Gus Cosio says so

Ideas on the Philippine Stock Market

testing the font

I do not know what happened last night when I posted.  All of a sudden, the fonts were smaller.  It could be that the servers of wordpress had gotten very sleepy since it was past 11pm when I posted.  Anyway, I hope the fonts are normal now.  Sorry for the inconvenience.

For your easy reading, I am re-posting last night’s blog here for easier reading.

Arguing against an idea

11:00pm  Sunday  27 June 2010

According to an analyst that I follow, the DJIA “failed at its declining 50-day moving average.Even worse for the bulls was its failure to attract buyers at last week’s breakout area and 200-day moving average near 10,250. This area may become resistance on a bounce moving forward, so traders should keep an eye out. While DJIA closed flat on Friday, it was well off the lows that could be showing some buyers in the low 10,000. This was where the majority of trading volume occurred in the past few weeks and could represent an area of support.”

He further wrote that:”The markets are at an area where traders need to show patience. Overall, most of the market indexes are right in the middle of their most recent highs and lows. The weakness shown this week was not promising at all, but there is the possibility that the markets will form a higher low in this area. This would be a positive sign, and could cement the recent area as a more important intermediate low. However, it is still too early to interpret the possibility that this will happen, and there is still the real possibility that the markets will flounder in this area for a while before breaking much lower. This is why traders need to show patience, and allow the markets to fluctuate until more clear patterns emerge. While it is tempting to try to pick the bottom of this pullback, traders are probably better served waiting for the markets to stabilize and present a better opportunity.”

Local traders may be wondering why our market is slightly out of sync with the weakness in the global markets of the past week.  My only answer is that there are quite a number of special situations which are too compelling to ignore.  MBT for instance, as a proxy play for the economy, may just exceed expectations.  While this presents a very strong possibility, the market may just have moved ahead of itself already.  I would not chase MBT at this point and try to wait for a consolidation.  I feel the same way for AEV, AP, URC, RLC, and even DMC.  I would use any steep correction, nevertheless, to accumulate these stocks in the coming days or weeks, and I will be patiently waiting.

For stocks like DGTL which to my mind has gathered a lot of following and momentum, I would take bold moves and ride the momentum.  For the likes of PNB, EDC and FGEN, I think that they remain at the low-end of their recent range so I do not think it very risky to position trades for these issues.

As the man who analyzes the developed market say, the real virtue in this market is patience.  Ask any businessman, patience is what you really need for a sustained stream of profits.  I wouldn’t argue against that idea.

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June 28, 2010 - Posted by | Financial markets in Asia

38 Comments »

  1. thanks sir!

    Comment by lilfonts | June 28, 2010 | Reply

  2. Bought a lot of Digitel today @ 1.54 hoping for an end of first-half rally …

    Comment by andy | June 28, 2010 | Reply

    • Good luck, Andy. You may make money yet.

      Comment by Gus Cosio | June 29, 2010 | Reply

  3. Hi Sir Gus,

    May I know your fair value of EDC? I have been buying at its current level since it corrected so much already. Just wanted to have some more guidance when to sell.

    God Bless and more power!

    Thanks in advance!
    Cris

    Comment by Cris | June 28, 2010 | Reply

    • Cris,
      You have to understand that valuation measures are very subjective. Valuing a stock is both a science and an art; valuation estimates are merely used to guide you in comparison to the price it is trading in the market. I have read valuation as high as Php 6 per share, something that I agree with.

      Comment by Gus Cosio | June 29, 2010 | Reply

      • Hi Sir Gus,

        I noticed sir that some stocks have high NAV but low PE while some have opposite, that is, they seem fairly valued based on NAV against market value but they have high earnings growth and therefore low PE.

        Base on your experience sir, which one does analysts use in cases like this?

        Thanks

        Comment by alex | June 30, 2010

  4. Hi Sir Gus,

    Would you believe SCC is a good long-term buy? From it’s peak last weak, the trading becomes weak. It’s price for the SRO is 74, do you think its price will go down to this price or even lower after the SRO exercise. Also i’m hesitant to take advantage of the SRO, Im worried it will plunge down.

    Thanks in advance

    Comment by Olive | June 28, 2010 | Reply

    • Olive, SCC is a very good stock. the company is projecting increase in earnings.. even at below 80, I will be a willing buyer.. I think the stock could go up to 100 even before the end of this year.. Caveat..

