Gus Cosio says so

Ideas on the Philippine Stock Market

A bullish octopus

6:10pm  Monday  12 July 2010   Philippine Stock Exchange Index 3406.96 (+0.37%)

Paul, the octopus, successfully predicted the outcome of the FIFA World Cup – a victory for Spain!  Apparently, the prophetic mollusk has an inherent predictive talent that allows it to foretell the future in football matches.  I’d like to get my hands on this celebrated octopus and find out if it can presage the movement of stock prices.  If this famous dweller of the deep manages to guess the direction of the index even on a week to week basis, would you put your money on his predictions?

Anyway, the reason that I haven’t been posting is because I got involved in some corporate social responsibility (CSR) projects and then I had to go to Baguio to give an investors briefing to investors in the city of pines.  My feedback was that they were quite appreciative because they needed someone to give them deeper insight into what they read in the business news.  It seems that if they can get better information on what going on in the economy and what listed companies are doing, they are more than willing to allocate some of their assets into equities.  I found the feedback from the audience very fulfilling and plan to do a follow-up in around two months time.

As far as the market is concerned, while I am pleased that the global markets have recovered, I’m still not one who would plunge into the deep end just yet.  Yes, I like the market.  Yes, a number of headline Philippine stocks are still cheap.  Yet, common sense, or shall we say market sense, tells me that we cannot load the bases yet and hit for the home-run.  For stock prices in the Philippines to forge farther than it already has, a global heavyweight must re-rate our market into a strong buy.  Such a rating has yet to be seen.

When prices have gone up so much, even when stock prices are relatively cheap, you must not fail to ask yourself who you think will the next buyers would be.  In short, if you buy a stock now, you must not only be convinced that it is cheap, you must also establish that at the point you will be willing to sell, some other buyers will still be thinking that the same stock is still cheap.  Otherwise, it will be as if everyone is rushing out the door at the same time; people usually get hurt in the rush.

I would be very selective now in buying stocks and will likely avoid the big winners year to date, such as AP and AEV.  While they are still relatively cheap, I think many are being tempted to take profits.  It may also be compelling for holders of DMC and SCC to take profits at this point, so I would think twice about adding positions in these stocks at these prices.  I would feel the same way about SMDC which has been the stellar performer among the Henry Sy stocks.  URC is another outperformer that is temporarily running its course.  I sense a bit of reluctance from people to take this market higher at this point in time because they are being careful not to drive the market into expensive levels before a strong base of buyers emerge.

Since I am being selective, I feel very comfortable picking up PNB at this point despite criticisms that the BIR might be going after Lucio Tan.  I maintain the view that if Mr. Tan is forced to sell PNB due to tax problems, there will be a lot of buyers queuing up for the auction.  Today’s volume spike following the slowly rising volume of the past two trading days tells me that something is afoot.  We may not be hitting 40 yet, but we will slowly get there.

I haven’t turned bearish, but I think I would like to give the market a rest.  I believe that we need another pull-back to build a stronger base for a follow through rally.  At that point, I believe we shall see the continuation of the rally.  We can even get Paul, the octopus, to do the predicting for us.

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July 12, 2010 - Posted by | Financial markets in Asia

45 Comments »

  1. Sir Gus,
    Seems that Lopez power stocks has finally started to outperform the market as well as other power stocks for the past trading days particularly today. What is your overall view as compared to the other power stocks that have been climbing up e.g. AP.
    Regards, Mark

    Comment by Mark | July 12, 2010 | Reply

    • Dear Sir,

      I suspect that share buyback can only do so much for a stock. Ultimately the company should sell itself to investors . . . by having a good business plan and execute based on it and grow profits.

      Thanks

      Comment by alex | July 12, 2010 | Reply

    • Mark,
      My bet is on EDC among the Lopez stocks. I think it has room to outperform.

      Comment by Gus Cosio | July 13, 2010 | Reply

  2. Hi Sir, What can you say about PSe @ 250/share..Is it a buy? or I’ll wait for a couple of weeks to enter.

    Comment by andy | July 12, 2010 | Reply

    • Andy,
      PSE at 250 is certainly worth looking at.

