Gus Cosio says so

Ideas on the Philippine Stock Market

Grape juice, feta cheese and olive oil

9:00 am   Friday  30 April  2010     Philippine Stock Exchange Index  3297.00  (+0.372 Thursday Close)
Meralco earlier today disclosed that  its consolidated core net income for the first quarter jumped by a hefty 135% from a year earlier to P2 billion.  Its consolidated net income for the period soared by 127% to P2billion, while consolidated revenue improved by 34% at P61.1 billion.  I guess there is reason to believe that MER could still go further from here as I have heard some analyst upgrading their forecasts for MER.  Again, this is part of the power sector story that is very strong in the market, and we can see the opinion of investors from the way FPH, FGEN, EDC, DMC, AP, MPI and AEV have performed.  These stocks look to be the mainstay of the power sector in the Philippines.  That is not to say that the field will be limited to them because the San Miguel group, with the recent acquisition to control PCOR, is strongly positioning itself in the power sector.  The infrastructure requirement sector is so huge that other players can still come in and reap good profits.  There is also rumor that the Ayala group is finding avenues of entry into the sector.  That to me is the main reason why the sector will likely remain strong for the rest of 2010 and even into 2011.

Thursday market movements showed some follow through buying from Wednesday’s downturn as New York recovered.  I for one do not think that the Greece and even the Portugal situation will affect us that greatly.  This issue has been in the market since February and it will no longer be a surprise.  As a matter of fact, the policy dilemma has been facing the strong economies in Europe, namely France and Germany, that there are quarters now predicting that the weaker economies will be kicked out of the common currency.  Personally, I do not believe that all of Europe could survive with just one currency.  It simply takes away a lot of flexibility in managing domestic economies.  There was reason why the United Kingdom did not join the Euro even if it was part of the preceding European Monetary System, and it was precisely because they would lose their sovereign powers in steering their domestic economy.

Look what is happening between Greece and Germany.  Germany, in order to grant financial aid, wants Greece to make tremendous adjustments in its economic policy which borders on political issues such as budget deficits, the public pension system and unemployment conditions.  Germany sees that the Greek government which has a socialist tradition gives higher unemployment and pension benefits to its citizens than Germany in spite of the fact that their fiscal position is in shambles.  I do not blame Germany because if Greece continues with its fiscal profligacy, they will never be able to pay Germany back.  Bottom-line is either Greece bites the bullet and does a lot of belt-tightening or they get kicked out of the Euro (currency).

Now tell me, why should Greece’s possible departure from the European Monetary Union be bad for the global equities market?  I do not really see them permanently affecting the U.S. and most certainly not Emerging Asia, meaning China, India and the ASEAN.  To me it only means that the grape juice, feta cheese and olive oil imported from Greece will be cheaper at the supermarkets in Manila.  How can that be so bad?

So, where do Philippine stock go from here?  Personally, those that I have stuck in my portfolio I think will be higher.

By the way, there is news that Greece will bite the bullet.  The government is said to be agreeing to a drastic belt tightening measure including drastically reducing pension benefits.

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April 30, 2010 - Posted by | Financial markets in Asia

33 Comments »

  1. on a lighter side, I’m starting to crave for Greek food =S
    Salads and Gyros….now thats sounds like a good lunch =) Good luck in today’s Trading! I’m still waiting for the AP and AEV to drop to re-enter =D

    Comment by Raymund | April 30, 2010 | Reply

    • That’s a good idea, Raymund. No point chasing prices.

      Comment by Gus Cosio | April 30, 2010 | Reply

  2. A story is developing that Kirin will be buying GSMi, together with its very high profit that even increased by more than 25% this year, this stocks is bound to be 35 at least.

    Comment by Chris Monterola | April 30, 2010 | Reply

    • Chris,
      The question is whether GSMI has good relative value at today’s price. If you are buying it purely for a punt, you should at least know the value of what you are buying. If you don’t, no matter how reliable your rumor mill is, it is still a formula for losing money if you do not have information of a stock’s intrinsic value. Be very careful.

      Comment by Gus Cosio | April 30, 2010 | Reply

      • Thanks Sir Gus for the advice, yes i can assure you i`m a relatively careful trader! 🙂 I got my shares at 27.0 two trading days ago, sold at 29.50, then reinvested at 29.50 today.

