Gus Cosio says so

Ideas on the Philippine Stock Market

Volatile times

5:00pm  Friday  14 May 2010  Philippine Stock Exchange Index   330.42 (+0.08)

We had a shortened trading week due to election on Monday, May 10.  We also had a good week because of the same elections.  All the conspiracy theories about failure of elections and troubles that would accompany the failure turned out to be nothing more than a theory.  The wisdom of the market place would have been a better gauge of the election outcome rather than all these fears and anxieties of those who were even far removed from the market.  I always believed that those who are willing to risk money for their views have a better handle of the things to come.

This country never ceases to scrounge up doomsday theories.  The media now abounds with stories of how GMA will control congress as a number of Lakas-Kampi congressmen have been voted in.  My personal thoughts are that these same congressmen will be changing colors as soon as Noynoy is proclaimed.  These guys know who butters the bread, and it is not one of the congressional colleagues.  My fearless forecast is that GMA in a few months will be relegated to the dustbin of history.

I am very pleased with the performance of financials this week with MBT leading the pack.  I had always thought that the private placement at 48 was a pure diversionary factor in the market.  The portfolios that bought the block could not have been flippers (tsupiteros); they were serious portfolio managers who had seen MBT as one of the cheapest banks among a host of globally recognized banks.  I think I will not be exaggerating if I said that MBT is undoubtedly the leading bank in the Philippines.  BDO may be more visible because of its relation to the SM group, but it does not have the solid history in banking that MBT has.  BDO may be big in numbers, but they are relatively new comers to big league banking.  They simply merged their way to the big leagues.  On the other hand, MBT has a track record of organic growth over the many years of its existence as a commercial and universal bank.  While MBT had their share of M&A, it was never in the same magnitude as when BDO acquired Equitable -PCI a few years back.  Anyway, MBT will be headed further north of 56.50 where it closed today.  Having said that, we are seeing the financial sector of the market continuing to move higher.

In the power generations sector, the big jump in FGEN and the strong support levels on AP and EDC tells us that the sector will follow whatever rally the broad market does.  FPH will continue to move closer to its perceived net asset value of around 70.

MER moved in the opposite direction of the market, but I believe that should be temporary.  With DMC and ICT also going lower, I think prices of these stocks ease some more, it will really be an opportunity to buy these exceptional performers at cheap levels.

I think this time MPI, PIP and AGI will lag.

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May 14, 2010 - Posted by | Financial markets in Asia

43 Comments »

  1. sir gus, these are what i currently have: bpi, edc, mpi, at, mwc, ov, opm, ict, eei, fli, meg, pax, ip. Whats your take on my position, am losing money in pax, ip.

    Comment by gerald | May 14, 2010 | Reply

    • gerald,
      sell PAX, IP and OPM. MPI- sell at 3.25 and buy DMC close to 15. Sell BPI and buy MBT. ICT has upside around 30. EEI should go close to 4. FLI and MEG stocks you can trade actively – in and out at ranging prices.

      Comment by Gus Cosio | May 17, 2010 | Reply

      • even if i lose a million and a half on pax, ipvg?

        Comment by gerald | May 23, 2010

  2. i both have positions on mbt and fph…do you think adding my position in fph at its current price on monday is better than adding to mbt?

    And thanks in advance sir gus, More power!

    Comment by mike tan | May 14, 2010 | Reply

    • Pardon my bias, Mike, but I favor MBT over FPH. MBT has a more straight forward financial picture.

      Comment by Gus Cosio | May 17, 2010 | Reply

  3. Hi tito Gus!

    Why do you think those three stocks will lag?

    Comment by Nicole | May 15, 2010 | Reply

    • Hi Nicole,
      current price movements tells me that people are taking profits on these stocks.

      Comment by Gus Cosio | May 17, 2010 | Reply

  4. Do you have an idea which power company San Miguel is eyeing?

    Comment by Mark | May 15, 2010 | Reply

  5. Well said on MBT, Gus. Combined that with the income streaming from their power generation business soon, and their bold and visionary expansion in China, MBT’s comeback is very hard to ignore and resist.