      Comment by Gus Cosio | July 13, 2010 | Reply

  3. Hello Sir Gus! 🙂

    I’ve been following your blog for some time now. I want to ask your opinion on CPM. Do you think it will continue to decrease its price? Will it still rise to its P6 price? Thank you in advance! 🙂

    -Aizelle

    Comment by Aizelle | July 12, 2010 | Reply

    • Aizelle,
      In general I do not like issues that have been listed by introduction because the supply of shares is very limited. It can be easily be subject to manipulation. Unless they come to market with a follow on offering to increase the float, I’ll probably not be interested in following it.

      Comment by Gus Cosio | July 13, 2010 | Reply

      • Thank you for your insight, Sir! 🙂

        Comment by Aizelle | July 13, 2010

  4. Sir Gus,

    Is Petron in your radar? Please give us some feedback on this company?

    thanks

    Comment by Jojo | July 12, 2010 | Reply

    • Hi Jojo,

      I’m not Sir Gus, but i love petron! they give regular dividends…

      Comment by WoyldCup | July 12, 2010 | Reply

    • Jojo,
      Petron should be followed because it is a significant energy player and will probably be a bigger player in the future.

      Comment by Gus Cosio | July 13, 2010 | Reply

  5. Sir Gus,

    Your previous article “Slow and Soft” got the record high of 100 comments as i write, i think your advocacy for Filipinos to become more oriented to the equity markets is slowly materializing. Thank you and more power Sir. You are the man.

    Comment by JohnTheMan | July 12, 2010 | Reply

    • Hey John,
      Help me spread the word. I think it is a patriotic act for people to invest in good stocks in our own market. This helps business confidence in general and could attract more investments to our shores.

      Comment by Gus Cosio | July 13, 2010 | Reply

      • thnak u so much sir gus, i am one among those who are spreading the good news of investing in our local equities in my own little capacity. your direcct and simple use of language in sharing a well thought information coupled with your vast experience make your opinion next to prophecy. it is very helpful not only to us experienced trader but most especially to the newcomer, by this many are encouraged to participate unknowingly{those who are giving comments) in your noble mission of spreading the word to financial independence and ultimately to our national progress. im glad we have a financial guru like YOU.{im the one who talked with you nervously after our money forum and we met again during fami shareholding meeting}

        Comment by richard | July 13, 2010

      • Hey Richard,
        I am a mere mortal like you. No need to get nervous. It is amazing how people appreciate investment information. I was in Baguio last week and presented macroeconomic figures and developments as they affect the markets and investments. There were around 60 people in attendance from individual investors to managers of cooperatives to religious institutions. Everybody appreciated the presentation. It seems that very few professionals in the investment community ever reach out to communities outside the NCR.

        Comment by Gus Cosio | July 13, 2010

  6. Who needs Paul when we have Sir Gus? I was one of those who believed and followed your advice on PNB & FPH. Both stocks climbed today and I’m really thankful.

    Just some question sir. What’s your take on GSMI? Do you have any news on Kirin’s takeover? TIA.

    Comment by herecomesthebaby | July 12, 2010 | Reply

    • Herecomesthebaby (wow what a long moniker),
      I really have no feel on GSMI. It does not looks to me and there seems to be nothing compelling about the stock at the moment. why don’t you follow it for more information because it belongs to the SMC group and they’ve been doing some maneuvering on the listed companies they control.

      Comment by Gus Cosio | July 13, 2010 | Reply

    • herecomesthebaby,
      I really have no information on GSMI. The stock is not cheap and I haven’t heard anything that compells me to look at the stock. It belongs to the SMC group and they have been doing a lot of maneuvering on their stocks as they work on their restructuring into power and telecom.

      Comment by Gus Cosio | July 13, 2010 | Reply

      • Thanks for that substantial insight. SMC is now into diversification which requires them “new” capitals. If beverage biz is no longer they’re baby, they might drop GSMI to finance their future venture/s. I am hoping for this scenario to work to create more buzz for GSMI since Im postioned. 🙂

        All the best to us, sir!

        Comment by herecomesthebaby | July 13, 2010

  7. Hi Gus, we have been patiently waiting for PNB to go down to 28.50 or 29 but it is continuously going up. Is it time to buy now at 31 or wait some more? Thank you again ..

    Comment by Bobby | July 13, 2010 | Reply

    • From a purely technical side and looking at its previous fluctuation behavior, PNBs resistance is at 32 to 32.50/share, if it can move over this price i think PNB will start fluctuating in the 35 to 40 range breezing the 32.50 to 35 level.

