Gus Cosio says so

Ideas on the Philippine Stock Market

Portugal? Que Paso?

8:30 am     Thursday  25 March  2010   Philippine Stock Exchange Index  3166.60 (+1.19%) pre-opening

Once again, we had a good market Wednesday in reaction to the triple digit rise in the DJIA of the previous night .  What drove up U.S. stocks Tuesday was the situation where many hedge funds were running short positions in the market.  Last Friday was triple witching hour in the U.S. when stock futures, options on stocks and options on futures expire.  Normally, this brings about a lot of volatility because investors either unwind or roll into the next contract period.  I think because volatility did not rise and whatever spikes were sold into by traders, hedge funds mangers realized that long only investors were very much willing to add more stocks to their positions.  I find that condition consistent with the liquidity situation in the U.S.  The sustained low interest rate environment encourages investors to put more money into any possible leveraged returns in stocks.

My theory is that the same liquidity situation is driving our market higher.  Oh yes, there will be threats from time to time.  The fear of election failure is one.  The sovereign credit anxiety in Europe is another.  Overnight, Portugal was downgraded a notch by Fitch with a statement that there could be further downgrades, and Greece is rekindling a scare again.     After the announcement, the DJIA dropped around 50 points and hovered at the level for the rest of the day.  In spite of the drop, banking shares were mostly up as further resolution measures to the bad housing loans are being taken by big banks such as BofA, CITI and JP Morgan.

Actually, things like Greece and Portugal will continue to haunt the markets.  That is why stock prices never go up in a straight line.  The question that is bothering people is whether the European dilemma will douse water into a newly fueled rally in local stocks.
My reactive answer is that it will, as it always does.  After all, the markets are global and money tries to find its best geographical use.  The jury who decides the verdict in these situations is usually the investing public.  They decide where they think their money can be safely tucked away.  That is the bottom line.

In the U.S., it looks like investors are happy staying at home although a lot of  interest is seen in Asian markets and resource based economies such as Australia and South Africa.  Domestically, I think some investors are still reeling from losses incurred during the 2008 meltdown in the developed markets.  This brings us to the real reason behind the buoyancy of the local market.  Investors are more comfortable keeping money close to home nowadays.  I think domestic liquidity will continue to be the driver and the beneficiaries will be the fundamentally sound stocks.

So, we could get buffeted around by what happens in China and Europe, but at the end of the day, it will still be the earnings growth of local stocks that will save the day for us stock market disciples.  New York and London had a mild sell off on account of Greece and Portugal, but I do not think that it will put a dent into the profitability of AP and AEV.  Neither do I think that it will reduce the prospects for DMC and MPI and certainly not TEL.  We may see some pull-back in JGS, RLC and URC, but I do not believe that the immediate and long-term future has changed for these stocks.  I think Ramon Ang will still tender for PCOR at 6.85.  The prospects for MBT, BPI, SECB and UBP have not changed.

Tell me then, what do you think smart money should be doing in a shake out such as Greece and Portugal?  Will that stop me from using my cell phone, taking out a housing loan or participating in the next elections?  Life will go on in the Philippines and so it will be with  Philippine stocks.

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March 25, 2010 - Posted by | Financial markets in Asia

22 Comments »

  1. Sir Gus, Selling my fph @52/sh today……buying firstgen…1 share of fph = 5 shares of fgen @ 10/share….Selling my SECB buying PNB…1secb = 2pnb shares

    Comment by frank | March 25, 2010 | Reply

    • That is a very smart move, Frank. You’re behaving like a seasoned Wall Street fund manager because that’s how they squeeze more out of their portfolios. Remember to keep score so you can evaluate yourself on the amount of money you make vs whatever losses.

      Comment by Gus Cosio | March 25, 2010 | Reply

  2. Sir Gus, I have just started investing in stocks recently and I just want to say that I’ve learned so much from you.Thank you so much. I would just like to ask if you think there is value in enrolling in the PSE Stock Specialist Course in Ateneo which is 4 months (3x a week) or to just take the technical ananlysis seminars offered by PSE and other entities. My objective is to be able to know more about the market and how to invest so I can make better decisions for my portfolio. Your opnion would be highly appreciated.

