Gus Cosio says so

Ideas on the Philippine Stock Market

Panic time?

10:00am  Friday 21 May 2010  Philippine Stock Exchange Index 3162.68 (in panic mode)

The 376 point drop in the Dow Jones Industrial Average will definitely cause further panic in Asian markets and the Philippines will not be spared.  The global indices are in levels similar to when the first news of the Greek fiasco was revealed in January this year.  I believe it will be a continuing concern for the rest of 2010 and for early 2011.  Such a mess is not easy to clean up.  While the best way to solve this problem is to kick Greece out of the monetary union, it may not happen yet for some political reasons.  I believe, however, that hardliners in Germany will argue the point strongly because German taxpayers who are among the hardest working in Europe will be bearing most of the burden.  I, for one, would agree.  Why should one country’s productivity pay for the profligacy of another.  I do not want to argue the point further, I just wanted to voice out my conservative opinion.

In our market, I also feel that I am conservative.  I would not want to take unreasonable risk for the sake of impressing or shocking others.  My view of investment conservatism is founded on appreciating the appropriate fundamental information.  In as far as the value of stocks is concerned, the bottom line is earnings per share and the quality of its sustainability and possible growth.  Combined with historical and prospective return on equity and a stock’s net asset value.  all of these factors should tell us conservatively what a company’s stock is really worth.  The price in the market will be a function not only of its fundamental value, but also of the sentiment that the market attaches to it.

Given this point of view, is there really reason t panic if you are holding stocks with sound fundamentals?  Each trader will have a different answer, so i will not even offer mine.

Anyway, I think a few stocks may be worth the picking in this downturn, perhaps today or maybe sometime next week.  MBT below 55 should be an excellent buy.  DMC at 14 or below should have a good pay-off before 2010 is over.  This downturn should also be a good opportunity to buy AP and AEV on the cheap.   RLC and URC were attractive at last week’s prices; they should be more attractive if they decline by at least 5%.  FGEN and FPH also at 5% below yesterday’s close present compelling value.  For a stock like PNB, nothing fundamental has changed.

Overnight, I read a feature on an ongoing hedge fund conference in San Francisco, CA.  The consensus was most hedge funds were overweight in liquid assets.  By liquid assets, they were referring to the more liquid S&P 500 stocks.  This is probably why there is a sell-off in the DJIA which represents the largest of the S&P stock roster.  Some of the hedge fund speakers were also saying that if everybody was overweight in liquid assets, illiquid assets may be very cheap.

From a global perspective, the Philippine market is one categorized as illiquid.  Keeping in mind that the money flow is going in the direction of Emerging Asia, is it a long shot to bet that funds would be coming our way? We just have to hold our breath.

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May 21, 2010 - Posted by | Uncategorized

52 Comments »

  1. Sir,
    With the current situation, do you think major indices will hit March’09 level. As I recall it was the time when Obama was sworn as US president. Is the Europe issue worse than the US recession? or rather do you think the impact is worse than the US recession? I see that you are looking into Banking, Property and Power for possible shopping spree. Does this mean that it is not wise to bet on Holding Firms?
    Regards, Mark

    Comment by mark anthony | May 21, 2010 | Reply

    • Mark,
      I do not think that the situation in Europe is similar to what happened in the U.S. in 2007-2008. Germany, France and the Benelux countries are fiscally sound. It is really just Greece who is in deep trouble. Spain and Italy are threatened, but their fiscal positions are not as bad. As for sectoral allocation, I will stick to the strong banks and the power sector. For individual property stocks, I will stick to RLC and SMDC.

      Comment by Gus Cosio | May 21, 2010 | Reply

      • Sir, in you last statement in the previous write-up you may, you explicitly said that I should take a long vacation to wait for current indices to drop to Mar’09 levels. I believe you are right. I had to go on shopping yesterday!!! ’09 levels is already history. Many thanks for your thoughts…more power.

        Mark

        Comment by mark anthony | May 22, 2010

  2. Hi Sir Gus,

    I am a bit concerned that if we did not have the election which lifted stock prices momentarily, our stocks would be more lower today. I am thinking would it go down some more to disregard the election effect?

    Comment by jovy | May 21, 2010 | Reply

    • Jovy,
      You have to watch the price movements in the market, not just your own stocks in order to get the big picture. The market could go either way. I do not have a crystal ball and I cannot predict where it will go next week. This is why I am just sticking to my strong stocks. Others may agree or disagree, but that is why we have a market – we have different views. Otherwise, everyone of us would be on one side only. We would not see any trades.

      Comment by Gus Cosio | May 21, 2010 | Reply

  3. Sir by the way, among the power stocks, you did not seem to mention EDC? Any thoughts on this stock? it has slide down from 5.6 to 4.85 despite good earnings. I own some and its only 15% of my portfolio.

    Thanks in advance for your advice.

