Gus Cosio says so

Ideas on the Philippine Stock Market

Sounding like panic!

9:15 am  Friday  8 May 2010   (pre opening of the market)

It was a terrible day in Wall Street.  Actually, the market was already slipping from the opening bell until midday.  I looked at the DJIA just before I went to bed around midnight Manila time and the index was already down 70 points.  all this was due to heightened anxiety about the sovereign debt situation in Europe.  The European Central Bank was assuring investors and the public that in spite of the rapidly eroding conditions in Greece, the financial position of Spain and Portugal were not going out of control.

Nevertheless, markets were not looking at anything else but protecting their portfolios.  There was a disastrous glitch in the trading systems of the different exchanges, and from what I gather, even off market trading platforms had experienced similar technical glitches which further fueled the decline in prices across the board.

Again, I call your attention to the technical condition of the market that seems to be screaming for a price correction on all fronts.  Now, the markets seem to be responding.  Personally, I would not panic here.  It is not as if we did not see something like this coming.  Recall that over the last few days, I have been reminding investors that the world markets after a year of rallies would find any reason to take profits.  Now, many appear to be doing it all at the same time.

What should we be doing t, then?  I think that it may be too late to sell in many of the strong stocks because bids are going to be marked down substantially this morning and I do no think anyone would want to be a hero in an environment such as this.  The logical thing to do under these conditions is to wait until the dust settles.  If you are fortunate enough to have some cash, do not be in a rush to buy as we do not know yet to what extent this market will go.  If you have strong stocks in your portfolio, notably the power sector stocks, i would not be too worried.  Stocks like AP, EDC, FGEN, DMC, and MER will still make their revenue targets simply because there is a huge demand-supply gap that needs to be filled in the electric consumption of this country.  The banks are also worth watching because I do not think business conditions have changed for banks in this country and even in the Asian region.  I am referring to MBT, SECB, BPI and PNB.

If an investor needs to raise cash, i would probably suggest cutting loss in the weaker or the more volatile stocks such as MPI, MEG, FLI, AGI, PAX, ORE, ANI, CPM and the like.  These are stocks that are moved strongly by sentiment.  Down the road, use the cash generated from any sale to buy the power or the banking sector when prices start to stabilize.

The worst thing for an investor to do at a time like this is to panic.  It is time to hold on to your seats and examine your investment objectives once again.  The result will be a sounder style of managing your investment portfolio.

God bless you.

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May 7, 2010 - Posted by | Financial markets in Asia

37 Comments »

  1. Gus,

    Panic seems to be averted, for now. Anyway, what are your thoughts on PX at these levels (below 12 per share). Gold seems to have spiked up due to volatility. Is PX finally cheap enough?

    Cheers,
    Jack

    Comment by Jack | May 7, 2010 | Reply

    • Hi Jack,
      I picked up some PX yesterday at 11.50. I’m postponing any additions to my position until after elections, just to be safe.

      Comment by Gus Cosio | May 7, 2010 | Reply

  2. Gus,

    I think the market is telling us that there will be a smooth election coming on Monday. And that we may see a possible rebound next week. I am holding EDC, FGEN, AEV, ICT and FLI (dividend play Wednesday next week). These stocks have relative strength that even the DOW dropped big, they still managed to make a gain or unchanged from their yesterday’s close. I found your website very useful Gus. I wasn’t able to buy DMC sayang.

    More Power! and Thank you!

    Comment by teddy | May 7, 2010 | Reply

    • Teddy,
      I casted my vote today and I think many, like me, were happy with the elections in spite of the long queues and long waiting time. I think we’ll have successful elections. Do not be surprised if we have a very strong market on Tuesday.

      Comment by Gus Cosio | May 10, 2010 | Reply

      • Like what you’ve said, there’s nothing new with this election. Losers will always say they’ve been cheated and that they will file for a recount, etc… Normal na yan dito sa pinas. Technically this could be a V-reversal for the US Market as the VIX spiked last week. DOW 10,800+ as of this writing. I’m thinking Sir Gus that if AP and EDC posted strong earnings this first quarter, what more on the second quarter since that was the peak of summer? I will buy tomorrow DMC, I’m waiting for their cash dividend. This week will be a good week for everyone. Good luck!