    Comment by James T. | May 15, 2010 | Reply

    • Yes, James,
      MBT owns a wholly owned subsidiary in China – Metrobank, China – which is a full licensed commercial bank. This subsidiary can potentially be as big as the parent company being the size of the market in China.

      Comment by Gus Cosio | May 17, 2010 | Reply

  6. mr gus,

    any insights on mining? (px in particular)
    true or false: pnb will rally in the next couple of trading days?

    thanks so much sir. God bless

    Comment by draco23 | May 15, 2010 | Reply

    • Draco,
      I continue to accumulate PX below 12 because I think gold will remain firm for the rest of the year. On PNB, the story of the merger with Allied remains intact. My view of PNB trading above 40 is still in place.

      Comment by Gus Cosio | May 17, 2010 | Reply

  7. Sir Gus, I was looking at Bloomberg and referring to certain local stocks. Will you please explain what the following terms mean and their significance: 1) Relative PE; 2) Beta vs PCOMP; 3) 90 day volatility; 4) Relative Dividend.

    Thank you in advance.

    Comment by Nel | May 16, 2010 | Reply

    • Neil, Those are very technical terms which you can read on in wikipedia or in Bloomberg itself.

      Comment by Gus Cosio | May 17, 2010 | Reply

  8. Hi Sir Gus, Next month there will be a World Cup in South africa i think every Europeans will forget there debt problem and spend more because of this event..My Favorite Brazil & Argentina….

    Comment by Troy | May 16, 2010 | Reply

    • Troy,
      I don’t think their memories are that short. They will be doing quite a bit of adjustment over the coming months. Europe is not as nimble as the U.S. in shifting policy simply because they are several sovereign states unlike the U.S.

      Comment by Gus Cosio | May 17, 2010 | Reply

  9. Hi Sir Gus, I Think this bull market is still intact were going to 3400 level next month……GO GO BULLS….I Love Chasing the RALLY……..

    Comment by Philip | May 16, 2010 | Reply

    • Have fun, Philip. Enjoy the ride while it is going on.

      Comment by Gus Cosio | May 17, 2010 | Reply

  10. Hi Tito Gus, last year i invested in a mutual fund and right now i had a paper gain of around 40%…Is it Time to sell or still hold?

    Comment by Vicky | May 16, 2010 | Reply

    • Vicky,
      Mutual funds should not be traded. I assume that you bought an equity fund. First of all, it is not time to leave the equity markets because we are in an up cycle. Secondly, you should not trade a mutual fund like a stock. Your consideration in selling or buying a fund is the capability or performance of the fund and its management. Click on this for more information about mutual funds: http://www.save-and-learn.com

      Comment by Gus Cosio | May 17, 2010 | Reply

  11. Hello Gus,

    My brother and I are thinking of holding SMDC on a long term (6 months at least). In my studies, this seem to be a good stock, what do you think about it?

    Comment by Born On Christmas | May 17, 2010 | Reply

    • I think that it is both a good and potentially profitable idea. Good luck.

      Comment by Gus Cosio | May 17, 2010 | Reply

  12. Hi Sir Gus,

    JPMorgan and JAKA sold a lot of DMC today. What’s a good entry price at this point?

    Thanks.

    Comment by Mal | May 17, 2010 | Reply

    • Mal,
      Anywhere around 15 is fine, I think.

      Comment by Gus Cosio | May 17, 2010 | Reply

  13. Hi sir Gus, 1 week ago i had a paper gain of 15% today its only 9% i lost 6% in 5 trading days. What will i do sir gus? Thanks in advance and Godbless….

    Comment by Butch | May 17, 2010 | Reply

    • Hi Butch,
      Just keep following the market. I think the up cycle for equities is very much in place.

      Comment by Gus Cosio | May 17, 2010 | Reply

  14. Hi Sir,

    Is 56.50 for MBT still a good price to enter? What’s your view on LC? Thanks.

