Gus Cosio says so

Ideas on the Philippine Stock Market

Easter time is the time for eggs…

10:00pm  Sunday   27 March 2010

This being Easter Week, I am convinced that markets worldwide will start to thin out.  That’s because many fund managers both here and abroad will be taking most of the week off.  In spite of the fact that it is quarter-end, which normally attracts some window dressing, I think that it would be wise to sit back and do a bit more reading as to where this market is headed.  Again, I do not believe that the market will run away from us.  If it moves up on account of window dressing, it will not be sustainable.  People should actually sell into any window dressing precisely because it serves only to deceive investors for the benefit of some fund managers.  You will realize that real values always emerge after any window dressing.

If this market declines because of lack of volume, I think that would be good.  While I believe in the underlying strength of the market, I also believe that investors who are very concerned with their own cash management will want to generate cash from whatever profits there are already in their portfolios.

Anyway, I will probably be updating my market views sparingly until after Easter Sunday.  I have always been a proponent of prudent investments or trading strategy and how can one really maneuver in a three-day trading week.  By Wednesday, half of the market will be more interested in getting out of the office than minding their stocks.

There had been questions about a few stocks such as DMC, FGEN, EDC, GMAP/GMA&, SECB, PNB and the like.  I think all the trends that we’ve seen on these stocks have remained the same.  There have also been questions on illiquid stocks like RFM.  My rule of thumb in stocks like these is until the value turnover starts to hit Php 1 million from time to time, it will be better to keep out. You wouldn’t want to be the hero in these kinds of stocks because there is nothing in it for you.  Remember that in the stock market, you are either looking to make money in the momentum of a stock-price movement or from the merging value of a stock in the measurable future.  Time and volume has to be considered because if you ignore these factors, you will never make money.

I’ll be standing by to respond to comments, but I will probably lie low until the market warms up again on Easter Monday.

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March 28, 2010 - Posted by | Financial markets in Asia

33 Comments »

  1. Hi Sir Gus,

    Thank you so much for sharing and keeping us inspired on stock investing. I wished I’ve known about your blog early so I could have avoided costly newbie mistakes in the market. I am learning to be prudent and would appreciate your comments on these items. I’m getting input from stock gurus so I could incorporate it with my research and then make a decision. Thanks!

    Assumption: other personal finance areas are well covered (eg 6 months living expenses, insurance)

    1. What is the optimal # of philippine stocks to hold?

    2. For a dividend retail investor with 20K monthly infusion, what stocks do you suggest?

    3. For cost averaging, do you suggest an investment in all the stocks in your portfolio (as if kasya 20K per month ko, TEL na lang kulang na, hehhe)? Or invest on 1 stock per quarter.

    Thanks po ng marami, Sir Gus! =)

    Comment by Denise | March 29, 2010 | Reply

    • Denise,
      1. For effective portfolio management: 5 to 7 stocks.
      2. For dividend: PIP, GMAP or GMA7, AEV, AP, BPI, SPH
      3.For cost averaging, it really depends on how you allocate your cash. Dollar cost averaging works best if you invest in an equity mutual fund. Go to the links on this page and clikc on Mutual Funds in the Philippines.

      Comment by Gus Cosio | March 30, 2010 | Reply

  2. Dear Mr.Cosio,

    Ifound your blog site through a friend and it is very helpful. I have a double- edged disadvantage in trading this stuff. firstly, I am not a computer savvy. secondly, i am a retiree at 62. the second might not be as bad as the first.
    my portfolio is doing okey so far, but listening to the chartist talking makes me crawl the wall and pull my hair to get myself attuned to them. i trade basis fundamentals and very, very limited on technicals. reading your blog gives me more conviction on moving on. thanks for your unselfish thoughts.
    my portfolio is 80% blue chips and second liner. 20% third liners and speculative. I am holding ac, bpi, mbt, pnb, px, edc, fph, scc, pse. the speculative ones are acr, ani and tuna. for dividends I took some acpr.
    I am happy on how the trading went so far, but i know it is far from what is “desirable”. Indeed, trading commodities is far different from trading the stocks. In the commodities, I could have done arbitrage and spreads in lots of grains and oils. In stock it just didnt work when I tried. with BPI at a discount to MBT, one could have sold MBT and long BPI. it didnt work.

    Comment by benjamin uy | March 29, 2010 | Reply

    • Benjamin,
      Commodities change prices much more quickly than stocks and stocks are not as homogeneous as commodities. Switching between stocks may work but at longer intervals. actually, if 4 months ago you sold BPI at 45 and bought MBT at 40, that trade would be reversible today because today you can sell MBT at 50 and buy BPI at 46. That would have been a reversal profit of 9 pesos per share.
      You seem to be doing alright.