    Comment by mark anthony | May 21, 2010 | Reply

    • Mark,
      I think EDC trades in a range between 4.50 and 5.50. It is a fundamentally sound stock. You should be trading the range if you like the stock, i.e. buy close to 4.50, sell close to 5.50.

      Comment by Gus Cosio | May 21, 2010 | Reply

  4. Hi Sir Gus!

    I’m curious to know what your usual holding period is? And at what level you usually cut your losses in percentage terms if any?

    Thanks sir! 😀

    Comment by Jack B. Nimble | May 21, 2010 | Reply

    • Jack,
      It varies from stock to stock. I’ve been in and out of PNB for 8 months now.

      Comment by Gus Cosio | May 21, 2010 | Reply

      • Oh okay.. thanks, Sir!! 🙂

        Comment by Jack B. Nimble | May 25, 2010

  5. Sir Gus,

    Let them sell so we could buy some more! hehe kiddin right there to ease the tention 😛

    Comment by JohnTheMan | May 21, 2010 | Reply

    • Hi john, Cut loss and profit taking is an option…If your averaging down or buying on dips then go for it…Gobless and goodluck..

      Comment by clive | May 21, 2010 | Reply

  6. sir meg seems to be holding at 1.2 is it time to buy at this level or is it poised to go down? and sir mpi is at 2.85, is it time to add and play the range of 2.8 to 3.2? thanks and good health to you sir!!!

    Comment by migs-ron | May 21, 2010 | Reply

    • Yes Migs-ron,
      both are at the perceived bottom of its ranges. Just don’t forget to manage your cash.

      Comment by Gus Cosio | May 21, 2010 | Reply

  7. Gus,

    I agree that MBT is a good bank. However, at P70, valuations seem pretty steep (price to book). Moreover, 21% upside is not so compelling considering the the downside. US banks are sputtering and we’re likely to follow suit. Personally, I think PNB is a good play. MBT, I wouldnt touch until P45. Just my opinion though. It may never get to P45. Haha.

    Comment by Jack | May 21, 2010 | Reply

    • Suit yourself Jack. I have high hopes for both MBT and PNB.

      Comment by Gus Cosio | May 21, 2010 | Reply

  8. @johntheman there are only 2 kinds of investor/trader those who make a fortune and those who loss even there shirt. Right now im 100% cash waiting for the perfect time to buy even if it takes 1 year to wait…

    Comment by clive | May 21, 2010 | Reply

    • wow lucky for you if you have 100% cash, does that mean you’ve taken profit before the negative news went out? or you’re already 100% cash for months now? I think at this levels it’s a good time to buy, that’s just me by the way 🙂

      Comment by JohnTheMan | May 21, 2010 | Reply

  9. Sir Gus,

    There is really a panic among PSE investors today. Hope, by next week, the market will rebound. I think only investors who are bold enough to face the uncertainties are left in the market.

    I think AP has a stronger fundamentals than FGEN. AP rebounded to its previous close compared to FGEN (slide down to 10.25). Good decision, I sold my FGEN position at a gain 3 days ago and bought AP.

    Thanks……

    Comment by Romy | May 21, 2010 | Reply

    • I agree, Romy. AP is the strongest among power stockss.

      Comment by Gus Cosio | May 21, 2010 | Reply

  10. Hi sir Gus,
    i heard somewhere that the market’s going to bounce back next week. and just wanted to ask, across all sectors, which do you think would bounce back the fastest? I’m looking at properties since the 1st posting of REIT is on the first week of June right?

    Comment by Mike Tan | May 21, 2010 | Reply

    • Not so Mike,
      I think the earliest REITs will be listed will be late July.

      Comment by Gus Cosio | May 21, 2010 | Reply

  11. Sir Gus,

    At current prices, MEG or RLC? My instincts tells me to go with MEG since it’s trading range is 1.2-1.7. Your insights would be highly appreciated TIA!

    Comment by JohnTheMan | May 21, 2010 | Reply

    • John,
      I prefer RLC.

      Comment by Gus Cosio | May 21, 2010 | Reply

  12. sir, i would just like to know your insights about ICT. ICT is more than 50% in my portfolio because i’ve been trying to average down, and it’s really troubling especially lately that it has been moving inconsistently.

    Thank you.

    Comment by jimmy c | May 21, 2010 | Reply

    • Jimmy c,
      I think can stll make it to 30. Sell it by then. Next time, do not put more than 35% in one stock unless you are just punting it.

      Comment by Gus Cosio | May 21, 2010 | Reply

  13. Hi Sir gus, I made an ALL-IN today..Goodluck on monday..

    Comment by Oscar | May 21, 2010 | Reply

    • Wishing you all the best. I think you’ll make money.

      Comment by Gus Cosio | May 21, 2010 | Reply

  14. Sir
    What do you think of San Miguel’s offer to buy Petron shares? Should we sell? Bought mine during the IPO and pretty much forgot about it since then. Thanks!

