Gus Cosio says so

Ideas on the Philippine Stock Market

Investing? Why not bullish?

9:00 am   Tuesday   6 April 2010   Philippine Stock Exchange Index   3186.77   (+0.79%)

Monday was a good way to start the month.  It was as refreshing as Easter itself.  I know for a fact that the research note by Credit Suisse about the MSCI Philippine Index being undervalued dated 31 March 2010 had already started circulating.  I wonder how much of Monday’s enthusiasm was as a result of people reading the research note.  Another bullish factor was from another foreign broker who released a rather bullish recommendation on Semirrara (SCC).  The buy recommendation was positive for both SCC and DMC.  Personally, I like DMC even without SCC because of the strength of its construction and housing business, but undoubtedly SCC which acquired the Calaca power plant, DMC should merit a home run on the stock over the next few weeks.

Just to show how positive investor sentiment is, people jacked up the already expensive BDO because of news that it was looking into buying Asia Trust Bank (ASIA).  Asia itself shot up by 34% on the scuttlebutt, in spite of the fact that valuation wise ASIA is practically worthless except for its banking franchise.  These are signs that investors are confident that the market will pay a return in the short run.  Of course, I agree with what the market is saying although my choice of stocks may just be different.  For instance, I think buying PNB would be a better bet than buying ASIA because on a valuation basis, PNB is miles and miles ahead.  I would rate the comparative risk of owning PNB compared to ASIA is 10 to 1, i.e. it is 10 times riskier to hold ASIA than to hold PNB.  The pay-off is probably the same, at least a 50% return.  Looking at it that way, I see no reason to risk my hard-earned bucks for such a pay-off.  Having said that, I think BPI and MBT might even have a better pay-off also.  I just want to put the risk-reward picture in perspective.

TEL had rebounded quite well because it was ridiculously cheap at 2420.  I mentioned to a reader that if TEL went down below 2400, I would be a buyer as it would be a good average down exercise on my position at 2475.  Buying TEL at 2460 is owning a stock at 11.8X PE (trailing) and will yield an 8.86% dividend yield on the country’s most important company.  For me, it is worth the risk which I rate to be very low.

MEG also took a beating today for no apparent reason.  I checked around if there had been any fundamental changes in the company and have not heard anything yet.  MEG is another trading buy, and it is something that you can hold for a 30% to 40% return target over the next 3 months.

The rest of asia was strong today.  Jakarta was up the most among our neighbors and Shanghai and Korea were the ones least up.  The reason I mention this is because the research note that mentioned the Philippines as being undervalued also noted that Korea, China and Thailand was also undervalued and that Jakarta was removed from the undervalued list already.  Of course, fund managers and traders do not act on the broad markets so swiftly, but I am sure they are evaluating each and every stock in their portfolio.  For those that Bought JGS with the view that Cebu Pacific was going to be listed should not be discouraged.  i think that it eventually will be but at more reasonable pricing.  JGS remains to be a fundamentally good stock although many might still view it as a slow-moving laggard.  For that reason, I think if you wanted to get involved in that stock, you should have the patience to wait.  I would probably wait for it to drop below 9.00 before taking another look.

Overnight in Eyrope and in Wall Street, markets started revving up again.  Analysts who had been recommending mid-cap U.S. stocks are now suggesting that investors rotate to blue chips.  There are also a good number of skeptics who are recommending shorts on the index futures which is a sign that the major markets are not yet approaching frenzy.  Over-all, given the renewed constructiveness among blue chips in Wall Street, I would be bullish Philippines as well.

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April 6, 2010 - Posted by | Financial markets in Asia

11 Comments »

  1. Sir Gus,

    I would like to share this Forbes article

    http://www.forbes.com/2010/04/01/china-india-brazil-emerging-markets-lenzner.html

    Comment by Dez | April 6, 2010 | Reply

    • Thanks for the link Dez. Great article.

      Comment by richard | April 6, 2010 | Reply

    • Thanks. Actually, Goldman Sachs sees the Philippines as one of the best performing economies in a list called the next 11 after BRIC. Thailand is visibly absent from the list. So is singapore.

      Comment by Gus Cosio | April 6, 2010 | Reply

  2. Nice performance on our market today.

    Comment by jm | April 6, 2010 | Reply

    • JM, indeed my thoughts. Why not bullish?

      Comment by Gus Cosio | April 6, 2010 | Reply

  3. Hi Gus,

    Clear breakout above 3,200 resistance on huge volume. Today was a great day particularly for DMC which should have been up by 8.20% by the close had Deutsche not interfered. Do you think there is still more upside potential for this?

    Thanks.

    Comment by richard | April 6, 2010 | Reply

    • Richard,
      There are very few sellers of DMC at these levels. I would be a buyer of DMC on dips rather than sell today.

      Comment by Gus Cosio | April 6, 2010 | Reply

  4. hello Sir Gus! another enjoyable post!!

    curious to know what your take is on SECB vs. say, PNB? thanks! 🙂

    Comment by Jack B. Nimble | April 6, 2010 | Reply

    • Jack,
      I like SECB but percentage wise, I am keeping my money on PNB.

      Comment by Gus Cosio | April 6, 2010 | Reply

  5. Hello sir Gus,been reading your post quite sometime,lucky enough was able to buy some PNB at its low and still holding.I noticed SMPH was a laggard,is it a good buy at these level or wait for further dips.Thanks for your daily analysis and more power.

    Comment by Kelly | April 6, 2010 | Reply

    • Hi Kelly,
      If the market dips on wednesday, go ahead and buy it. Alternatively, I would suggest that you look at SMDC also.

      Comment by Gus Cosio | April 6, 2010 | Reply


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