Gus Cosio says so

Ideas on the Philippine Stock Market

Ben, Claude and Bill

8:10 Friday  26 March 2010  Philippine Stock Exchange Index  3171.14  (+0.14%)

The other markets around Asia reacted to the European situation with much more pessimism than Philippine stocks.  As a reaction to the decline in Wall Street overnight, local stocks were bid down at the open, but there was no selling.  There was a lot of pent up demand reflected in the market today.  A lot of investors were waiting in the wings to buy at pull-backs, and today was a good opportunity to do that.

Personally, I thought that TEL was a good buy at 2515 so I posted, but I think I posted a few minutes too late.  TEL traded briefly to a low of 2515, but very little traded at the price. TEL closed at 2520, down from yesterday.  I think TEL is cheap at these levels.

The stock that brought the index into positive territory was AC as people reacted to the company’s share buy back program.  Its sister stock, ALI moved the other direction but not enough to pull down the index.  I would not be deceiving myself if I though that the market is in very good shape.  It is probably poised to move even higher.

The stocks that dipped along with TEL and ALI were AEV, AP, MPI, RLC and DMC.  These were the strongest stock of the past few weeks so it is no surprise that they are having a respite.  Profit taking on these stockss will only make their support stronger.

The U.S. and European market recovered whatever they lost on Wednesday.  In fact the U.S. had moved way past those levels as FED Chairman Bernanke affirmed the low interest rate policy to persist for a few more months.  Unfortunately, IMF’s Trichet came out in an interview that the EU was not doing enough to address the present Greek problem.  This invited profit taking in U.S. stocks although the DJIA managed to hold its gains as investors continue to buy large banking shares.

Bill Gross of PIMCO said  that there is no more performance to be expected in the government bond market.   He thinks, however,that there is a lot of value to be derived from equities.

It is probably time to trade again even if the local stock prices dips some more.  Yesterday’s move is definitely pushing the above 3200. It would be a pity if you were not there for the ride.  I would not chase AC at these levels, but there are a lot of shares that can still be bought.  I would be looking at DMC, AP, AEV, MBT, SMDC and the undervalued PNB.  I think BPC will also do well, and perhaps GMA7/GMAP may be deserving a second look.  I would keep away from mining shares for the time being as commodity prices are softening.

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March 26, 2010 - Posted by | Financial markets in Asia

28 Comments »

  1. Hi Gus,
    What do you think of RFM? Hovering around 60 cents. P/E is quite low. Company is doing fine, specially with its flour operations.

    Comment by Adrian | March 26, 2010 | Reply

    • Adrian,
      If you were going to trade, RFM is a 100 to 1 long shot. You can be lucky and bet on it, but I would try my luck on something that has better odds.

      Comment by Gus Cosio | March 26, 2010 | Reply

      • Sir Gus, Adrian,

        If I may, another to view it is the prospect for RFM and the Phil food and beverage industry as a whole in general. While it maybe doing good at the moment, competition is very intense and there maybe a limit to what the Philippine market can do.SMC, the biggest diversified to other industries although of course its PE is around 20. It would be better if one have a balance of revenues from Phil and abroad. One that fits nicely there is URC, for atleast the past 3 years its revenue abroad climbs vis a vis its Phil operations.

        Thanks

        Comment by alexis | March 26, 2010

      • The problem with RFM is it just did not perform on its promises when it went public. If you look at the companies it had in its portfolios – Swift Foods Inc. (SFI), Cosmos Bottling (CBC) and Selecta (SEL) – they added nothing to its value when they went public. Eventually, RFM sold CBC to SMC which eventually killed the company. I don’t even know if selecta and swift are still listed. You see, if a company does not give anything back to investors, why should people invest in it. Companies give back to investors in the form of dividends – cash and stock – and share buy back if the price falls too low. RFM did nothing of this sort.

        Comment by Gus Cosio | March 27, 2010

      • Thank you for this insight Sir. I was quite not active on the capital markets yet when RFM did the IPO. This provides better background re RFM.

        Comment by alexis | March 27, 2010

  2. Good morning Sir Gus. The stocks that you have been mentioning in your articles for the past few days and weeks were all up BIG time. Congratulations!

    Indeed our PSE is challenging the 3200 level and perhaps even higher. I agree with your pick on GMA7. After declaring a cash dividend of P0.45/share, I hope this stock will reach 9 before the ex-date.

    Also, would like to know your thoughts on the cement industries like Holcim, RCM and CMT.

    Thanks!

    Comment by Marcus | March 26, 2010 | Reply

    • Marcus,
      all these 3 are illiquid but the one that has the best chance to kick up is CMT. Fundamentals are good, it just has a very limited following.

      Comment by Gus Cosio | March 26, 2010 | Reply

  3. Hi Sir Gus,

    I’m a bit confused about GMA7’s dividends… will this also entitle GMAP holders? If not, what is the attraction of GMAP over GMA7 if shareholders of former are wont of dividends? I read that GMAP allows foreign participation, is that the only attraction? Would appreciate some clarifications on this. Will also try to call the Investors’ Relations Office later to get their take on the matter.

