Gus Cosio says so

Ideas on the Philippine Stock Market

Ignoring sentiment

6:45pm  Wednesday 23 June 2010   Philippine Stock Exchange Index  3342.97 (-0.26%)

The index came down again today with TEL and ICT moving down further.  Heavyweights AC and ALI contributed some points to the decline.  Even some of my favorites such as AP and EDC are down.  Why then am I not worried?  I guess with DMC and SCC being strong as they are, I cannot generalize that the market is broadly weak.  Other stocks that are high on my buy list such as URC and MER were also firmly bought today.

The market has become rather selective which is a good sign because selective buyers usually are firm hand buyers.  They are selective because they intend to hold the stock until it realizes its full value.  Of course, if the major markets will always bring ripples and even waves to local stocks, but we must not lose perspective of domestic conditions.    In a statement to Bloomberg News today, Economic Planning Secretary Augusto Santos that there are solid indications of underlying strength in the local economy.  Philippine economic growth may exceed the target the government set with manufacturing and service businesses being boosted by global recovery.  Second quarter growth may match or exceed the first quarter’s 7.3 percent pace.  The fiscal crisis in Europe has little effect on the Philippine exports to the region or on remittances from overseas Filipinos.  The government last week raised this year’s gross domestic product growth target to as much as 6 percent, from a previously forecast 3.6 percent after reporting the first quarter expansion, which is the fastest since the second quarter of 2007.

Another factor not to ignore is the fact that sentiment of businessmen and investors are usually upbeat after an election.  That sentiment is being widely felt today.  If that translates to some concrete foreign direct investments into the country in the next six months, GDP growth may really exceed expectations.  Should all of these materialize then saying that the market could be bullish would in fact be an understatement.

What it would boil down to is money management on the part of investors and portfolio managers.  The game will be won by those who can wisely allocate to the market within the ebbs and flows of extreme sentiments.  What I am trying to say is that one should not be overly bullish when everybody else is nor should be overly bearish when people are running scared.  Based on today’s price action, I think players are being quite deliberate and very cerebral in their buying and selling activities.  To my mind, we are seeing market conditions that is mature and may not be subject to panic even when adverse news come out from the developed market.  We have been outperforming Wall Street and Europe so far this year.  We may just follow it through for the rest of the year.

Advertisements

June 23, 2010 - Posted by | Financial markets in Asia

60 Comments »

  1. Hi Gus,

    BPI seems to be lagging behind so is AC vs its peers, is there any problem with the Ayalas lately?…..how about IMI…what’s your view on this stock? thanks and more power..

    Comment by MIKE | June 23, 2010 | Reply

    • Mike,
      There is nothing wrong with the Ayalas except that they have recently looked like being stagnant. Other business groups such as the Aboitizes, the Sys, the Gokongweis, the Tys, Manny Pangilinan and the tandem of Andrew Tan and George Yang have been showing more dynamism that the highly esteemed Ayala family.

      Comment by Gus Cosio | June 24, 2010 | Reply

  2. I Love SCC ….6 pesos a year dividend….My Holding period is forever….bought @ 58..more than 10% div. yield…

    Comment by frankie | June 23, 2010 | Reply

    • Good for you Frankie. when SCC hits 100, consider taking some profits, just for the discipline of getting some cash in every now and then.

      Comment by Gus Cosio | June 24, 2010 | Reply

  3. Hi Sir Gus.

    What’s your view on Philex? Based from the news, it expects 10% income hike this year and a positive outlook on their Silangan project. Is it a good time to buy shares today? Thanks.

    Comment by Bach | June 24, 2010 | Reply

    • Hi Bach,
      I think it is good to buy PX now. It went to as low as 10.50 a few weeks back. I think the weakness is behind us now.I think PX should be worth at least 14.

      Comment by Gus Cosio | June 27, 2010 | Reply

  4. Sir Gus,

    AGI has just broken it’s support. Any ideas on why there is a sell off?

    Comment by Bonfire | June 24, 2010 | Reply

    • I know not why, Bonfire. I’d wait till it settles down, but I’d come back to buy it. I still believe in the gaming story.

      Comment by Gus Cosio | June 27, 2010 | Reply

  5. Sir Gus,

    I entered EDC @ 4.7 and AGI @ 5.4 sir. What do you think with these prices sir Gus? TIA!

    Comment by KennyV | June 24, 2010 | Reply

    • Kenny,
      I think those price levels are within range. I think we can still be constructive in the market.