      Comment by Gus Cosio | March 30, 2010 | Reply

      • dear mr. cosio,

        thanks for the thoughts and hope i can one day meet you.

        happy easter and with my best regards,

        benjamin uy

        Comment by benjamin uy | April 1, 2010

      • Benjamin,
        Call me Gus. sometime near the end of april, I will be speaking in an investment forum. I’ll send you an invitation.

        Comment by Gus Cosio | April 4, 2010

  3. Nice buying opportunity for TEL today Gus, what do u think of Tel @ 2475? happy easter!

    Comment by mike | March 29, 2010 | Reply

    • Ey mike, Just wanted to share my opinion. I think TEL is a really good buy at 2475. TEL is very good fundamentally and it yields an 8% dividend, way better than banks. So if your looking for a long term hold, TEL is a good bet and its cheap now. I’m sure come next month its gona be around the 2550 – 2580 range. If i had extra cash i’d get tel most of the other blue chips are pretty high now anyways.

      Comment by Raymund | March 29, 2010 | Reply

      • Thanks! for your insights Ray… just added more positions in TEL today…

        Comment by mike | March 29, 2010

      • Hi Raymund,
        I think TEL is cheap at 2475. I just bought some.

        Comment by Gus Cosio | March 30, 2010

  4. HI MR.GUS ,Im Mr. ronaldo avid follower ng site mo. now lang ako nag post ng comment.Thanks for your tips and advice. You know because of your advice and tips i earned money here in stocks Market.. Iam a newbie here almost a yr palang me involved sa market. Anyway what do you think will happen to MPI FGEN EDC FPH and MER tom. tuesday because of call option that is going to happen? Thank you and more power..

    Comment by ronaldo | March 29, 2010 | Reply

    • Ronaldo,
      The exercise of the option has long been discounted. I believe the stocks you mentioned are responding to the improved fundamentals arising from lower debt arising from the Lopez sale of Meralco.
      You can follow these stocks on their own merit.

      Comment by Gus Cosio | March 30, 2010 | Reply

  5. Hey Gus,
    You’re probably on your way to Boracay by the time you read this hehe Just a quick inquiry, I like to ask your wisdom on the IPO on Cebu Pacific. I’m planning to subscribe to 1000 shares @ 95 (IPO) and the usual trend would be the price getting ceiling for 2 – 3 days. I then plan to sell it. Whats your take on this? Thanks so much Gus! and Have a great Holy Week!

    Comment by Raymund | March 29, 2010 | Reply

    • Raymund,
      Unfortunately, I am not in Boracay. I’m sitting it out in Metro Manila and will just tty to catch some golf. I have to read more on Cebu Pacific to get a take on it. My thinking is that the issue has already been hyped so there should be some interest. The sustainability of demand really depends on how cheap or expensive it is at IPO.

      Comment by Gus Cosio | March 30, 2010 | Reply

      • Hi Ray and Gus,

        Yesterday I had a convo with a former professor of mine who now works with ICCP. One of the things we discussed is the CEB IPO. He mentioned that there were very few institutional investors willing to buy CEB shares. Assuming that the offer price will be P95, the PE ratio will stand at 17x earnings multiple. Quite high for an IPO. He also mentioned that JGS does not pay that much dividends. Although value appreciation can compensate for it, it might take a long time in the case of CEB but I will get into that later.

        In the stock trading forum that I follow, the traders, investors and brokers there are also not subscribing to this. Their primary concern is the offer amount which is estimated to be worth P6B based on a 95/share. This they believe will saturate the market with too many float shares that come listing date, sellers might overwhelm buyers causing the price to drop. The dividends issue was also raised here. I mentioned that value appreciation might take a while since one of the brokers said book value currently stands at P10 per share, making the offer price 9.5x BV. Though CEB is in a strong position in domestic and regional air travel, it might take a couple of years before we see better valuations. Another concern they have is the history of Gokongwei IPOs, this one i’m not too familiar with.

        Disclaimer: All these things I mentioned are second hand information. I am yet to see the prospectus and conduct my own research regarding the matter. But, with regards to these matters, I believe that where there’s smoke, there is fire. The sources of such information are in a much better position than me given that they have been in the market for over a decade while I started trading only in 2004.

        I hope Gus that you can discuss more on the IPO when the prospectus is released.

        Thank you.

        Comment by richard | March 31, 2010

  6. Hi Gus,

    ETF’s are very popular nowadays, I wonder what would be the impact to Phisix since companies like iSHARES are planning to rollout country specific EFT’s including the Philippines (http://etf.com/category/country/philippines/)… Anticipating this (if it pushes through though..), would slow accumulation of “choice Phil. Index stocks” a way to go?? Would our foreign ownership limits deter the impact to liquidity of this planned ETF for the Phisix???