    Thanks, sir!

    Jet

    Comment by Jet | March 26, 2010 | Reply

    • Jet,
      From what I understand, GMAP are entitled to all that GMA& is entitled except voting rights.

      Comment by Gus Cosio | March 28, 2010 | Reply

      • If I understand correctly, GMAP itself, not the stockholders of GMAP, will be entitled to receive dividends from GMA7. So maybe once it actually receives the dividends from GMA7, then MAYBE it will remit to its own stockholders (if those are the terms of the ADR/PDR), but there would be, in effect, a delay, at the very least compared to the stockholders of GMA7.

        IF GMAP is not a typical ADR/PBR but more of a holding company (as the name seems to suggest), then it might not even be required to remit the dividends to its stockholders.

        Just sharing my thoughts, I am NOT sure.

        Regards,

        Warren

        Comment by Warren | March 28, 2010

  4. PNB is looking strong.

    Comment by Finch | March 26, 2010 | Reply

    • Finch,
      this stock has a long way to go.

      Comment by Gus Cosio | March 30, 2010 | Reply

  5. Sir Gus,

    Thank you for your favorable advices regarding PNB. As a result, I was able to accumulate PNB up to 25% of my investment fund. Hope this will reach the estimated value of around P50. Do you think this is possible?

    Comment by Nel | March 26, 2010 | Reply

    • Nel,
      It is possible, but if it goes to 35 or 40, I’ll be happy.

      Comment by Gus Cosio | March 26, 2010 | Reply

  6. Hi Gus,

    how ur doing great!. Do you think PNB will be back to its 21-22 as lowest or this trend will continue to go up? like before and after our election.

    Thanks!

    Comment by kier | March 26, 2010 | Reply

    • PLDT is going down wonder why?

      Comment by kier | March 26, 2010 | Reply

      • I think PLDT is down because people would rather buy something else. i am happy, though because I am a buyer of TEL.

        Comment by Gus Cosio | March 26, 2010

      • im happy too that TEL went down to 2505.. was able to enter substantial positions today.. 🙂

        today it was the banking stock that sizzled… is SECB still a good buy @ 52.5 Gus?,

        regards

        Comment by mike | March 26, 2010

      • Hey mike,
        I’m happy for you on TEL. on SECB, I think it’s worth a punt.

        Comment by Gus Cosio | March 27, 2010

    • Kier,
      I really don’t know if it will go down to 22. I just have confident that the upside is a strong possibility because even at 26 it is cheap.

      Comment by Gus Cosio | March 26, 2010 | Reply

    • Kier,
      I would not like to put the market in a box. While I think that it could go up after elections, it could also go up before elections and go down after elections. The real crux of viewing the market and individual stock is that there is value for the investor. Value is seen when stocks have very good stable earnings or strong earnings growth that are under-priced or mispriced by the market. That is why analysts look at Earnings per share, price to book, etc.

      Comment by Gus Cosio | March 27, 2010 | Reply

  7. Sir gus, i am now officially going to invest in the Philippine Stock Market and my Trading account has been activated today, with an initial investment of P20k, im going to divide them with three stocks, namely: PNB, MEG and MPI.. i would like to hear your feedback on this combo, or suggesting a better a combination would be very much appreciated 🙂 More Power IDOL!

    Comment by JimBoy | March 26, 2010 | Reply

    • Jim,
      I think that your selection is alright. It is diversified into sectors and all three stocks have a good following.

      Comment by Gus Cosio | March 27, 2010 | Reply

  8. Hi! sir gus, Good news to everybody NIHAO will have its first shipment of nickel and gold this april..and its share price will spike above 5/sh…

    Comment by sarah | March 27, 2010 | Reply

    • Hi sarah,
      You apparently like NIHAO a lot. If you could send me more information, I’d be happy to follow the stock. It is just that mining stocks follow hard commodity trends most of the time.

      Comment by Gus Cosio | March 30, 2010 | Reply

  9. Sir gus, i’ve noticed that FGEN is more of moving sidewards from march last year up to the present, while EDC has moved upwards, i think buying FGEN right now is a cheaper way of owning EDC. Would love to hear your view regarding this matter.

    Comment by Kenny | March 27, 2010 | Reply

    • Kenny,
      I think FGEN is cheap whether or not EDC is expensive – which it is not. I would be a long term buyer of FGEN.

      Comment by Gus Cosio | March 28, 2010 | Reply

      • tnx sir gus, i have to re load my account to buy more shares..tnx for inspiring me to invest in the stock market, i only have two stocks in my portfolio now, PNB at 27, and MEG at 1.28.. hehe hopefully this stocks perform well in the future.. im holding them for a long time, specially PNB 🙂 godbless you 😀

        Comment by Kenny | March 29, 2010


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