Gus Cosio says so

Ideas on the Philippine Stock Market

The other G

The Philippine economy expanded 7.3 percent in the first quarter.   In a Bloomberg survey of 15 economists the median forecast was for a 4.4 percent growth.  What this tells me is that economists can be totally out of the ball park even as they closely monitor their favorite indicators.  What the GDP growth rate affirms is that there is good reason for the Philippine stock market to perform better that the developed markets.  Ours is not so small an economy, although we are just half the size of that of Greece’s.  However, it is not so small that we need to be so dependent on other economies.  It is true that 40 percent of our economy is  export oriented, but almost half of those exports are shipped to our neighbors whose economies are even more robust that ourselves.

What this give us is confidence that in spite of the woes in the global markets, we need not be as battered as they are.  Personally, I am not that worried about the European situation simply because the sub-prime crisis of 2008 was much larger than this.  Spain and Ireland have not yet been threatened wioth default.  Banks and investors have just become preemptively cautious.  It is not the panic that we saw when the commercial paper and the global inter-bank markets dried up in September 2008 right after Lehman Borthers collapsed.  While I see reason for Eurpoean and U.S. financial institutions to be worried, I view it as an impetus for unpopular and tough measures to be take.  I am sure that the Germans will be very tough on Greece, and the rest of Eurpoe will take the hard-line on whatever financial support is being mustered.

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May 27, 2010 - Posted by | Financial markets in Asia

43 Comments »

  1. Good PM sir Gus,nice article from our excellent Q1 GDP. Sir gus could you possibly teach me where to search more about Philippine bonds & the whole bond market as I think majority of Filinos are still very underinformed with it unfortunately that includes me.What books do you recommend I read or websites that can I visit to learn more about bonds.

    regards
    steve

    Comment by steve | May 27, 2010 | Reply

    • Steve,
      It would be useful to look at the Asian Development Bank site on the asian bond market initiative.

      Comment by Gus Cosio | May 31, 2010 | Reply

      • Good evening sir Gus, thanks for the reply

        Comment by steve | May 31, 2010

  2. Great News on the GDP. That will put a lot of confidence back in the market. Hope we have a good day tomorrow. Cheers!

    Comment by James T. | May 27, 2010 | Reply

    • You’re right James. Fund managers cannot ignore a 7.3% GDP. For the Philippines GNP is also significant because of the absolute amount of net factor income from abroad. GNP grew by 9.5%.

      Comment by Gus Cosio | May 28, 2010 | Reply

      • Wow. Got any breakdowns of this stat? It maybe because of the rush of completion and frontloading of gov’t projects in the 1st Q before the election season started.

        Comment by James T. | May 29, 2010

  3. 100% bullish tomorrow….3 percent up…..Newbies time to buy and hold….

    Comment by Yulla | May 27, 2010 | Reply

    • Yulla,
      be sure to wacth prices first before doing anything.

      Comment by Gus Cosio | May 31, 2010 | Reply

  4. Sir, with the goodnews on Phil GDP and assuming Europe crisis is tamed, what would be your top 3 sectors to look into. With MVP in Meralco, do you think MER as a company, value roadmap will follow TEL’s tale? Seems most of the companies that MVP touch transform from good to great companies.

    Regards.

    Comment by Mark Anthony | May 28, 2010 | Reply

    • Mark,
      I still like banks, power and infrastructure.

      Comment by Gus Cosio | May 28, 2010 | Reply

  5. Sir gus,

    What are your thoughts with JGS?

    I got it because i like it’s holdings: RLC, JGS, DGTL, Cebu pac, Robinsons bank. As they say, if you cant afford the pieces buy the whole. Looking forward on your insights TIA! 🙂

    Comment by JohnTheMan | May 28, 2010 | Reply

    • JGS is a good stock to keep in core portfolio at the moment. It does not look expensive, given the businesses it is in. From a trading point of view, I would consider it a buy.

      Comment by Gus Cosio | May 28, 2010 | Reply

      • Sir Gus, John,

        Allow me to mention that while other conglomerates are repositioning for growth, it seems to me that JGS portfolio is already positioned to take advantage of improvement in economy.

        Geographically, it continues to improve percentage of revenue coming from Asia via URC and maybe Ceb Air.

        Thanks

        Comment by alex | May 28, 2010

      • I bought JGS more than 3 years ago near its price now (at the peak too). I don’t think anything has fundamentally changed since then, just waiting now (the eternal optimist) for it to make a run and will unload to fix my rookie mistake. Had high hopes for the growth of Digitel and Cebu Pacific then, the growth story still seems intact but the margins are not growing as quickly. Their portfolio is too biased on consumer spending to be at my comfort level for long-term growth.