        Comment by Teddy | May 10, 2010

  3. Hi Sir Gus,
    My portfolio was flat for the last 4 days. Seems a good mix. What’s your thoughts on EDC? net foreign sell today while in the past few days heavy buying despite news on earnings + bid win. Was able to buy EDC. AC seems holding on despite the massacre.
    Regards, Mark

    Comment by Mark | May 7, 2010 | Reply

    • Mark,
      I think with successful elections, anything you are holding will do well when the market opens.

      Comment by Gus Cosio | May 10, 2010 | Reply

  4. Hi Gus, what is your take on SMDC. Base on today’s trading the stock fell to 5.5 and it closed by 6. what does this mean? is it still a good buy @ 6? would it be ok to hold it for long term like 6 months?

    Comment by Son | May 7, 2010 | Reply

    • Son,
      I think SMDC will be a strong and steady stock. I see strong support at 5.50. A buy at 6 probably gives you an upside to 7 and a downside of 5.50. That’s probabaly the trading range over the next few weeks.

      Comment by Gus Cosio | May 8, 2010 | Reply

      • Son,
        I would buy SMDC if I had more cash. My favorite right now is DMC and MBT.

        Comment by Gus Cosio | May 10, 2010

  5. Hi Gus,

    There is a recent news that FGEN and DMC would be remove from the PSE index. How would this impact us. Am not sure why DMC and FGEN would be removed from the index, both stocks are more liquid to ABS and CHIB.

    Comment by Son | May 7, 2010 | Reply

    • Son,
      I sent an email to PSE giving them my thoughts that DMC and FGEN are more liquid than CHIB and ABS. Actually, there will no impact in the stock performance of DMC and FGEN.

      Comment by Gus Cosio | May 10, 2010 | Reply

  6. Hi Gus,

    I guess last night’s turmoil is a reminder that though automation is a good thing, safeguards need to be built in and audit logs must exist so one can do a trace back when the unexpected happens.

    With today’s closing prices for MBT and DMC being a tad higher than the intraday low, isn’t it already safe to consider them stable? Or should one compare day-to-day using the closing price as the benchmark? How does one generally figure out if a stock is already stable? Thanks.

    Comment by Mal | May 7, 2010 | Reply

    • Mal,
      This becomes academic with the successful elections. You should add to whatever positions you have.

      Comment by Gus Cosio | May 10, 2010 | Reply

  7. gus,

    do you have a copy of the sph 2009 annual report by any chance? no sign of it in the pse corporate disclosures BUT the eps for the full year (2009.12.31) of the stock is shown as php 0.03. is the pse sitting on it? would be interested to know if anyone has info on the whereabouts of their 10-K.

    thanks.

    Comment by ed | May 7, 2010 | Reply

    • ed,
      I think the SPH annual report normally comes out during their annual shareholders meeting which is on the second or third Saturday of June. Their annual results disclosure should be available by May 30 which is I think the PSE deadline.

      Comment by Gus Cosio | May 8, 2010 | Reply

  8. Hello Sir Gus,
    I’m afraid I actually panicked this morning and sold my positions, even the good ones. I was looking at it from a technical standpoint, being that support levels were breached so I sold. I felt really bad because my stocks rebounded. I had been in cash for quite some time then I started buying last Tuesday because the prices were low and I was confident with my picks (FPH,AEV,EDC,RLC) . But I did not expect the DOW’s 3% drop. Well, I lost 5% of the value of my portfolio. Then I bought back EDC at the end of the day because I think I over reacted earlier.Until the last minute, before opening, I wanted to hold but panic got the better of me so I started selling. Sir, had anything like this ever happened to you before? I am so disappointed with myself. Too bad I did not read your blog this morning before open. I would not have sold.

    Comment by charmagne | May 7, 2010 | Reply

    • Charmagne,

      I think the lesson here is to visit this blog, before doing your transactions in the market. That has worked for me, i hope it also works with you.

      Comment by JohnTheMan | May 7, 2010 | Reply

  9. Hi Sir Gus,

    I initiated positions in DMC and MBT today and felt optimistic doing so. But after reading your blog entry, I’m wondering if I’m being irrational. I guess I’m a bit scared that I’d miss the chance to buy low.

    P.S. I’m optimistic that the elections would turn out well.

    Comment by Mal | May 7, 2010 | Reply

  10. Sir Guys,

    Do you see a bloodbath this monday?

    Comment by JohnTheMan | May 7, 2010 | Reply

    • JohnTheMan, there will be no trading on Monday. We will resume trading on Tuesday.

      Comment by Teddy | May 7, 2010 | Reply

      • Thanks for that Teddy,

        So Sir Gus, Do you see a bloodbath this tuesday?