      Comment by mike | June 28, 2010 | Reply

    • Olive,
      From what I’ve seen of SCC, you should not be afraid of it coming down at all. You should actually pray that it comes down so that you and I can pick it up cheap. Otherwise, this stock will go through the roof on account of solid and growing earnings. If you find SCC to high a price to pay, you can consider DMC which owns the biggest chunk of SCC.

      Comment by Gus Cosio | June 29, 2010 | Reply

      • sir gus,

        just got the scc sro entitlement offer from my broker i’m subscribing and would exercise more on the second round so i won’t end up having odd lots i do hope that there would be some unsubscripted after the first offering. btw, would you know when the second round offering would happen.. i’m asking my broker too. thanks.

        Comment by lilfonts | June 30, 2010

      • Lil,
        The second round happens only if the first is under subscribed which I doubt will be the case for this offering.

        Comment by Gus Cosio | June 30, 2010

  5. Hi Sir Gus,

    I was wondering what sectors are out-of-favor with the market right now? I use a contrarian approach to investing so I look for recently out-of-favor companies with good fundamentals. EDC looks like out-of-favor right now having recently been the toast of the town. But do you have some more obscure or unpopular stocks in mind? Thank you! Your blog is a big help to individual investors like me looking for good ideas in the market.

    Comment by zpac | June 28, 2010 | Reply

    • Zpac,
      I agree with your view on EDC and I am one who is willing to hold it for long term growth. One out of favor stock is SPH. An investment banking contact of mine from overseas said that the book value of the stock is way above the stock price. Furthermore, market cap of SPH is Php 1.74billion and its cash on hand is Php 1.4billion. It is ridiculously undervalued, but is sorely out of favor. Another one is TEL which at 2385 is trading at 10X 2010 PE. Dividend yield at this level is 9% and the company has net cash flows of Php 60 billion. Telcos and media are out of favor, so other cheap out of favor stocks are GMA, ABS, and BPC.

      Comment by Gus Cosio | June 29, 2010 | Reply

  6. Hi Sir Gus, I think Ayala stocks might rally soon…MWC,GLO,Bpi and AC….this four are all laggard and defensive stocks…

    Comment by butch | June 28, 2010 | Reply

    • Butch,
      MWC and BPI are defensive stocks, but I do not think GLO is. AC used to be a market proxy but, lately, I observe that it has lost its shine. I do not see any outperformance from ayala stock in the next 3 months.

      Comment by Gus Cosio | June 29, 2010 | Reply

  7. Sir,

    Someone asked you about talking a loan to buy stocks.I have been thinking similarly.

    How about if the rate is 15% per annum but no monthly amortization. Would it be alright?

    I only have to pay the interest on the 12th month.

    Thanks.

    Jovy

    Comment by jovy | June 28, 2010 | Reply

    • Jovy,
      It is quite demanding to hurdle 15%. You have very little room for mistakes. Theoretically, you can do it, but you cannot afford to take big losses which means that you should have strict cut-loss parameters and discipline. You should also have sell discipline when a stock goes up more than 15%. It would be quite tough.

      Comment by Gus Cosio | June 29, 2010 | Reply

  8. Many swing traders and tsupitero entered DGTL yesterday. they been buying this stocks since last week…

    Comment by clive | June 29, 2010 | Reply

    • Clive,
      I think DGTL is a special situation. It is a stock that is recovering from a long state of bad results and market atrophy. A lot depends on how serious research turns out for the stock.

      Comment by Gus Cosio | June 29, 2010 | Reply

  9. Im expecting a Big rally today……

    Comment by tony | June 29, 2010 | Reply

    • Tony, better to gauge the qualitative direction of the market rather than predict specific moves. That will stymie your portfolio moves.

      Comment by Gus Cosio | June 29, 2010 | Reply

  10. Sir Gus,

    At this time, what can you say about dgtl and edc? Almost 10% paper loss on dgtl. Your insight was highly appreciated.

    Comment by jaayem | June 29, 2010 | Reply

    • Jaayem,
      I’ve had paper losses bigger than that. I imagine that you buy stocks that you believe in. When it gets cheaper, what do you think you should do?

      Comment by Gus Cosio | June 29, 2010 | Reply

  11. Hi Gus,

    Any thoughts on ALI? It’s been performing flat for quite some time now. I don’t know if its waiting time or time to sell and move to a better stock, say PNB.

    Thanks and more power!