    Comment by regina | March 25, 2010 | Reply

    • Hi Regina,
      The PSE Stock specialist course is pretty good. I would choose the one conducted in the Ateneo. You can earn MBA credits if you pass the course. I do the section on derivatives.

      Comment by Gus Cosio | March 25, 2010 | Reply

  3. Hi sir gus, Good News to all…NIHAO min.resources acquired 30% equity interest in Oriental Vision Mining Phils and NIHAO will be having there first shipment of Nickel,Gold Ores to China and Other countries starting next month…NIHAO will be the next Biggest mining company by 2011….

    Comment by art | March 25, 2010 | Reply

    • Hi Art,
      I do not know much about NIHAO. If they have an operating mine, it will start to trade in the direction of commodity prices depending on what they produce – copper, nickel, gold, etc.

      Comment by Gus Cosio | March 25, 2010 | Reply

  4. Hi sir gus, We are not in a big correction just a little consolidation phase…..Im 100% BLUE CHIP STOCKS…..BLUE CHIPS OR NEVER!!!!!!! one of my banking stocks is already @ 26/share…THANKS!!!!

    Comment by mel | March 25, 2010 | Reply

    • You’re probably right, Mel. Just don’t forget, you have to be diligent in following your positions for changes in market conditions.

      Comment by Gus Cosio | March 25, 2010 | Reply

  5. i bought some positions in AP @ 12.25 and DMC 13.5 today… sometimes news like this (ie. credit downgrades) is what we need to enter additional positions in stock with strong fundamentals.. :).. placed order for MPI @ 3 but didnt go through.. perhaps tommorow..

    Comment by mike | March 25, 2010 | Reply

    • Mike,
      Long term fundamentals in the market have not changed. What underpins stocks today are low interest rates domestically and in countries that matter, such as the U.S. Corporate earnings are also looking better as the economy continues in a growth track. I was trying to buy the market today, but placed my orders a little below he market.

      Comment by Gus Cosio | March 25, 2010 | Reply

  6. Hello Sir Gus!

    Just dropping by to say Congratulations, you have a lot of fans now hehe

    Comment by wren | March 25, 2010 | Reply

  7. Hi! Sir Gus, Im planning to sell some of my Blue chips(20% gain in 2 months) and replace it with small cap (w/profit and dividend for the last 2 yrs)value stocks like…. Cebu holdings inc,Chemrez inc,Asian terminal inc.BDO leasing & Fin. corp and Splash corp….Sir gus is this a wise strategy? or I’ll wait for a correction to make a move…

    Comment by ray | March 25, 2010 | Reply

    • Ray,
      Cebu Holdings is cheap but it is a stock that very few peole follow. You will need a greater push on this stock for it to go. You’ll probably need the same thing for BDO leasing. Chemrez and Splash have a bit of a chance because they pay regular dividends.
      Try not to load up with iliquid stocks. You’ll do better with those that trade daily.

      Comment by Gus Cosio | March 30, 2010 | Reply

  8. Hi Sir Gus, can I get your insight about MWC? Based on my research, MWC is way undervalued. However, I think there is currently no interest in it. Any information you could share would be great. Thanks and more power.

    Comment by Tim | March 25, 2010 | Reply

    • Tim,
      MWC is a very good company. Yes, it is undervalued because it is a boring stock which will always make money. It will eventually move higher but at a slow pace. If you are convinced with MWC, set a target of, say, 15 and keep on buying when it gets there.

      Comment by Gus Cosio | March 30, 2010 | Reply

  9. Sir Gus, I think we will hit the 3200 psychological level next week cause of window dressing…

    Comment by kim | March 25, 2010 | Reply

    • Kim,
      when you trade because of window dressing alone, you risk being whipsawed. If the index exceeds 3200, the more important thing to determine is whether or not it is sustainable.

      Comment by Gus Cosio | March 28, 2010 | Reply

  10. Master Gus:
    Likewise, would like to congratulate you for your lot of fans. Moreover, aside from those participating, i think there are still 100x that are your silent fans! Like me, we are not aware or understand some of your terminology in stocks hence we cannot participate. If only we can use common language – huge participation will come.

