Gus Cosio says so

Ideas on the Philippine Stock Market

Still the place to be!

9:40  Thursday   29 April 2010   Philippine Stock Exchange Index  3299.42 (up 14.64 points from Wednesday close)

After the volatility over the past two days, perhaps the local market will attempt to stall the up trend that we have had since February.  There are very strong stocks out there that have been impervious to the shock that the global markets got from the credit downgrade of Portugal and Greece.  The major markets were whacked by the downgrade supported by the Goldman Sachs sideshow.  Investors got worried that attention would be taken away from the strong earnings report from 79% of S&P companies that have exceeded analyst expectations on their 2010 first quarter earnings.

It is not surprising that people should pocket some profits when signs of trouble arise.  The market’s view of the value of prices is a process of never-ending change.  The differences of opinions expressed by investors through their buying and selling activity is what results to a collective wisdom of the market place.  It is not so much that there are forecasts and views given by personalities such as Nouriel Roubini or Marc Faber.  It may not even be the influence of astute investors such as George Soros or Warren Buffet.  At the end of the day, there is only so much that these market movers can do.  The final arbiter of stock prices is what the breadth of investors decide to pay for them.  It is dependent on how people vote stocks with their money.

Locally, investors have been convinced that the place to squeeze out returns is the stock market and that is why local money has been strongly engaged in stocks.  Even if you stick it out with just one stock, you would have done much better that keeping it in any government fixed income bond or time deposits in the banks.  Some examples are AEV, AP, DMC, MBT and PNB, just to name a few.  If you held these stocks from the beginning of the year, each of these stocks would have returned at least 20% regardless of how the global markets behaved.

Going back to the very influential U.S. market, many analysts believe that earnings of the S&P component stocks would be growing by 29% this year.  It is no surprising then that with every major sell-off that happens, a comfortable base in prices is built.  We saw this when the first news of Greece and the rest of the European PIIGS broke out in the latter half of January this year when stock prices slid until the middle of February.  But what did we see after? Was it not a sustained rally until the second wave of bad news about Greece and the problematic Portugal broke out again.  This gave investors reason to consolidate their gains by cashing in on some stocks.

The question that remains is whether or not to abandon this market or at least dramatically decrease exposure.  My opinion and my money are of the view that we will remain engaged.  I see a lot of value remaining in stocks like TEL, FGEN, PX, and MER at present prices.  That is not to say that the other stocks should be ignored.  I just think that from yesterday’s price action, these stocks are looking like bargains today.  For stocks like MBT, URC, RLC and PNB, I think the trend is still intact.  i just see them moving sideways in the near-term.  Two stocks that look to be steaming ahead above the sum of all fears are DMC and PIP; there is probably something going on in these stocks.

Anyway, yesterday, I thought that the bloodbath on Wall Street would result in similar hemorrhaging here, but it did not.  I do not think that local investors were like ostriches burying their heads in the sand.  I think they were pretty clever coming to the conclusion that stocks are still the place to be.

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April 29, 2010 - Posted by | Financial markets in Asia

17 Comments »

  1. Sir, what can you say about agi?

    Comment by jolly | April 29, 2010 | Reply

    • Yo Jolly,
      AGI moves in spurts. It has gone from 4.00 to 5.80 year to date. Before it got to 5.80, it first traded between 4.00 to 4.50 for a few weeks; then, between 4.50 to 5.00 for a while then 5.00 to 5.50 before its present range of 5.50 to 6.00 where it is ranging now. My suggestion is if you like to trade the stock,trade the range of 5.50 to 6.00 and wait for a break out of the 6.00 which may just happen in a few weeks.

      Comment by Gus Cosio | April 29, 2010 | Reply

  2. Sir Gus,

    I got MPI at 2.8 and it is now trading at 3.1, do you think it still has some way to go? Or should i sell it and buy PIP, DMC, AP or FGEN? Thanks for your insights sir! You’re the man!

    Comment by JohnTheMan | April 29, 2010 | Reply

    • Yo John,
      I was wrong on my call on MPI today. I thought that it would recede a bit. The stock looks stronger than I thought. It probably has a short term objective of 3.25 – 3.30. Among your alternatives, I see DMC to be the outperformer with an objective of 20 -22 in the near term. There is something going on in PIP which could take it to 3.30, but that is just a story.

      Comment by Gus Cosio | April 29, 2010 | Reply

      • Yo Gus!

        Thanks for the insight! You are right stocks is still the place to be.

        Comment by JohnTheMan | April 29, 2010

      • Hi Gus, I heard Lotte of Korea, buying in PIP… still a rumor… 🙂

        Comment by mike | April 30, 2010

      • Mike,
        It is probably a rumor. The fact remains that PIP is worth a buy by whoever is looking for value.

        Comment by Gus Cosio | April 30, 2010

  3. Hi tito Gus, PAL employees plans for a Strike could this affect the coming election?

    Comment by Nads | April 29, 2010 | Reply

    • Nads,
      If PAL were the only airline domestically – maybe. Now, you have Cebu Pacific, Zesto-Air and a handful of others. I don’t think there could be any effect.

      Comment by Gus Cosio | April 29, 2010 | Reply

      • Sir Gus,

        Suppose PAL, for one reason or another, stop being a going concern, how would such a development affect investor sentiment for related companies such as PNB et al… put another way, are there possible spillover effects from negative developments in PAL that could dent the outlook for its sister companies?

        Would appreciate your thoughts on this, Sir.

        Thank you and regards,

        JR

        Comment by JR | April 29, 2010

      • JR,
        That would be a lot of speculation which is not really worth the exercise at this point. Apparently, you have no faith in PNB. Move on then. You can choose to buy other stocks.

        Comment by Gus Cosio | April 30, 2010

  4. Sir gus,

    At what price should i post for DMC? Is it posible to get it at 16? or should i wait for more correction and market jitter since the election day is getting near?

    Comment by JohnTheMan | April 29, 2010 | Reply

    • Frankly John, I don’t. I owned some DMC at 9.60 and I waited too long to add to my position. Weeks later, I got some at 15.25 already because it was not going my way. In my assessment, the stock should be at least 20, maybe 22. I think the market will strong going into elections. I expect it to correct as sson as there is a clear mandate.

      Comment by Gus Cosio | April 29, 2010 | Reply

      • Sir Gus,

        Hope to get your insight… Between DMC and MPI, which one offers better value right now?

        Comment by Mal | May 1, 2010

      • Mal,
        I favor DMC at this point in time.

        Comment by Gus Cosio | May 4, 2010

  5. hi gus. what do you think of FLI at its current price now?

    Comment by paul | April 30, 2010 | Reply

    • Paul,
      FLI is not bad at these prices. It can go up by around 10% in the short run.

      Comment by Gus Cosio | April 30, 2010 | Reply


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