    Comment by MJ | June 29, 2010 | Reply

    • Hi MJ,
      ALI is probably the best among Ayala stocks. Unfortunately, there is very little excitement in the prospects for growth of Ayala companies unlike RLC or URC of the Gokongwei group. Also ALI has very expensive valuations which was fine in the past when they were the dominant property player. Now they are just a niche player in the high end space. Companies like SMDC, SMPH, MEG and RLC are giving them a run for their money at cheaper valuations.
      As to PNB – yes, it will outperform ALI in the next 3 to 6 months solely on the merger with Allied which I am betting will happen soon.

      Comment by Gus Cosio | June 29, 2010 | Reply

      • PNB remains to be seen I guess, we’ve been having talks of merger since 2007

        Comment by kobe | June 29, 2010

      • Kobe,
        If you bought PNB at its low eying the merger, you would have a three bagger by now. Those that bought at 22 three months ago have made 30% on their positions already. I, for one, am not complaining.

        Comment by Gus Cosio | June 30, 2010

  12. Hi Sir Gus,

    What’s your thought on AT? The developments seem to be promising, targeting two shipments per month starting 3rd quarter plus the long term power supply will further reduce cost. However, copper prices in the world market is disappointing. Thanks.

    Comment by chinky | June 29, 2010 | Reply

  13. Good day Gus,

    The DOW is down 200 points =( and there are news of another Global Slowdown. Would it best to Sell some of the current positions or just tank the coming days? I’m currently holding AP, AEV, DMC and PNB. The US and EURO markets look weak but PSE with the oath taking tom looks full of hope and economy is doing strong. Will this greatly affect our PSE? Thanks so much for the your insights!

    Comment by Raymund | June 30, 2010 | Reply

    • dow jones drops 260 pts… damn those europeans and their debt crises, balooning deficits, rising unemployment. when will they stop punishing us with these stock market selloff… patience sucks i guess theres no window dressing… just when i think im out they pull me back down. grrr

      Comment by gerald | June 30, 2010 | Reply

      • Gerald,
        The global markets are now reacting to slower growth prospects all over. The European cat is already out of the bag.

        Comment by Gus Cosio | July 1, 2010

  14. Hi Gus, Im fully invested right now with a paper gain of around 37% my holding are PNB,Bdo,Meg and Scc…Im planning to sell everything this week im fearful how the market behaves Dow,european and chinese market are going down bigtime maybe we are next….I think we are in a bubble state right now waiting to explode anytime…..imho

    Comment by jay | June 30, 2010 | Reply

    • By the way Thanks for your Recommendation on SCC and PNB these 2 stocks gives me a very good paper profit this Quarter…Maybe by July im 100% cash…Godbless and Happy Holiday…

      Comment by jay | June 30, 2010 | Reply

      • I am planning to sell all my positions after the oathtaking. No matter how good things turn out to be after the oathtaking, we can’t fight the oncoming onslaught. Decoupling or not, if something big happens abroad it will affect us one way or another.

        Think about it, the DOW rallied to 11,000 but then this year it’s back to the 9,800+ territory. If this isn’t our cue, then I don’t know what is. The US still insists of pump-priming its own economy even if europe is already facing a debt crisis. What is happening in Europe should be a wake-up call for the US to take a look at themselves.

        But WAIT! We may ask, what the hell do we have to do with the US anyway?? Well, I’m no economist but I’m just imagining that if they become the next greece……..

        Comment by afraid | June 30, 2010

      • Afraid?
        I think you should change your moniker. It is what some people term as a “negative confession.” You can’t be an investor and be “Afraid.” The most important trait of an investor is confidence. Nevertheless, Have a read of my article today. There is strong evidence of decoupling from the Dow in the 2nd quarter.

        Comment by Gus Cosio | July 1, 2010

      • @ jay & afraid Im still Bullish on our market but maybe im made a wrong decision in buying DGtl @ 1.58 & 1.54 but i still believe in the longrun our Market will rally above 3500..

        Comment by andy | June 30, 2010

  15. Hi Sir Gus,
    What are your thoughts on AT. The prospects seem to be promising, targeting two shipments per month starting 3rd quarter plus the long term power supply contract is expected to reduce cost. However, the copper prices in the world market is disappointing. Thanks.

    Comment by Senen Fenomeno | June 30, 2010 | Reply

  16. beware of the consunjis………remember universal rightfield leisure club shares? where did all the money go?…universal rightfield UP delisted till now? if the consunjis are real businessman who care about their name….they wont let this dastardly act happen!
    good thing i did not buy the club shares………

    Comment by MIKE | July 5, 2010 | Reply


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