Gus Cosio says so

Ideas on the Philippine Stock Market

Don’t throw mud at my parade!

7:10pm  Tuesday  April 27, 2010    Philippine Stock Exchange Index   3307.71  (+0.459%)

We have had two days of strong performance of stocks in the Philippines with most of the sentiment being influenced by the surge in neighboring stock markets as well as the U.S.  Analysts in the U.S. are saying that stocks are in their cheapest levels since 1900.  First quarter results are beating analyst forecasts by 22% in the U.S. fueling further bullishness.  In Asia, a resumption of export activity and a smaller trade surplus from China is making growth prospects even more attractive for countries like the Philippines.  At the same time, no investment alternative presents itself as more attractive than equities.

Yesterday, practically all the most active stocks closed higher, and those that did not simply had their prices unchanged.  It was one of those days when you just buy anything and it will go up.  Today (Tuesday), judging from the behavior of prices, the rising trend remains intact.  With other stocks like TEL doing a catch up, the trend is confirming itself even further.  For example, MER bottomed out last week at 165 and recover a few days later to 171.  Slowly, it crept up to 176 yesterday and has consolidated at the same level today after trading at a high of 178.  Even second liners such as PIP and third liner CMT are both showing strength giving further bullish signals to enthusiastic buyers.  PIP looks to be headed back to its IPO level of 3.15 where I expect the resistance to emerge.  Of course, I could be wrong and PIP could go even higher to 3.50 because of momentum.

I had mentioned in the past that the trend is your friend and for as long as the trend is going our way, we should stay engaged.  I mentioned earlier that I was 80 percent in the market.  I am tempted to go fully invested, but I will probably chose to be conservative.  What I am considering is to sell some slow movers even at a loss and deploy the cash into stocks that could move even stronger.  I noticed that AGI could be breaking out soon.  MEG and FLI are both looking to be trading buys at this point.  Again, I will raise a flag and mention that we should not be careless and be left buying stocks that people are starting to dump.

While I would like to see DMC come down so that I could add to my position, I just may have to pay up for it.  There are guys out there who are seeing their EEI positions pretty much in the money.  I would like to suggest a switch to DMC since the latter trades a lot better.

FGEN and JGS hardly moved the past two , so they might be good buy candidates.  SM and SMDC has been quite strong leaving SMPH behind.  Perhaps, SMPH might be a safe bet although I could see SMDC and SM performing.  I would probably ignore ALI and AC for the time being but among the Ayala portfolio, I think BPI and MWC may be worth looking at.

For those who are concerned that prices are too high compared toa few days ago, I think what we are seeing is a market that is trying to discount events that are ahead of us.  In my case, I would buy whatever weakness emerges for as long as the index stays above 3150.  I would like to ride the market’s wave for as long as the momentum is there.  My second thoughts would probably hinge on negative political developments and I am not referring to the mudslinging going on.

P.S.  Wednesday 9:15 am

Wall Street was dwon over 200 points on account of Greece.  Should we be worried?  The answer is yes.  Should we lose our heads?  I would not want to.  Remember, I reminded people to keep some cash in their portfolios for a possible drop.  Well this is it.  There should be some blood on the street, and normally attracts the wolves.  The question is are you a wolf or a pussycat?

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April 27, 2010 - Posted by | Financial markets in Asia

29 Comments »

  1. Hi Sir Gus!

    Curious to know what you think about Marc Faber?

    I heard his comments and concerns about the divergence in the Hang Seng and the China stock markets…how they are off their highs unlike the US markets. Also, MSCI EFA and CWI are yet to make new recovery highs as well. Do these things concern you regarding the local market at this point?

    Thanks sir!

    Comment by Jack B. Nimble | April 27, 2010 | Reply

    • Jack,
      I know Marc Faber personally. Actually, ages ago I had dispute with him on a trade. In my opinion, you can listen to his views and vet it against your own research. Personally, I have never put money on what he says.

      Comment by Gus Cosio | April 28, 2010 | Reply

      • wow that’s amazing!!! thanks for sharing, sir!!

        Comment by Jack B. Nimble | April 29, 2010

  2. Hello

    REIT are coming soon. Will you guys create another mutual fund to purchase these REITS? If not, which mutual fund will buy those stocks? Thanks…

    Comment by gabe | April 27, 2010 | Reply

    • Gabe,
      Reits will be treated by fund managers just like any other stock. I do not see any reason why REITs should be different anyway.

      Comment by Gus Cosio | April 28, 2010 | Reply

  3. Hi Sir Gus, I’ve been holding ISM for quite sometime now and was planning to sell it even in a loss but because of their impending change in par value, will it be reasonable to hold on to it?

    Comment by Jojo | April 27, 2010 | Reply

    • Jojo,
      I took profits on ISM a few months back. I have no feel for the stock today. It will probably be a while before the stock comes into play again.

      Comment by Gus Cosio | April 28, 2010 | Reply

  4. Sir Gus,

    There was an april 26 research article on JGS that its current PE is at 17 at the price of 10.The PSE website says 2009 full year PE at 7.93 at 10. What do you think of this?

