YOUR BRAIN by Jason Zweig it will be a great help to you in making your trade/investment…..

    Comment by miko | March 23, 2010 | Reply

    • thanks, Miko

      Comment by Gus Cosio | March 24, 2010 | Reply

  15. “In Gus, we trust!” Thanks and be safe, we need you for long! I`m an enthusiastic fan of your analysis. I have no formal training in market trading but reading your blogs have strongly improved my fundamentals. I believed i was able to estimate statistically some of the reasons for your forecasts, especially for PNB! Again, i repeat fellow traders, President Gus for 2016! 🙂

    Comment by Chris | March 23, 2010 | Reply

    • Glad to be of help, Cris. Keep money management in mind always. Don’t be afraid of cutting loss on mistakes. Do not dwell on them, but keep moving on. That is what good traders do.

      Comment by Gus Cosio | March 24, 2010 | Reply

  16. Hi Sir Gus!

    What do you think of LR?

    Thank you so much for all your help.

    Comment by jolly | March 23, 2010 | Reply

    • Unfortunately, Jolly, I do not know what LR is doing right now. You’ll probably do better following stocks that trade at least one million pesos a day. That way, you know that it trades. You won’t learn how to trade if you focus on illiquid stocks.

      Comment by Gus Cosio | March 24, 2010 | Reply

  17. Sir Gus,

    In one of your advices above, you suggested that the letter writer does not forget to revisit the research of his stock as the analyst might have downgraded his stock. Can you recommend a good site for the research by analyst. Thank you.

    Comment by Nel | March 23, 2010 | Reply

    • Nel,
      The only one where information is readily available is the PSE website on disclosures. You will have to be reourceful and find out more from your broker. If he is any good, he should be able to find out for you.

      Comment by Gus Cosio | March 24, 2010 | Reply

  18. Sir Gus,

    What do you think of LOTO? I noticed it has an estimated EPS growth of 197% for 2009 and a PE of 10. There is a total of P0.75 dividend for the year or a yield of 4.7% in dividends alone. Thank you in advance.

    Comment by Nel | March 23, 2010 | Reply

    • Nel,
      Given this information, Loto may be worth looking at. Try to find out more from your broker if there is available information. Check it out on the PSE site as well.

      Comment by Gus Cosio | March 24, 2010 | Reply

  19. Hi Sir Gus, I think gsmi was set-up for an ambush @ 24 or 25/sh..pse tips was hyping this stocks for 3 days… in the stock market you must be as a brave as a lion and wise as a fox…..

    Comment by Brian | March 24, 2010 | Reply

    • Brian,
      I looked at GSMI but it looked expensive to me. Between that and PIP, you’ll probably get more bang for your back with PIP.

      Comment by Gus Cosio | March 24, 2010 | Reply

  20. interesting

    Comment by cecilia | March 29, 2010 | Reply

    • Thank you, Cecilia. Please continue following the Philippine Financial markets.

      Comment by Gus Cosio | March 30, 2010 | Reply


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