    Comment by ixia | May 17, 2010 | Reply

    • Ixia,
      If you get some MBT at 56.50, that would be excellent. I think LC could move back to .30 because of the price of gold, but it would take some time.

      Comment by Gus Cosio | May 17, 2010 | Reply

  15. Most of the JGS portfolio went up pretty well, too bad i dont own one os their stocks 😦

    Comment by JohnTheMan | May 17, 2010 | Reply

    • There will be others, John. Just keep your eyes on the market.

      Comment by Gus Cosio | May 17, 2010 | Reply

  16. Sir Gus. I own mpi, edc, ac and fgen where 40% of total portfolio is mpi and the rest 20% each. Any suggestion on the mix? My plan is just to sell mpi and replace with pnb. Your thoughts pls. Thanks

    Comment by Mark Anthony | May 17, 2010 | Reply

    • Mark,
      I would sell AC instead of MPI and use the money to pick up some MBT. Or sell AC and MPI and buy MBT and PNB.

      Comment by Gus Cosio | May 17, 2010 | Reply

      • Thanks sir. I never thought about selling AC until now. I see your point here sir. Many thanks.

        Comment by Mark | May 17, 2010

  17. Hi Sir Gus, MBT is over bought while NIHAO is over SOLD planning to buy NIHAO next week…..GOOD LUCK and GODBLESS….

    Comment by ray | May 17, 2010 | Reply

    • Personally Ray, I do not think that NIHAO can out perform MBT.

      Comment by Gus Cosio | May 18, 2010 | Reply

  18. Sir Gus,

    Is it still prudent to pick up JGS at current 12.75, which is a 12 month high? whats your take on this?

    Also, DGTL seems to be a turn around story and I remember reading once” there is money to be made in turn around stock”?

    Regards

    Comment by alexis | May 17, 2010 | Reply

    • Good point Alexis. Some trading ideas are worth experimenting on. In cases like these, just remember not to chase prices. I think JGS, RLC, and URC are all worth buying, especially on market dips.

      Comment by Gus Cosio | May 18, 2010 | Reply

  19. Hi Gus,

    The markets have gotten more volatile again indeed. Last night the DOW had a 400-point swing. I remember the same thing happened at the start of the bear market in 2007 when the bulls were trying their best to keep the markets afloat. During times like this, I think trading more actively can give an investor lots of opportunities to make money. Although, one has to practice prudence and patience to avoid losses. Buying and holding might give modest returns but not as much as swing-trading good companies.

    The week before the elections, I have been fully invested and very much happy with my gains. In the last 3 trading days of that week, I saw all my paper profits get erased. My portfolio even managed to turn negative, by as much as half my previous gains. Now that the domestic market has rallied following the successful elections, I have recovered all my lost profits, plus a little more. Had I lightened my positions at their peaks, and bought back early Friday morning, I would’ve had good gains for a short period of time.

    Now that volatility has increased once again, I will be looking to protect my gains, and take advantage of the dips. What do you think of this strategy Gus?

    Comment by richard | May 18, 2010 | Reply

    • Richard,
      Normally, volatility spikes lead to lower stock prices. That is why I recommend being cutious. Notice, however, that stocks with strong earnings enjoy equally strong investor support. I think you would be right in buying on dips. I would place lower bids and wait to get hit by impatient sellers.

      Comment by Gus Cosio | May 18, 2010 | Reply

  20. Good Day Sir Gus,

    A few questions,

    How come EDC and URC didn’t perform well as much as FGEN and JGS when most of the profit came from them?

    How come PX is going south when gold is up?

    Thanks always.

    Comment by jovy | May 18, 2010 | Reply

    • Jovy,
      That’s the beauty of the market place; everyone has a different idea on different time horizons. That is why it is important to understand the company’s fundamentals so that you do not get fazed by day to day movements.

      Remember also that both JGS and URC came from around 5 a year ago.

      Comment by Gus Cosio | May 18, 2010 | Reply


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