      Comment by Gus Cosio | June 24, 2010 | Reply

  6. Sir Gus,

    How do you treat dividends? Do you use dividends to lower cost of stock? I’m assuming for long term investment, dividends could pay for cost of stock bought and becomes income earned.

    Thank you.

    Comment by thewingedpalate | June 24, 2010 | Reply

    • Dividend is like the interest paid on your deposit. Either you use it as cash or reinvest it in your portfolio.

      Comment by Gus Cosio | June 24, 2010 | Reply

  7. “Beating the Gun” Globe……MBT 60….yahoo….

    Comment by Fritz | June 24, 2010 | Reply

  8. HI sir Gus,

    Sir may I ask your insight on EDC and DGTL? Especially the sudden drop in DGTL today. Thank you so much.

    Comment by jaayem | June 24, 2010 | Reply

    • Jaayem,
      I am quite positive on EDC. I think that the stock is worth more than 4.55 although I bought it at 4.65 on the average. DGTL should still be okay. I may be a brave move, but buying some on weakness may prove very profitable in a few weeks.

      Comment by Gus Cosio | June 24, 2010 | Reply

      • Thank you sir Gus, I am out of the office today and Im surprise what happen to DGTL. My EDC average is 4.70 and its 30% of my portfolio. Small portion on DGTL and planning to average down tommorrow. Thank you so much and more power.

        Comment by jaayem | June 24, 2010

  9. Best time to buy after end of month..buylist DMC,AP and Globe.

    Comment by Ragingbull | June 24, 2010 | Reply

  10. Hi Sir Gus,

    How can I know that a stock is being jockeyed, I’ve been following ORE price for sometime and I believe it is being jockeyed, Although a lot has been saying that it has a potential in the future, SRO etc. What are the reasons why they are jockeying stock prices. Do you think also SCC will be jockeyed so that many will take advntage of the SRO.

    Thanks coz I am just a newbie and need to understand this

    Comment by Olive | June 24, 2010 | Reply

    • ORE is just like GEOgrace or LIHC..(potential in the future)…SCC is very different mining actually happens and they are operating Calaca Power Plant…

      Comment by Mr.lim | June 25, 2010 | Reply

    • Olive,

      In addition to what Mr Lim said, jockeyed stocks are manipulated for the sole purpose of making money. Thus one would be wise to take great caution when trading said stocks. IMHO, these issues should be merely traded and not held for investment as you could lose a huge percentage of your money.

      To know more about which stocks are being jockeyed, better google JAP and Chucky stocks. JAP refers to Jerry Angping and Chucky is Chucky Arellano. There might be other jockeys but I am only aware of these 2 as they are the most prominent in the 2 stock forums I follow.

      Comment by richard | June 25, 2010 | Reply

      • Remeber reading that PSE found violations for Angping and Associates to the effect that “shares are being crossed creating impression theres actual buying involve” Bear with me on the exact wordings. I noticed this sometimes on TUNA shares.

        Thanks

        Comment by alex | June 26, 2010

  11. Good pm Sir Gus,

    i just bought DGTL today for P1.60… hope it was a good move.

    Comment by tatels | June 24, 2010 | Reply

    • Never trade against the trend..bearbull

      Comment by mr.bearbull | June 24, 2010 | Reply

      • I think its important to get a feel of the buyers and sellers behind a trend. Many times, traders pushed prices up only to unload it at the slightest concerns. There maybe a trend going up but it is weak. Follow this trend, buy near the high and you maybe left holding the empty bag.

        Institutions and long term buyers buy conservatively, sometimes on corrections. but they are the ones with the deep pockets and longer investment horizons. hence trends supported or created by them are stronger.

        Thanks

        Comment by alex | June 26, 2010

  12. Hi Gus,

    What is your take on SECB? is it also good as MBT and PNB?

    Comment by Son | June 24, 2010 | Reply

    • Son,
      SECB is a stock that I am constructive on. Intrinsically, it has the highest ROE among banks. It has gone ahead so far already so be careful of the corrections.

      Comment by Gus Cosio | June 25, 2010 | Reply

      • Sir Gus,

        SECB is strong on corporate banking, PNB and MBT are diversified and the two seems to be trying to get revenues from outside of Phils which is I think a good move. MBT even seems to engage in power generation and mining. Again however, these may have been factored on the share prices already so one has to check those.

        Thanks

        Comment by alex | June 26, 2010

  13. Hi Sir Gus,

    I got DMC at 18.25.. now its at 17.75. is there still hope??? And how come FGEN is not going anywhere beyond the 10.25 level?
    Also Im just curious why EDC is seems to be trending down?

    THank you Sir!

