Gus Cosio says so

Ideas on the Philippine Stock Market

Is anybody screaming

9:25 am  Wednesday    24 March 2010   Philippine Stock Exchange Index   3129.24 (+1.47%)  per opening

On Tuesday morning I wrote that the market should be taking a breather ahead of the holy week.  How wrong I was. Tuesday was one of the more impressive days I have seen so far this year.  Headline stocks were very strong, and many of the second liners saw a lot of activity.  The value turnover was also on the high-end of the range, at 3.9 billion pesos, reflecting that investors are coming in with more money.

This comes on the back of the budget deficit announcement of the National Government amounting to Php 33.2billion in February.  Coming after a Php 37.1 billion shortfall in January, the two month deficit is now beyond Php 70 billion.  I think the government has front loaded a lot of spending in the first quarter to preempt election spending ban which actually happens every election year.  This is likely why early indications show that the 1Q2010 GDP number will be a positive surprise.  An economist friend of mine uses Meralco and Jollibee sales as proxies for economic activity and already the revenue growth of these two are already indicating the economy’s robustness in the current quarter.

I would try to buy some favorite stocks today to add to my position.  I am speculating that we will break the 3130 resistance level of the index.  I suspect most index stocks will spring forward today.  My best bet among the heavies would be MBT, MEG, AEV, AGI, EDC, RLC and URC.  Among the second liners, I would go for MPI, PNB, PIP, DMC and SMDC.  For the third liners, I think CYBR, PCOR and BPC.  I do not want to sound too enthusiastic because stock investors should always be cerebral when they make moves in their portfolios, but there are times when the market just screams at you.  It happens in times when it has gone to ridiculously low levels, but sometimes it occurs at breakout points which is what appears to be going on now.  The mistake that most people do in this type of situation is to go for very cheap stocks that have not moved.  I think that is a very big mistake because it is those stocks that people do not really want, and you will just get stuck if you are wrong.  I would go only for any of the top 50 stocks because there will always be liquidity should I be wrong and want to get out quickly.  In short, don’t go for ‘basura’ stocks; that is what they are – rubbish, and rubbish is not worth anything.  It is better to buy a valuable stock expensive than buy a worthless stock cheap.  No matter how cheap it is, if it has no value, it will never give you any return.

Here is for luck to everyone.  I think the next couple of days will be enjoyable for traders.

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March 24, 2010 - Posted by | Financial markets in Asia

33 Comments »

  1. Hi Sir Gus! I’m glad I bought RLC. It performed well today. May I know your target price with this stock? Thanks in advance.

    Comment by chinchin | March 24, 2010 | Reply

  2. Chinchin,
    I am not of the school that look at target prices. I buy a stock and hold it while its value vis a vis other stocks is favorable. I would sell either when I feel that it has lost its relative value or if I think the market is due for a correction or if I turn negative on the market in general.

    Comment by Gus Cosio | March 24, 2010 | Reply

  3. hi Gus, today was really impressive performance!! closed @ 3166… bought some MPI today.. glad to have closed my GLO position @ 990 yesterday… today it is down to 975… :)..

    btw Gus, what is the implication of the MER call option on MPI.. is it positive or negative?

    i regret to have hesisated to pull the gun on MBT earlier @ 45.5..the technicals is screaming a breakout @ 45.5

    Comment by mike | March 24, 2010 | Reply

  4. Hi sir Gus, The truth hurts coz i am one of those who buy basura stocks. And you are right coz it is cheap but i am stuck with those stocks, now i am decided to sell them and switch to stocks with value. Thanks sir for the reminders. I am really very fortunate to know your website. More power sir and thanks.

    Comment by ella | March 24, 2010 | Reply

    • Ella,
      what is important is that you learn something and appreciate the lesson.

      Comment by Gus Cosio | March 24, 2010 | Reply

  5. Gus, what’s are your thoughts on MWC? Thanks.

    Comment by Keith | March 24, 2010 | Reply

    • keith,
      MWC is a good stock but a slow mover. Usually a defensive stock. It should be part of the core of a long term portfolio.