    Comment by patman | May 21, 2010 | Reply

    • Patman,
      you should take advantage of the tender offer for Petron by San Miguel. After the tender offer, nobody will be interested in Petron.

      Comment by Gus Cosio | May 25, 2010 | Reply

  15. Hi Sir Gus,

    If The REIT listings would push thru later in the year (hopefully), Is it prudent to move funds from the property stocks that i hold TO their respected REIT listings? I have been holding RLC,AGI since last year, SMPH since Jan 2010. These 3 would add up to 25% of my portfolio (overweight on RLC). Planning to Sell AGI soon…

    What would be the best action?

    Thank you very much Sir for your views, this Blog is very essential to my daily reading!!!

    Comment by jay | May 21, 2010 | Reply

    • Jay,
      REITs and property stocks while similar have different return profiles. REITs will pay you dividends out of rental income. Prpoerty firms will pay you from development returns as well as rental income from commercial units.

      Comment by Gus Cosio | May 25, 2010 | Reply

  16. Hi sir Gus, I think its time to load-up on monday…50/50 Fgen and RLc…..More Power and Godbless

    Comment by Al | May 22, 2010 | Reply

  17. Metrobnk and Pnb go go on Monday….

    Comment by mel | May 22, 2010 | Reply

  18. Sir Gus,

    I currently hold MBT, FGEN and MPI(Planning to sell around 3.2 and buy PNB).

    Since i have extra cash right now, I am planning to buy JGS, RLC and DGTL, but i only want to own two of the three mentioned stocks, if you were me what would be the combo you’d pick? Or if you could suggest a better stock to buy on mondays prices would be highly appreciated. And yes, just like jay, i read your blog EVERY SINGLE DAY! More power Gus!

    Comment by JohnTheMan | May 22, 2010 | Reply

    • John,
      This market will not yet be coming out of this negative sentiment. You must have a longer time frame.

      Comment by Gus Cosio | May 25, 2010 | Reply

  19. Hi Sir Gus,

    What is your view regarding IPO. I think ANI will be having its IPO soon. Trading at 13.50, is IPO for ANI go up (higher than 13.5). I read a lot about its expansion especially abroad, but price did not go up (may affected by el nino).

    Thanks in advance for the insights .

    Comment by Romy | May 24, 2010 | Reply

    • Romy,
      ANI needs to share its story at greater length to investors. I am not sure that it has a wide following yet.

      Comment by Gus Cosio | May 25, 2010 | Reply

  20. Sir Gus,

    Whats your outlook for UBP? should i buy or hold?

    Comment by Mike W | May 24, 2010 | Reply

    • Mike,
      UBP should hold around 40. Between UBP and MBT, I prefer MBT.

      Comment by Gus Cosio | May 25, 2010 | Reply

  21. Hi Gus,

    at todays closing prices which of the ff issues offers the most attractive valuation and upside?

    MBT @ 53.5
    MPI @ 2.8
    DMC @ 15
    RLC @ 13.25
    AP @ 15.75

    Thanks in advance for the insights and happy birthday to you.

    Regards…

    Comment by mike | May 24, 2010 | Reply

    • Mike,
      My view on MBT is that it is cheap compared to its peers. Upside is 70.
      MPI is in a range – 2.65 to 3.25
      DMC is cheap. I see the stock going to 24
      RLC is cheap at 13.25. I see it going to 20.
      AP has very strong earnings. it should be worth at least 18.

      Comment by Gus Cosio | May 25, 2010 | Reply

  22. Sir Gus,

    Got AP @ 15.75, JGS @ 12.25, PNB @ 29.5, What are your insights regarding this purchase, thank you sir! More Power and Happy Bday! 🙂

    Comment by KennyV | May 24, 2010 | Reply

  23. Happy Birthday Sir Gus! More power and more birthdays to come! We (me, my brother and my colleagues are avid followers of your blogs) have a gift for you, let me know when you are close to UP or Ateneo (via email perhaps) and we will drop by to hand it over. Thanks for all the information here, it is highly appreciated ! 🙂

    Comment by Chris Monterola | May 24, 2010 | Reply

    • yeah mr gus, happy birthday, let me know if you love danggit…hehe thanks for the blogs and opinions.

      Comment by draco23 | May 24, 2010 | Reply

      • thanks, Draco,
        I avoid bacon so I eat danggit instead.

        Comment by Gus Cosio | May 25, 2010

  24. Belated happy birthday, sir!

    Comment by oliver mia | May 24, 2010 | Reply

    • Thank you, Oliver.

      Comment by Gus Cosio | May 25, 2010 | Reply

  25. Happy Birthday sir Gus!

    Comment by charmagne | May 25, 2010 | Reply

    • Thanks, Charmagne.

      Comment by Gus Cosio | May 25, 2010 | Reply

  26. Happy Birthday!

    Comment by Bobby | May 25, 2010 | Reply

    • Thanks.

      Comment by Gus Cosio | May 25, 2010 | Reply


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