    Comment by Jude | June 25, 2010 | Reply

  14. Hi Gus,

    Last night, the DOW closed 145 points lower. Looking at the technical side, it breached the 200 day M.A, and closed below the 10200 support. I was expecting our market to follow suit, opening lower and getting weaker as the day progresses. Instead, we opened in the negative but has only gotten stronger. At the open, we were much better off compared to the our neighbors and now, we are standing out.

    I know that domestically, the listed companies are doing tremendously well. However, I can’t help but be cautious in the very short term. I’m thinking why buy now when the odds might be for prices to go down a bit. I would like to hear your thoughts on this sir.

    Thanks

    Comment by richard | June 25, 2010 | Reply

    • richard,

      In my opinion, if you keep waiting for prices to go down before entering chances are if the prices goes up, you wont enter because you believe it will go down in the near term or if the price does go down, you’re still not going to enter because it might go down some more. I think the better thing to do in this case is to look for good undervalued companies of w/c you are confident that will increase in value a year or two years from now, then identify the price support and resistance, and enter near the support, if the price go down and you have extra money buy some more, if you dont then just be patient and hold on to your sit because over the long run, history has proven that investing in quality stocks provide greater returns than other instruments. Much more if you got these quality stocks at a discounted price! right?:)

      Comment by JohnTheMan | June 25, 2010 | Reply

    • Dear Richard,

      I read before and sinced believed that ” there are always things to worry in any part of the world”. there will never be a perfect investment environment in our lifetime. Nobody knows what direction the stock market and the exchange retes will take in the short term. Demand and supply, nobody will clearly know that.

      There is no point worrying over things that are above or beyond our control. Therefore, we can just concentrate on things that are quantifiable to us. That is, understanding how the specific company we invest in is doing now and maybe doing 2 years from now.

      Our buying may not be at the lowest point in a stock price but it doest not mean that we will not have reasonable returns later if the company we buy into are profitable.

      Regards

      Comment by alex | June 26, 2010 | Reply

      • Alex, John, Richard,
        You guys are correct in your views and observations. there is no substitute for good fundamental both from the standpoint of the stock (the company behind it) and the macroeconomy. No matter what critics say about the latest economic figures, they are credible and corporate results and the figures confirm each other. On the other hand, market sentiment will always have a sway. We have to be reflective on whether the sentiment is just giving us a signal to buy or to sell or whether it is telling us that it is time to take a strategic retreat. It is, therefore, indispensable to keep a good handle on the information flow on all three levels – the stock, the economy, and market sentiment.

        Comment by Gus Cosio | June 27, 2010

  15. Hi Sir Gus,

    What’s your insight on EEI? I’ve been holding on to this stock for quite some time now, waiting for a breakout. Any inputs would be appreciated.

    Thanks!

    Comment by Jun | June 25, 2010 | Reply

    • Hi,

      Read that EEI is trying to study to enter in small renewable energy to have revenues that yield steady yearly returns in constrast to its construction revenue which are cyclical and one time in projects. This highlights EEI weakness. If your investment horizon is 2 to 5 years you will look for some revenue contribution that are steady yearly. Food, telecoms, the malls, electricity, even interest revenue by banks, this will occur every year.

      First step to solve a weakness, recognize it. EEI seems to have saw it but how it acts to strengthen it will affect it a lot.

      Thanks

      Comment by alex | June 26, 2010 | Reply

    • Hi Jun,
      when i first spotted EEI, it was only 2.30 and it even went down to 2.10. I took profits around 3.20 so my view is a little jaded. It had traded to a high of 4.15 and my knowledge of how this stock trades tells me that it will not move up for some time to come. It is what the English or Scottish fund managers call a jobber’s stock which you can stag once in a while.

      Comment by Gus Cosio | June 27, 2010 | Reply

  16. hello again Sir Guz,

    you were absolutely right about AGI’s income, it came out positive although price action did not reflect it for the moment, i wonder why foreigners are more interested on MEG rather than AGI for the past few days?

    Comment by ENRICO FERNANDEZ | June 25, 2010 | Reply

    • Enrico,
      i don’t really know why. perhaps they’re more interested in the pure property play. AGI has food and beverage, gaming, hotels and property. It is not a pure play on property nor gaming. It looks to be a conglomerate play which is complicated in the view of portfolio managers.

      Comment by Gus Cosio | June 27, 2010 | Reply

  17. hello again sir, my hats off to you on calling MBT right. i remember you mentioned that it might challenge 60 soon and wow, it actually went to 63, Good call sir.