        Comment by Mal | May 29, 2010

  6. Sir Gus,

    Which of the following stocks do you think has the best fundamental; LIB, ISM, WEB?

    Comment by Jun | May 28, 2010 | Reply

    • Jun,
      I am not familiar with LIB. WEB is an e-commerce and gaming play while ISM is specialized telco play. I would say both WEB and ISM have acceptable fundamentals.

      Comment by Gus Cosio | May 31, 2010 | Reply

  7. Hi Sir Gus,

    It seems a lot of investors is interested with JGS. It has a good performance today (up by 13%) volume is also great. I am just wondering why URC, DGTL, etc is not performing in the same step as JGS.

    One thing that comes in my mind, is that it is still cheap though it almost reach its 52-week high. This is because it holds companies with good fundamentals (or it has something to do with the upcoming IPO of Cebu Pac?). Is it possible that it will break its previous highs?

    Comment by Olive | May 28, 2010 | Reply

    • Olive,
      I think the theme for JGS is for the price to catch up with RLC and URC as both have gone up relentlessly over the past 14 months. I do not know if it can break recent highs.

      Comment by Gus Cosio | May 31, 2010 | Reply

  8. Hi Gus,

    I was wondering whether there are free company analyses online that come from the big brokers and financial institution. I only know that of Bloomberg and Business World. Would you know where we can read company reports from the likes of JP Morgan, Deutsche, etc?

    Thanks!

    Comment by richard | May 28, 2010 | Reply

    • Richard,
      Houses like JPMorgan and Deutche only provide research to their clients on a timely basis. Others may be able to access reports through friends who have received the reports.

      Comment by Gus Cosio | May 31, 2010 | Reply

  9. Sir Gus,

    I trade with COL (CitisecOnline), a friend of mine told me that it is not a member of good standing at the PSE, how true is this? I tried to search online for a list of good standing brokers at the PSE but couldnt find one. Thanks in advance sir.

    Comment by JohnTheMan | May 28, 2010 | Reply

    • I am trading with COL also, however I believe that (COL) is in good standing. Its services is good (trading is fast), its fundamental analysis and the guide that being posted in its website. Income of COL is good for the first quarter as posted in the PSE. I dont know how did your friend came up with his idea.

      Comment by Olive | May 28, 2010 | Reply

    • Just curious. The leading online stockbroker in the Philippines is not in good standing with the PSE? what did your friend mean exactly?

      Comment by Jack B. Nimble | May 29, 2010 | Reply

      • I think that it is wrong information that COL is not in good standing with the PSE.

        Comment by Gus Cosio | May 31, 2010

    • Yeah, i think what he told me was a wrong info, he told me he just heard it from somebody else too. Most probably it’s a false rumor.

      Comment by JohnTheMan | May 31, 2010 | Reply

  10. Hi Sir Gus,

    I can’t figure out whether MPI’s plan to exit the Harbor partnership with the Romero’s is a plus or a minus for the stock. Any insight? I’m guessing it’s neutral for the stock and a negative for port operations in the country.

    Comment by Mal | May 28, 2010 | Reply

    • Mal,
      They may be shedding assets to raise cash. Perhaps, they are consolidating their acquisitions.

      Comment by Gus Cosio | June 1, 2010 | Reply

  11. Thank you Mal for your comments. I asked myself that question. Whats the difference between 3 years ago and now for JGS. Its price is almost at peak now.

    3 years ago its all a matter of valuation, now it seems to be backed by earnings. I suggest please study the annual report for 2005 and 2006 and compare it with 2009 and first quarter of 2010. Now, please take a look and compare at the earnings, revenues and where each company was in 05 and 2010.

    I believe things does not happen overnight in business sometimes. Foundations have to be built. But then again as Sir Gus would say, that is why theres buyer and seller in the stock market.

    Regards

    Comment by alex | May 29, 2010 | Reply

    • PS, to all fellow rookies out there.

      I remember one book, the Alchemy of Growth (practical insights for building the enduring enterprise) by David White.

      A bit old but may give you some things to read.

      thanks

      Comment by alex | May 29, 2010 | Reply

    • Thanks for the reminder too, Alex. I wasn’t into reading annual reports then. I was just gauging performance via street prices and consumption. Back then, C2 was becoming a hit – C2 is now synonymous to iced tea. Back then, Sun Cellular always had no signal, nowadays Sun usually gets good reviews when it comes to broadband wireless. I thought JGS then was a screaming buy because it had nowhere to go but up, I was just disappointed with the way the stock price subsequently tanked after I bought. Up to now, I still don’t understand what happened to JGS.

      Comment by Mal | May 30, 2010 | Reply

      • Hi Mal,

        The US subprime crises bought several losses to URC, Ceb Air and JGS.It resulted in big “unrealized foreign exchanged losses (UFL), marked to market losses for investments in bonds and stocks and losses on fuel hedges.

        These losses are what took my notice for JGS. The US crises is abnormal in many ways and in short it will not last forever. The world economy will rebound just as I believe that although stock prices will fall, when fundamentals are intact, it will rebound by itself. I think JGS is a classic point case.

        Seldom can you also find a company that invests heavily in financial assets such as URC and JGS other than their core operations. And properly managed those financial investments will bring some returns just as you and I have investments in the stock market while we continue to perform our daily means of living.

        UFL partly arise from foreign exchanges transactions restated to reporting currency but are not actually losses until such time that the transaction was done,except interest payments. Say a 2012 dollar loan will report a loss in 2010 when the exchange rate moves against it but its on paper only.

        And marked to market gains are again unrealized until such that the assets are sold or the issuer of the debt or stock becomes bancrupt.

        And fuel hedges, fuel goes up in several weeks and suddenly went down again. Quite difficult to hedge against that. But I remember Sir Gus once said fuel adjustments in air travel can be added as fuel surcharge if properly planned.

        There are stocks that are sometimes mispriced by the market for one way or another. I think that if one study those things, the better return will actually come from there.

        Yes, when the general market goes up, all the stocks tend to follow but upward movements will be limited just as we dont think that PSEI will go up to 5000 in the near term.

        Ive heard in CNBC comments from somebody like this. Everything in the stock market can be properly valued, hence properly priced in the stock.But there are companies that are behind the radar of some people or are not closely followed. This is where the mispricing comes from.

        Finally, may I say again that these are my personal views. And Sir Gus would say, for investors to have peace of mind they must be comfortable with the stocks they buy into for the longterm.

        Thanks for your time.

        Comment by alex | May 30, 2010

  12. Is it safe to say that its time to buy?

    Comment by gerald | May 31, 2010 | Reply

    • gerald,
      the safest time to buy is where your level of comfort is.

      Comment by Gus Cosio | May 31, 2010 | Reply

  13. Sir Gus,

    I would like to share my funny experience this morning, today is my Bday, and when my friend asked me: “What’s your Bday gift for yourself”, i answered: “I bought additional shares of PNB” impulsively simply because it was the first thing i bought for my self this morning. Haha!

    But when you think of it, Stocks/Mutual funds could be a very wise gift to someone because they are assets that appreciate in value over time, and gives income in form of dividends. Unlike gadgets,toys etc it losses ~20% of its value the moment you purchased it.

    Comment by KennyV | May 31, 2010 | Reply

    • Yes Kenny, I’ve been encouraging parents, ninongs, ninangs, lolos and lolas to give mutual funds as birthday and most specially graduation gifts for young adults. Hopefully, they will make monthly additions and enjoy the rewards of peso cost averaging in their portfolios.

      Comment by Gus Cosio | June 1, 2010 | Reply

  14. Great gift! The selling of the 28-percent equity share of Allied bank in Oceanic Bank is in final negotiation, PNB loyalists might be hearing the great news in two-three weeks time. Formality with merger might push through earlier than expected.

    Comment by Ric Lopez | May 31, 2010 | Reply

  15. Hi Sir Gus,

    How would you consider MEG for this period of time? Does it have the possibility to raise up to 1.4 at this time? Sir, I concentrated my portfolio to MEG. Is this a good decision?.Hope to have some advice from you sir. Thank you very much!

    Comment by Chad | May 31, 2010 | Reply

    • Chad,
      MEG is pretty much a trading stock. I think it will likely trade within the 1.20 to 1.40 band for the next 2 to 3 weeks until 2Q2010 earnings start to be apparent.

      Comment by Gus Cosio | June 1, 2010 | Reply

  16. I think many will take profit today or tomorrow….Dow may start going down next week….

    Comment by mark | June 1, 2010 | Reply

  17. Sell the rally ……buy when Dow falls more than 200 pts next monday…

    Comment by tristan | June 1, 2010 | Reply

  18. Sir Gus,

    Any thoughts about DGTL?

    TIA 🙂

    Comment by Jojo | June 1, 2010 | Reply

    • Jojo,
      Many analysts are not too keen on telcos because it is no longer a growth sector. My own opinion is that DGTL has a better growth potential than TEL or GLO because it is still small and can claw away market share from the two bigger ones. The data shows that it is gaining market share from GLO and not TEL.

      Comment by Gus Cosio | June 1, 2010 | Reply

      • Sir Gus,

        somebody said before, that the value of BPC’s Bayantel is its ownership of certain trans national cable system. Kindly expound further on this?

        Thanks

        Comment by alex | June 1, 2010


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