    Comment by Roberth | March 25, 2010 | Reply

    • Roberth,
      You will realize that my language is as common as it gets. The more people read what I write, the more readily they will understand it. I cannot sacrifice my standard because I would like people’s standards to be raised. I expect readers here to be mature and diligent. They should do their own studying as well why getting ideas from this blog.

      Comment by Gus Cosio | March 28, 2010 | Reply

  11. Hi Sir Gus,

    Gud eve! Sorry, this will be long one.

    What do you think of Prime Media Holdings (PRIM)?

    From what i gathered, it seems that MVP is really now flexing its muscle to challenge ABS and GMA7 in the TV industry by pushing TV5 in the next 3 years. TV5 has TEL’s networks to support its rapid expansion. Obviously, ABC5 has a very real chance of succeeding with TEL on its back.

    On top of that, if we pay attention to the local entertainment scene, many TV personalities and artistas are now being pirated by ABC5 (i.e. Ruffa G., Maricel Soriano and even Ms. Careless Whisper almost jumping ship).

    That said, what are the chances of PRIM being use as a backdoor listing vehicle for ABC5? Last Oct 2009, PRIM soared on this speculation. Last time I checked Metro Pacific owns 82% of PRIM. And it would be very interesting what MVP would do with PRIM (listed dormant co.) in the next 3 years? Will he fold it into ABC5? Even its name has some meaning to it. I see smoke rising from the haystock here.

    Thanks and godspeed to you always!

    Here’s the article:

    Prime Media stock soars on MVP’s TV-5 deal

    By Doris Dumlao
    Philippine Daily Inquirer
    First Posted 23:45:00 10/23/2009

    Filed Under: Media

    THE SHARE price of Prime Media Holdings Inc. soared on news that the listed firm would be used by the group of Manuel V. Pangilinan as the backdoor listing vehicle for ABC Development Corp., the owner and operator of ABC Channel 5 (TV-5).

    Prime Media’s stock price increased by 123 percent in just two days, or since MediaQuest Holdings Inc., a subsidiary of the telecommunication giant’s retirement fund PLDT Beneficial Trust Fund, announced a deal to acquire a 75-percent stake in TV-5.

    On Friday, Prime Media closed at P1.76 per share, up by 49.15 percent from Thursday’s close.

    Prime Media has a market capitalization of about P456.35 million based on Friday’s closing.

    Dealers said Prime Media, which is 82-percent owned by the Pangilinan-led Metro Pacific group, rose on speculation that TV-5 would be folded into this dormant company.

    Prime Media was originally incorporated as Private Development Corp. of the Philippines. It became PDCP Development Bank Inc. when the Metro Pacific group had banking interests in the Philippines. Later, it was known as First e-Bank Corp., which was sold to tycoon Henry Sy’s Banco de Oro Unibank in 2002.

    The company acquired its current name in 2003, which it was turned into a holding company for media investments after the banking business was sold to Banco de Oro.

    The group has been cleaning up Prime Media’s balance sheet over the last few years “to pave the way for the entry of a new investor who will be willing to inject its business or assets into the company.”

    When the Philippine Long Distance Telephone Co. group announced that it would break into the television broadcasting business, dealers expected Metro Pacific to sell the shell company to the PLDT group.

    Pangilinan’s group agreed to buy ABC-5 from a consortium led by Antonio Cojuangco and holding company DM Archers, which bought controlling stake in the company in 2003.

    Television content is said to be the last missing piece in the “convergence” strategy of the PLDT group. MediaQuest is also the major media and content partner for PLDT and its flagship wireless phone provider Smart Communications.

    Comment by James T. | March 25, 2010 | Reply

    • James,
      I think Prime media is a long shot even with the golden touch of MVP. ABS aand GMA are miles ahead in the game. This country is too small for 3 large networks. ABC5 will be a niche player for years to come. Maybe then, it will be worth a look.

      Comment by Gus Cosio | March 28, 2010 | Reply

      • Ok. Thanks for giving me your views on PRIM. Nevertheless, I’m keeping tab on this potential growth stock. We never know we might get lucky one day. As usual, your views are highly appreciated. Have a blessed holy week.

        Comment by James T. | March 29, 2010


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