    Comment by ENRICO FERNANDEZ | June 25, 2010 | Reply

  18. When Reward is at its Pinnacle, Risk is near at hand…..Jack Bogle

    Comment by Willy | June 25, 2010 | Reply

  19. all eyes on PNB now, added a lot at 29 today…..over ripe na pag nag break 32 eh stairway to heaven na 45

    Comment by MIKE | June 25, 2010 | Reply

  20. sold my pax and ip unloaded some fli, ict. shifting to fgen and dgtl? any comments sir gus?

    Comment by gerald | June 25, 2010 | Reply

    • agree 110 percent

      Comment by mike | June 26, 2010 | Reply

  21. sold all my Mpi and EDC bought DGTL @1.58…..TP 1.68..

    Comment by beber | June 26, 2010 | Reply

    • Also bought Dgtl 1.6 yesterday…selling @1.7..Gudluck to all DGTL holder/traders…

      Comment by vel | June 26, 2010 | Reply

      • Vel,
        This might be a crazy notion but i think DGTL could go as high as 3.

        Comment by Gus Cosio | June 27, 2010

      • ok thanks sir gus, i’ll hold it longer…

        Comment by vel | June 27, 2010

    • Good luck.

      Comment by Gus Cosio | June 27, 2010 | Reply

  22. Hi Sir,

    I just discovered that my employer gives loan benefits to us at 8% per annum. I was thinking on using this and placing them in my stock portfolio. I computed the interest vs. the gains and its really not bad (based on my history of trading profits). Is this a sound move i can take?

    Thanks!

    Comment by Joshua | June 26, 2010 | Reply

    • joshua,
      If the term of the loan is one year or more, I would recommend it; especially if it is monthly amortized. It is like putting away savings monthly. But do not buy speculative plays with it. Buy only sound stocks. By the way, TEL at these levels is yielding around 9% and the PE is low. It may not move a lot higher but I think downside is limited. the dividend alone can pay for your interest. the future capital gain will be the bonus.

      Comment by Gus Cosio | June 27, 2010 | Reply

  23. Hi Gus, What is the fair value of DMC, RLC and URC?

    Thanks in advance..

    Comment by mike | June 27, 2010 | Reply

    • Hi Mike,
      These are my estimates and you have to view them with caution because I have my biases. DMC – 28, RLC – 20, URC -35. These numbers are products of my reading some research reports, talks with fund managers and some stock screening metrics we use on market stats.

      Comment by Gus Cosio | June 27, 2010 | Reply

      • Thanks Gus, I just wanted to compare your numbers with what i have.. I agree with you that DMC has the highest upside potential, nothwithstanding that it’s already an 8-bagger since is 09 lows…

        Follow-up question on EDC,, it was reported today that it will be paying it’s 22B yen Miyazawa loan tomorrow.. What do you think is it’s impact on its share price?

        Comment by mike | June 27, 2010

      • Mike,
        I view pay down in debt as positive. It leaves a lot more of earnings for the stockholder instead of ceditors.

        Comment by Gus Cosio | June 27, 2010

  24. Avoid all basura stocks….If you want to buy just trade them never hold it for long term….

    Comment by nikko | June 27, 2010 | Reply

    • Nikko, If I might add, if you happen to trade any basura stock, cut or losses when the run is over. no point in having your losses mount up.

      Comment by Gus Cosio | June 27, 2010 | Reply

      • Sir Gus, RFm/Sfi moves like a basura stocks and also ASIAtrust…

        Comment by nikko | June 27, 2010

      • Nikko,
        RFM and SFI are not really basura stocks. They are just stocks with lousy performance because the underlying companies have been dismal in their earnings. If they can turn things around, they may have some promise. Basura stocks are those that are without operations at all. They are simply being played because someone wants to do a backdoor listing or perhaps inject a new business and use whatever money they make ramping the stock for new business. Basura stocks are those that have nothing at all in them but a rumor that it will be jockeyed. Good stock do not really need a jockey. Investors get to recognize their value.

        Comment by Gus Cosio | June 27, 2010

  25. Hi Sir Gus,

    At 1.40, is MEG still a good buy?

    Comment by Sonn | June 29, 2010 | Reply

    • Sonn,
      I view MEG as a trading stock, so it really depends on the momentum. Unfortunately, I haven’t been following MEG lately. I’ll be more comfortable with AGI which is the holding company which controls MEG.

      Comment by Gus Cosio | June 29, 2010 | Reply

      • Thanks sir Gus, I’ll keep that in mind. Do you think NI got any potential?

        Comment by Sonn | June 29, 2010


Leave a Reply

Please log in using one of these methods to post your comment:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: