Gus Cosio says so

Ideas on the Philippine Stock Market

The business of investing

10:45 pm    Sunday    4 April 2010    Philippine Stock Exchange Index   3161.80  –   31 March 2010 close

The Easter Holidays should have given us time to reflect on our own lives.  The Easter message is one of hope, hope that our lives are not temporal but eternal.  It is a message of looking beyond today and of having an eternal perspective which means looking well into the future and our eternal lives.

There is a lot of wisdom in having a long-term view.  For the same reason, our approach to our own stock market while not ignoring the day-to-day movements, we should be more concerned about the longer view.  I believe in watching indicators that point to the sustainability of trends.  I also believe that the less we are concerned about losing money in the short run, the more chances we will have of making it in the long run.

Entrepreneurs are often taking huge risks by putting out capital to major endeavors with a view that over time the capital will be paid back.  Even a franchisee that starts off a Jollibee or Chow King franchise has to put out around Php 10 million before the first sale ever comes into the till, more the net profits.  I think investors who play the stock market should at least have that kind of attitude.  Investing in the stock market is an enterprise of its own.  Any business that you pursue for a quick buck is not a sustaining business; it is merely a passing opportunity.

Similarly, the investment business is a process in itself.  To be in this business, you must also lay out the resources which you have to work with – in your case the capital you would put at risk, the broker who you would choose to work with and the information sources that you would be depending on.  The large investment firms pour a lot of resources into their investment operations in order to be profitable.  This means putting a lot of money, time and effort into gathering the right information.  They institutionalize their investment decision process and keep the discipline needed in order to make the process work.

Thinking that you can make money in the investment game on a sustained basis without putting in the resources of time and effort and the diligence and expense that goes with it is wishful thinking at best.  If you think that investing in stocks is just a betting game, you may as well go to the blackjack tables.   Tomorrow, I will give you an article that represents my view of the economic backdrop which underlies our market.

One of our readers sent me a research note from one of the top global investment firms.  The note points out that the four undervalued markets in this region are Thailand, Korea, China and the Philippines.  It also points out that overweighting in what their model point out as undervalued results to out-performance of their portfolio more than 90% of the time measuring from quarter to quarter.  What I find interesting in this research note is that they point to the Philippine stock market as undervalued.  In general, they see the telecom and financial sectors as the ones contributing to the undervaluation.  The two stocks that they have highlighted are PLDT for telecoms and Metrobank for financials.

I find this study which is dated 31 March 2010 quite ominous because I had thought that TEL had gone way too low already closing at 2420 last Wednesday.  I had also made mention of Metrobank a couple of weeks back as a stock that had a lot of potential.  Anyway, the general idea that our market could continue to move forward in the second quarter – in spite of the elections – is a reasonable risk to take because if objective investment measures see our market as undervalued, then the risk reward pay-off should be high.  This means stocks with strong stories such as DMC, FGEN, EDC, MPI, PNB AP, AEV and a few property stocks are worth accumulating.  While it may be too early to tell whether downward volatility  could develop wildly in the next two weeks, if our perspective takes us farther out into the end of the second quarter and even to year-end, certainly an enterprising investor should be putting more resources to work in the next few days.

A Happy Easter to everyone!

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April 4, 2010 - Posted by | Financial markets in Asia

11 Comments »

  1. What happen to MEG today? Is there any bad rumor on this stocks. Thank you and more power.

    Comment by jm | April 5, 2010 | Reply

    • None that I know of JM. I think it is cheap. Personally, if you really like the stock, it could be a trading buy tomorrow.

      Comment by Gus Cosio | April 5, 2010 | Reply

      • heard they overbid on the Jusmag property,, its why it was rated as sell by the fundies…

        Comment by mike nacua | April 5, 2010

      • Could be. But that is not going to drag earnings down in the short term. They needed a higher end land bank.

        Comment by Gus Cosio | April 6, 2010

  2. Master Gus Can you please comment on the upward movement of AC? will still go higher? roberth

    Comment by roberth | April 5, 2010 | Reply

    • I must admit, Roberth, I got left behind by the AC move. My take is that people dumped their TEL to buy AC as a proxy for the whole market. Foreign funds do this quite often. Having seen TEL plunge and AC skyrocket, it may be time to reverse the trade, i.e. sell AC and buy TEL.

      Comment by Gus Cosio | April 5, 2010 | Reply

  3. hir sir! given the postponement of Cebu Pacific’s IPO, is JGS still a buy/hold? also, do you know when JGS will be reporing its 09 full yr earnings? is there a website on listed companies’ quarterly and annual earnings report date? i’ve noticed that in the US, earnings reporting are scheduled weeks prior thus investors are aware of possible significant price movements. thanks sir and more power!

    Comment by marlon | April 5, 2010 | Reply

  4. To answer your question, Marlon,
    JGS should have their full year earnings out already. You can look at the PSE website. Also, if you follow JGS, you should follow RLC, URC and DGTL as well because these are related securities.

    Comment by Gus Cosio | April 5, 2010 | Reply

  5. What up with BDO and Asia trustbank? Big Rally Today because of the rumors…Selling my Bdo tomorrow i’ll buy Bpi…

    Comment by Cindy | April 5, 2010 | Reply

    • Good idea, Cindy.

      Comment by Gus Cosio | April 6, 2010 | Reply

      • I would agree with you on this Cindy (selling BDO). Though, I like MBT better than BPI. I have MBT as part of my core holdings. If my hunches are correct, MBT may very well close the income gap with BPI in terms of profit this year when they decide to lift that provision on their Lehman exposure. MBT is also only P11B away from BDO in terms of consolidated assets. MBT has also the highest capital among the Big 3. I think BDO is desperately trying to pad that assets lead by buying more banks (ECB and now ASIA) just to maintain that lead. That may very well impact ROE in the near term.

        Comment by James T. | April 6, 2010


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