      Comment by Gus Cosio | March 24, 2010 | Reply

  6. Hello Sir Gus!

    What would be your top picks for April? 🙂

    And do you think there will still be liquidation in the next 2 trading days due to the long vacation?

    thanks! 🙂

    Comment by Jack B. Nimble | March 24, 2010 | Reply

    • Truthfully Jack, I have none. I am sticking to my old list. I’m looking to add to my DMC, PIP, and perhaps AEV.

      Comment by Gus Cosio | March 24, 2010 | Reply

      • okay, great thanks! 🙂

        Comment by Jack B. Nimble | March 25, 2010

  7. Hi Gus,

    Today I bought BPC @3.3 due to the strong open of the stock. However, it lost momentum mid-day. I also noticed that there are a lot of sellers @ 3., probably traders like me who got hyped up. Do you think there is still some steam with this stock considering its subsidiaries FGEN and FPH are seeing good volume.

    Also, I am heavily invested in AP, since I know that this is a very strong stock. However, it has been encountering heavy resistances at the 13.25 levels and today ended unchanged even with the market breaking the 3,133 resistance. Would you recommend to sell a portion of my holdings or just hold on till it moves again?

    Your thoughts on DMC would likewise be very much appreciated.

    Thanks!

    Comment by richard | March 24, 2010 | Reply

    • Richard,
      I am not trying to convince you to hold on to your BPC. I just would like to point out some discipline in trading. Why did you buy it at 3.30? Probably because you believed that it had value at the price, something that I believe. If you look at the company website on investors relations, http://www.benpres-holdings.com/investor_relations.php?id=27, you will note that EPS for the 9 months ending 30 Sep ’09 is 2.38. It will probably report EPS for full year ’09 higher that 2.38 which means that this stock is trading less than 2X 2009 earnings. While there is no guarantee that earnings will remain the same, I am almost sure that the Book value per share of BPC is now far above 3.30 given this earnings picture.
      On AP and DMC, I would hold on for a while. If you are tempted to sell, sell only 1/3 of your position at most so you can keep your average low if you are not able to buy the position back at cheaper prices.

      Comment by Gus Cosio | March 24, 2010 | Reply

      • Sir Gus,

        The BPC EPS however is mostly gain from sale and early payment of debt and not core and operating items. May we request if you can kindly get idea from your associates, especially analyst who have access to the key people of BPC what are their plans for the company going forward?

        Thanks

        Comment by alexis | March 24, 2010

      • As I looked at BPC’s valuation and dividend history, I’ve noticed that it has not paid cash dividends since its listing and the only time it has paid out dividends was in 1995, a 10% stock div. It may be that this is due to the high debt obligations of the company. However, with the sale of its MER holdings, can we expect it to pay out some dividends in the coming months given the strong performance of its constituents?

        I’ve regained my resolve after realising there’s not much to be afraid of given the strong fundamentals of BPC as well as my other holdings.

        Thank you for your very helpful insights.

        Comment by richard | March 24, 2010

  8. erratum: a lot of sellers @3.3…

    Comment by richard | March 24, 2010 | Reply

    • Richard,
      Some stocks you buy for dividend; some you buy for value. The earnings per share on BPC is very close to its book value. That should be worth something.

      Comment by Gus Cosio | March 24, 2010 | Reply

  9. Hi sir Gus, You’re right newbies must avoid Basura stocks like L@#c,A#n,G&*,M!$,a#a,o&e…..and others…These company are RUBISH WORTHLESS shell companies……

    Comment by chard | March 24, 2010 | Reply

    • I’m glad you realize that.

      Comment by Gus Cosio | March 24, 2010 | Reply

  10. pls….lng….avoid pump and dump stocks…..they are hype then dump….some are in the mining and holding sectors…..I they will start dumoing next month……

    Comment by jo_sia | March 24, 2010 | Reply

    • that is precisely the reason why you should look at fundamentals first before you touch a stock.