        Comment by JohnTheMan | May 7, 2010

      • John,
        I think the elections will go through; I think there will be a good indication of the results by Tuesday morning; but I think things will be uncertain until Friday. I do not see a bloodbath. There could even be a rally, but the pall of the global markets hang over our heads.

        Comment by Gus Cosio | May 8, 2010

  11. Hello sir gus,

    I was just wondering what your thoughts are on GLO? I’ve always thought of it as being a very good defensive stocks. Any thoughts on it?

    My portfolio is a mix of banking and power sector as of the moment, this is of course partly from advice found on your blog and partly on my confidence in a strong economic recovery; is this line of thinking right?

    After all this(including the elections) boils over would you care to share your thoughts on the markets outlook for the rest of the year?

    Norman

    Comment by Norman Go | May 7, 2010 | Reply

    • Hello,

      Globe seems to be hit by declining revenue, increasing expenses and loans. Such is a double whammy.

      While it had been distributing generous dividends, its cash flow shows it maybe coming out from loans as it still have capital expenditures especially for its broadband.

      Also its high margin users on the post paid plan may not be renewing contracts as it expires. After all, one has to be practical on telephone expenses.

      Regards

      Comment by alexis | May 9, 2010 | Reply

  12. Hi Sir Gus,

    I’m not sure if you follow penny stocks but I would like to get your perspective with regards to ALCO. I went to fort and visited their project Arya Residences and it looks promising. However, unlike other real estate company, ALCO has only one project so far. Would you consider ALCO a fundamentally sound company?

    Comment by Kerwin | May 8, 2010 | Reply

    • I’m sorry Kerwin,
      I did not even know that such a stock existed. I have no clue what ALCO is all about. Unless you can get your hands on good research on this company, the prudent thing to do is to avoid the stock.

      Comment by Gus Cosio | May 10, 2010 | Reply

  13. Hi Sir Gus!

    I make it a habit to read your post everyday until yesterday when I failed to do so. I regret selling my AP but I do not want to chase the price.

    Right now, I am holding PIP, PNB, FPH, and RLC…I did not stick to my plan to add more shares of my positions should they go down when I saw that the support of the index was breached.

    Sir, will the Greece crisis affect us the way that the US recession affected the country? Also, is it a good sign that despite the huge loss in Dow, our pse managed to hold its support?

    Comment by jolly | May 8, 2010 | Reply

    • yes jolly,
      there was good news from Europe and the U.S. and with the successful elections, the market is wide open for a rally.

      Comment by Gus Cosio | May 10, 2010 | Reply

  14. Sir Gus,

    What will be scenario when a company lists on the REIT? Say SMPH and RLC? Will the ultimate positive cash flow and value unlocked redowned to the benefit of the controling shareholders, in this case SMIC and JGS?

    Would appreciate if you can expound how will the transaction go through?

    Thanks

    Comment by alex | May 9, 2010 | Reply

    • Alex,
      REITs are an income play on property stocks. Rentals from malls and commercial property are the backbone of REITs. what will likely happen is large commercial property owners will spin off their properties into listed companies with separate listing.

      Comment by Gus Cosio | May 10, 2010 | Reply

  15. Sir Gus,

    Between the two stocks AEV and DMC, which do you think is a better buy?

    Comment by Norlan | May 10, 2010 | Reply

    • Norlan,
      I like both but AEV might eventually replace AC as good play on the Philippines.

      Comment by Gus Cosio | May 10, 2010 | Reply

  16. SCC overbought for the past 2 months might fall back to 60/share.

    Comment by Miko | May 24, 2010 | Reply

    • But it did not. It closed on 24 May 2010 @76 and went all the way up to @212.40 upon closing on 18 January 2011. I very recently discovered the stock market last November 2010 and I am patiently learning its ways. I find this blog to be a valuable source of information. I am learning more from here than from the books that I had borrowed from a friend. I suppose, the lesson here is that nobody should expect to make quick profits. One who ventures into equity investing should be prepared to stay with a stock as it grows alongside the economy. In investing, time is a friend.

      Comment by beanstalker | February 5, 2011 | Reply

  17. Hi sir gus, What will happen to Megaworld shares after 1:4 stock rights offering..Thanks and GodBless..

    Comment by ben | May 24, 2010 | Reply

    • Ben,
      those rights are already priced in the market. This had been going on since December last year.

      Comment by Gus Cosio | May 25, 2010 | Reply


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