    Thant article can be viewed online under research section.

    Thanks

    Comment by alex | April 28, 2010 | Reply

    • Hi Alex. Thanks. That is good information.

      Comment by Gus Cosio | April 28, 2010 | Reply

  5. good morning gus, there was bloodbath in Wall Street last night (-213 points )due to Greece’s credit rating downgrade to junk status.. whats your take on this latest development? This could be the buying opportunity that we are waiting for?,, Like you, I aslo 20% in Cash and most of my positions are in defensive stocks ( TEL, BPI, GLO, MPI and PNB )..

    One more thing Gus, has the date for the investment forum been finalized?

    regards..

    Comment by mike | April 28, 2010 | Reply

    • Well mike, let’s hope for a 90 to 100 points drop in order to be able to buy our favorites cheap. On the forum, the organizers postponed it till june.

      Comment by Gus Cosio | April 28, 2010 | Reply

      • It appears the market is not that worried about the credit crises or goldman issue.. :).. today looks like a minor correction for PSEi…

        Comment by mike | April 28, 2010

    • Mike,

      I also noticed you didn’t have any power stocks in your portfolio, you might want to consider buying some if they go 3-4 flucs down. Not just any power stock though, I suggest you look into AP, EDC or MER. These are long term good investments but are also quite strong in the short term.

      PD: holding AP; FGEN (looking to sell FGEN at cost)

      Comment by richard | April 28, 2010 | Reply

      • Thanks for the insight Richard, Im looking at AP or MER,, just waiting for the right moment…

        Comment by mike | April 28, 2010

  6. Hi sir Gus, Greece credit problem is spreading to portugal and im 100% sure Portugal will be not the last..Ireland or Spain may be next…Are we seeing a European Debt Contagion in the making?

    Comment by Linda | April 28, 2010 | Reply

    • Linda,
      Today, most people will probably dig in their trenches. I expect a bloodbath. I also remember what guys like Franklin Templeton, N.M. Rothchilds and John D. Rockefeller said in the past – the time to buy is when there is blood on the streets.

      Comment by Gus Cosio | April 28, 2010 | Reply

  7. Hi sir Gus, PSE @ 3330 level for me is very expensive…waiting for market to go below 3000 to enter the market.

    Comment by cookie | April 28, 2010 | Reply

    • Cookie,
      Don’t hold your breath waiting for 3000.

      Comment by Gus Cosio | April 28, 2010 | Reply

  8. Sir Gus,

    I just looked at my brokers research guide, and realized that among the bank stocks CHIB has the highest EPS w/c is around 39 by 2010, and one of the lowest PE ratio of 9.45. Isnt this a very good indication that we should purchase it? Would like to know your insights idol 🙂

    Comment by KennyV | April 28, 2010 | Reply

    • Kenny,
      CHIB is a cheap but not a popular stock because it does not respond to market moves very well. You can buy it for a long term hold but if you ask me, you could do better with MBT, SECB, UBP, PNB or even BPI even if they are not as cheap.
      CHIB was cheap a few years ago. It is still cheap now.

      Comment by Gus Cosio | April 28, 2010 | Reply

  9. Hi Sir Gus! What do you think will happen to URC on Friday (Ex-div date)? I plan to sell on that day but I’m afraid its price will adjust lower from its current price of 25.5-26. What do you think Sir? Thanks in advance.

    Comment by chinchin | April 28, 2010 | Reply

    • Chin,
      It would not hurt to sell if you already have profits in URC. You don’t really have to worry about it going down significantly because it probably has some way to go yet.

      Comment by Gus Cosio | April 28, 2010 | Reply

  10. Sir Gus, Im expecting a BIG PSE rebound/RALLY by friday last day of April…..Goodluck…

    Comment by robin | April 28, 2010 | Reply

    • hi Robin, i am not as optimistic that a big PSE rally will happen this friday. The long weekend (May 3 is declared a holiday) will add more uncertainty to the already volatile environment due to European market woes and the upcoming election . Instead, i think the “wolves” as Sir Gus put it must be ready for possible bargain hunting during this time.

      Comment by Chris Monterola | April 28, 2010 | Reply

  11. Hi Tito Gus, Im an OFW just asking If RFM/Swift a good stock or a good investment? planning to invest next month….

    Comment by Beth | April 28, 2010 | Reply

    • Beth,
      I would not recommend RFM/Swift at all. There are a lot of better stocks which trade properly. This stock will not perform nor trade properly.

      Comment by Gus Cosio | April 29, 2010 | Reply

  12. Good morning Gus, Is SCC a steal @ 72.50? considering the 6pesos divs and the forthcoming SRO…

    Comment by mike | April 29, 2010 | Reply

    • Yes Mike,
      SCC is a stock that has around 25% to go for the rest of the year. By the way, DMC owns most of the shares in Semirara. In my opinion, SCC’s value is not yet fully reflected in DMC’s price.

      Comment by Gus Cosio | April 29, 2010 | Reply

      • Well, looking at SCC’s price run up today, im optimistic that this will reach 100 level after the elections, or even before that..

        Comment by mike | April 29, 2010


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