      Comment by Gus Cosio | March 24, 2010 | Reply

  11. last sept 09 lihc was dump heavily until february…from 13-12/share it went down to 6/share….

    Comment by jo_sia | March 24, 2010 | Reply

  12. Gus, Portugal’s sovereign debt has just been downgraded to AA- by Fitch, I am afraid that this will have a negative impact on tommorow’s trading…

    What do u think?, regards mike

    Comment by mike | March 24, 2010 | Reply

    • well mike,
      I reckon there will be a negative reaction. But that is what markets are all about; values shift all the time with available information. You just have to have some conviction in your strategy. There are no free lunches. If everybody thought in the same way, there wouldn’t be a market.

      Comment by Gus Cosio | March 24, 2010 | Reply

  13. Hi Gus,
    PNB buyers thinned out today. Sellers piled up starting at P26 onwards. Heard also that there’s P50B bad debt still. Also election in May and rumors of military junta isn’t helping…
    Do we have to reassess our position on PNB?
    Thanks.

    Comment by Adrian | March 24, 2010 | Reply

    • Adrian,
      Something to keep in mind is this: you must understand what you are doing. If there is a 50 billion Bad debt that has not yet been provided for, PNB would have been padlocked by the BSP by now because that is more than 10% of its total assets and more than 3 times its net worth.
      What do you think?
      Then again, if you don’t like the stock, don’t even bother looking at it. Go only for stocks that you like.

      Comment by Gus Cosio | March 24, 2010 | Reply

      • Hi Gus. Been holding PNB since last year. I like the stock. You’re right on the thing with BSP. And I’m sure the price now has its sins of the past factored in already. Thank you again for your crucial insights! Your blog is my Homepage!

        Comment by Adrian | March 25, 2010

  14. Hi! sir gus I think Pnb is one the cheapest banking stock in the pse right now because of the merger with AlliedBank…Rumors that it will go up to 50/share after merger…..

    Comment by Aldrin | March 24, 2010 | Reply

    • Aldrin,
      I don’t rely on rumors. The 50 peso number arises because that is PNB’s book value after all the write offs already done.

      Comment by Gus Cosio | March 24, 2010 | Reply

  15. Hi Gus, I think there will be a market correction starting tomorrow because of Greece Debt and Portugal Downgrade..but im not fearful of any correction cause starting last february im buying good value stocks like MBT,PIP,SMPH,BDO,PNB and FGEN…..and im avoiding speculative stocks like mining stocks…

    Comment by mitch | March 24, 2010 | Reply

    • I think so too mitch.
      I don’t know how you feel but because I am presently under-invested, I think I will consider adding to my position in this downturn.

      Comment by Gus Cosio | March 24, 2010 | Reply

  16. Hi Gus, I am anticipating a correction too, particularly for PNB once it reaches P26. However, it is a time for me to add more. 🙂 Thank you for answering your readers’ queries and clarifying some issues (rumors). I am learning a lot from them.

    Comment by Dez | March 25, 2010 | Reply

  17. Hi Sir Gus,

    May I kindly ask your opinion on RLC, Is it still a good buy “on the Dips”? I have core RLC holdings under Php 9.00 but looking to add more if it’s still prudent. I am not looking for a quick buck in my investments(very Long term, Fundamentals Based approach). I am just hopefully preparing if RLC will push through with their REIT plans in the future. Another reason that I want to add more of RLC is that since 50% of my portfolio is already composed of 3 Power/Utility stocks (AP/EDC/FGEN- too much allocation on 1 sector),I want to diversify. I am still looking for other stocks for my core LONG TERM portfolio.

    Thank you very much Sir Gus!! For the record, I always anticipate your daily entries and comments in your blog even if it would keep me up at night(Belong to a different time zone)!

    More Power!!

    Comment by jay | March 25, 2010 | Reply

    • Hi Jay,
      Yes i think RLC is worth the buy on dips. You can slos start looking tino DMC which has utilities, power and even real estate and construction. Watch it on dips. If TEL trades at 2500 or lower, it will be a good buy.

      Comment by Gus Cosio | March 25, 2010 | Reply


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