        Comment by Chris Monterola | April 30, 2010

  3. Gud am master Gus. Please comment why some of us sell a stock at 29.50 then reinvest it again at 29.50. Is there any profit or we’re just giving income our govt. and broker ? thanks

    Comment by roberth | April 30, 2010 | Reply

    • Hi Roberth, in my case i sold in the closing at 29.50 yesterday but noticed huge accumulation at this price moving towards 30. So at the opening today i bought back the price at 29.50 expecting further increase. Yes, you are right the govt gained from me 🙂

      Comment by Chris Monterola | April 30, 2010 | Reply

      • thanks Chris. Just trying to learn trading

        Comment by roberth | April 30, 2010

    • Actually, Robert,
      I try not to sell a stock unless I have a sense that I could buy it back cheaper. I computed it; if you sell something at 29.50, you need to buy it back at 28 in order to be in the same spot because of commisions and taxes. But then again, other people have other reasons for their trading moves and I’m not going to fault them for it.

      Comment by Gus Cosio | April 30, 2010 | Reply

      • Thank u very much master Gus. That’s the logic for those who knows little about trading like me. Why sell and buy again when you’ll pay a price. We are affraid to lose whatever we gained. But trading is really different. As i digest from chris and ur comments we got to learn somemore. This site really help me a lot! ! !

        Comment by roberth | April 30, 2010

      • Hi Sir Gus, for bpitradeonline users like me the average buy fee (transaction fee + tax) is less than 0.3% and the average sell fee is about 0.7%. This is approximately equal to 1% of your average stocks value [(BUY + SELL stocks value)/2]. A buy back at 29.0 after selling it at 29.50 means you save 1.6 % and that translates to 0.6% earnings if it returns to 29.50 spot. Additional gain is the fact that you now starts at a smaller denominator of 29. If you buy it back at 28 and it moves back to 29.50, you gain 5.4% well above the buy and sell average fee of 1% of average stocks value.

        Comment by Chris Monterola | May 1, 2010

  4. Hi Sir Gus,
    What do you think is the best price to buy EDC? I had it in my portfolio but sold too soon.

    Thanks,
    Ixia

    Comment by ixia | April 30, 2010 | Reply

    • ixia,
      It is very difficult for me to suggest prices. I like EDC and it looks to me that it is trading in a range between 5.00 to 5.50. I think the range should tell you when to buy it unless the market is definitely moving higher. Then just buy at the available price.

      Comment by Gus Cosio | April 30, 2010 | Reply

  5. Sir Gus,

    I was wondering why there seems to be no movement for LOTO, when it has already declared a P0.75 dividends for 2010 and it has a relatively good fundamentals. Also, I don’t think Filipinos will stop betting on Lotto, thus assuring the company of continued profits.

    Comment by Nel | April 30, 2010 | Reply

    • Not all companies have the market’s following. That is why even if a company declares cash divs, movement may not follow. Furthermore, lotto bets are not revenues for LOTO, they merely lease the equipment to the PCSO. I don’t even think they get any percentage from lotto sales. If you want to earn from the stock market, better save your effort and money by focusing on issues that have consistent daily turnover of at least 1M. For me I only trade stocks that have at least 5M turnover but that is for purely speculative play which I hold for ma max of 5 days. Rarely do I hold them for longer. All my holdings now are index constituents and I’m getting good returns. Low risk, fundamentally sound companies that have good prospects looking forward. This snippet I think everyone should take as a guiding principle: “Buy the company, not the stock”

      Comment by richard | April 30, 2010 | Reply

  6. Sir Gus, will you be a seller or a buyer before the elections?

    Comment by jolly | April 30, 2010 | Reply

    • Jolly,
      I am a buyer now.

      Comment by Gus Cosio | April 30, 2010 | Reply

      • Hi Sir, I am 100% invested in stocks right now. I still have not locked in profits for some of my holdings as thay still have not reached my personal target price. I currently hold, AGI, PIP, AP, FPH, SMDC, PNB..

        Thanks so much.

        Comment by jolly | April 30, 2010

    • Hi Jolly,
      If I were you, I would take profits in PIP and perhaps AGI just so you’ll have some cash incase the market goes down. It’s a matter of cash management.