    Thanks Gus!! More Power!!

    Comment by jay | March 29, 2010 | Reply

    • Jay,
      Personally, I hope someone sets up an ETF of Philippine stocks in exchanges where ETFs are easy to list. It will help our market gain deeper breadth.

      Comment by Gus Cosio | March 30, 2010 | Reply

  7. Hi sir Gus, Ipo’s and sro’s are coming out of woods and i beleive many more will be out this year…Will this be good to ordinary or small investor? I just sold everything today coz of the coming cebu pac ipo and the coming SCC sro next month. i think the market will be diluted by this ipo and sro listing and i think correction is coming.

    Comment by froy | March 30, 2010 | Reply

  8. Hi! Tito Gus, I think the Market is peaking right now because everybody are bullish and everyone is hyping their stock from PSE tips, Traders pizza & market mirror….Plan to sell 50% of my porfolio tomorrow just in case a correction happens next week… Godbless you..

    Comment by jamie | March 30, 2010 | Reply

    • Jamie,
      Your cash and position management is something you must develop on your own. If this is what makes you comfortable, do it.

      Comment by Gus Cosio | April 4, 2010 | Reply

  9. Hi sir Gus, What usually happen po after Window dressing or next week? My firend tells me market start to slowdown or correct after quarterly window dressing.

    Comment by Rene | March 30, 2010 | Reply

    • Rene,
      These things should not bother you because they are very short term movements. It is the main movement that should pre occupy you.

      Comment by Gus Cosio | April 4, 2010 | Reply

  10. Hi sir Gus, I would like to tell all newbies in the stock market to be wise in buying stocks because we are now in a overbought level and any bad news will create a Panic Selling and many newbies will lost money instead of gaining a profit in the market there are future winners and future losers and only 25% are winners the rest are losers….

    Comment by jay | March 31, 2010 | Reply

    • Jay,
      I do not think that the market is overbought although one always have to be careful. You should also keep in mind your time frame. If you are looking for a short term trade, then it is going to be tough to find a right entry point. But if would like to participate in a stock reaching its fair value, then enter when you are comfortable and be patient thereafter.

      Comment by Gus Cosio | April 4, 2010 | Reply

  11. Sir Gus,

    MPI and Tel seems are getting active in TV broadcast.This will have negative effect on ABS in a few years? And FPH had just sold majority of its shares in MER to MPI?

    Thanks

    Comment by alexis | March 31, 2010 | Reply

    • Alexis,
      i think it is too soon to tell. For me, the broadcast stock to watch is GMA7 or GMAP, not ABS. although ABS will continue to make money.

      Comment by Gus Cosio | April 4, 2010 | Reply

  12. Hi sir Gus,

    Good Day and Happy easter! Sir I’m wondering why Tel went down this morning as low as 2420. Is this still part of the correction of the stock? I really thought that 2475 is already low. I’m planning to buy if this is just a correction.
    By the way sir one of my friends told me that MPI has to pay interest 300M for their debts? I don’t know if he is joking and he advice me not to buy but i already bought it yesterday at 3.00. Now the closing price today is 3.10 and the volume is 21M. I want to hear your opinion on this matter. Thank you sir and mabuhay ka.

    Comment by ella | March 31, 2010 | Reply

    • Hi Ella,
      I think it is just rebalancing. I am a buyer of TEL because at 2475, I thought it was cheap. Now that it is 2420, I think it is even cheaper although I will wait if it will fall below 2400 before I average down.

      Comment by Gus Cosio | April 4, 2010 | Reply

    • ella,
      yes, MPI has to pay interest, but that’s all calculated already in the forecasts. It is nothing to worry about.

      Comment by Gus Cosio | April 4, 2010 | Reply

  13. Hi Gus,

    I will be in the country next week for a month-long holiday.. would be glad to attend the investment forum as well given the opportunity…happy easter

    Comment by mike | April 5, 2010 | Reply

    • Hey Mike,
      I may be speaking in an investment forum jointly sponsored by First Metro Asset Management and First Metro Securities Brokers. It is tentatively for May 6 which is a Thursday. It will be somewhere in Makati. Let meknow where I can reach you. I’ll send you an invitation.

      Comment by Gus Cosio | April 5, 2010 | Reply

      • Thanks Gus!, will let u know my mobile number as soon as im back in manila… sounds really great since i am a First Metro client too…

        regards

        Comment by mike nacua | April 5, 2010

  14. Hi Sir Gus,

    Thanks sir, i would like to know if small time investor like me can attend an investment forum you’ve been mentioning on one of your blogs? And if i could how much is the fee if you don’t mind sir. If i can afford sir i am interested to attend. Thanks and more power.

    Comment by ella | April 5, 2010 | Reply


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