      Comment by Gus Cosio | April 30, 2010 | Reply

  7. hello sir gus, whats your take on atlas minning? filinvest land? metro pacific? paxys? i have a considerable amount invested in them. . .

    Comment by gerald | April 30, 2010 | Reply

    • Gerald,
      I have no opinion on AT. I like MPI. FLI to me is an opportunistic trade, i.e. buy it when it is cheap and moving. I do not have a handle on PAX.

      Comment by Gus Cosio | May 4, 2010 | Reply

  8. Hi Sir Gus,

    Do you have any suggestions on stocks to research for an investor with a 3- to 5-year investment timeline, but who’s willing to track the market only sparingly? What factors should one concentrate on analyzing before making the investment?

    Comment by Mal | April 30, 2010 | Reply

    • Mal,
      I suggest that you justy keep reading. If you want a core portfolio recommendation, I would say MBT, AP, DMC, Mer, TEL and URC.

      Comment by Gus Cosio | May 4, 2010 | Reply

  9. Hi sir Gus,
    I finally saw MPI in your write up. 2 days ago you said that you are not seeing much gain on this stock. It seems that for the last 5 days, it has always been a net foreign buy. Whats your take on this. Yes, I have considerable amount invested at 2.8. Do you do believe that MPI has now come out from the bathtub and will perform at the same speed as the power stocks? Would appreciate your thoughts on this.

    Comment by mark | April 30, 2010 | Reply

  10. Hi Sir Gus, Since Jan.2009 many or Majority of Stock Market Investor/traders makes a huge PROFIT. I myself Gained more than 90% profit last year mostly in Property stocks like Filinvest and Ayala land and also in some Energy stocks….1st half of Last year was the right time to be bullish right now time to be cautious because of the coming GOLDMAN case and the coming European DEBT Contagion.. This European Crisis will HIT The Market BIGTIME in the 2nd half of 2010 and could trigger a Negative sentiment In Europe and US 1n 2011.. PSE might climb to 3450 or even 3600 before a sharp correction happens…Right now im just holding FGEN,ICT and AC…..GODBLESS & GOODLUCK…

    Comment by Carlo | May 1, 2010 | Reply

    • Yes Carlo,
      You do not really know when a big sell-off will hit the market. Worse is, you will not know when the selling stops. Right now, the market is in an uptrend and the trend has yet to be disturbed. The reason why I will continue to favor being long in the market is because trends like these go on for at least 3 years and go on for as long as 5. We are only beginning the 2nd year and the strong local companies are deriving organic growth from bottlenecks in the economies that have opened up. While I do not plan to be careless, I think there is good reason to be invested regardless of what is happening in Greece and the rest of Europe. My advice for Filipino investors is to avoid Europe. One of the safest places to be is the Philippine market because infrastructure is developing and that unlocks more value in the economy.

      Comment by Gus Cosio | May 4, 2010 | Reply

  11. Hi Sir Gus, I Think its the Best Time(this week or next week) to SELL Asiatrust Bank, GSMI,RFM,ATI a Stock Analyst friend of mine tells me that this stocks are overbought…..

    Comment by Miko | May 3, 2010 | Reply

    • Miko,
      There is no harm taking your profits wspecially that the stocks on your list have sporadic liquidity.

      Comment by Gus Cosio | May 4, 2010 | Reply

  12. Hi Sir Gus. I’m still studying the stock trading and planning to get in once I will have my initial capital. Your blog and its discussion in the comment section give me useful information. I am learning a lot. Thanks.

    Comment by Vic @ MoneyRelease | May 4, 2010 | Reply

  13. Hi Sir Gus,

    Just an honest question, how do you subscribe to a private placement in a PSE listed company taken from un-issued capital stock. What is the process?

    Thanks!

    Comment by James T. | May 4, 2010 | Reply

    • James,
      A private placement is a “private” transaction between parties. The public is excluded.

      Comment by Gus Cosio | May 4, 2010 | Reply

  14. MBT fell pretty bad, hope it falls more so i can buy it. What do you think sir gus?

    Comment by JohnTheMan | May 4, 2010 | Reply

    • You and me both, John. I’ll be happy to get some at 50.

      Comment by Gus Cosio | May 4, 2010 | Reply


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