      Comment by Chris M. | July 13, 2010 | Reply

    • Bobby,
      Because of the 3 days of progressively increasing volume, I think you can buy PNB at 31. I suspect that it will break 32 soon.

      Comment by Gus Cosio | July 13, 2010 | Reply

  8. Hi Sir Gus,

    Just wanna share an article if you don’t mind.

    Cramer’s Rules for Long-Term Investing

    http://www.cnbc.com/id/36056154/

    Comment by yvoj | July 13, 2010 | Reply

  9. Hi Gus,
    At what price is best to sell PNB?

    thanks

    Comment by kier | July 13, 2010 | Reply

    • Hi Kier,
      I think the next stop for PNB would be just below 40. Today, the value traded was Php 314.6 million and the price had not gone much higher yet. I am certain of another surge in price in the coming days.

      Comment by Gus Cosio | July 13, 2010 | Reply

  10. FInally another blog! Thanks a lot sir Gus!!Please know that every blog and every comment of yours is greatly appreciated. Keep up the great work! This goes to everyone sharing their constructive comments as well. We (newbies) cant thank you enough.

    Comment by Dex | July 13, 2010 | Reply

    • At your service, Dex. God bless you.

      Comment by Gus Cosio | July 13, 2010 | Reply

  11. PNB is 34.50 as I type. I just bought in additional shares at 33 each few minutes ago.

    Comment by Dex | July 13, 2010 | Reply

    • Just hang in there, Dex. You must train both your nerves, your patience, your prudence and your judgment while the market is behaving this way. You will later see that you will eventually become a seasoned investor.

      Comment by Gus Cosio | July 13, 2010 | Reply

  12. Sir Gus,

    i noticed that the price of DGTL had declined to P1.48. I bought it at P1.60. Do you think its wise to buy additional shares at this point? Thanks a lot.

    Comment by tatels | July 13, 2010 | Reply

    • Tatels,
      In my view, DGTL will get to 2; I just do not know when. perhaps in a few weeks, maybe in a couple of months. If it gets there in a year, it will still be a 25% return for you. Is that so bad?

      Comment by Gus Cosio | July 13, 2010 | Reply

  13. Sir Gus,

    At 34.50 would hold or take profit on PNB?

    Comment by KennyV | July 13, 2010 | Reply

    • For me kenny hold yan….going 55 yan after merger….

      Comment by trisha | July 13, 2010 | Reply

    • Hi Kenny,
      I might even buy because this is breakout level supported by very large volume.

      Comment by Gus Cosio | July 13, 2010 | Reply

  14. Hi Sir Gus!

    What’s up with PNB? On my screen now, it is now 34.50. You think it’s a good time to sell? Or would you sit and wait? You were saying you expected it to near the 40 level..

    Comment by Andrea | July 13, 2010 | Reply

    • Andrea,
      On clear breakouts such as today, supported by heavy volume, you should not even think of selling. Momentum traders would actually buy more on breakouts.

      Comment by Gus Cosio | July 13, 2010 | Reply

      • Sir,
        I agree. however what bothers me is there’s a lot of foreign selling particularly on stocks that have climbed so high. E.g PNB. Will this be a concern and warrant selling as well?

        Comment by Mark | July 13, 2010

      • I agree, I think PNB with the heavy volume for the last 3 days will move up higher(in gradual basis), instead of going down. The news of merger is in the mind of investors so as much as possible they will hold on to it. Selling it now then buy at retracement is an option, but the problem, you may caught yourself buying even at a higher price.

        Comment by Cliff | July 13, 2010

  15. Sir Gus,
    Nice one to PNB… Hoping for the turn of EDC (27% of my portfoli). Thank you sir Gus for your insight.

    Comment by jaayem | July 13, 2010 | Reply

  16. Hi Sir Gus,

    PNB is one of the favorite’s today. Do you think it is good to chase at 34.50 or wait for the retracement? Its price rise up 3 days in a row supported with a huge volume. What is the target price of PNB after the merger? I think, the merger will happen soon.

    thanks in advance

    Comment by Cliff | July 13, 2010 | Reply

    • Cliff,
      Let’s take this a step at a time. I think the next level is just below 40.

      Comment by Gus Cosio | July 13, 2010 | Reply

      • Thanks Sir Gus, youre such a great help.. It is correct July 23 is the deadline for FED final comment regarding the merger? By then the merger will finally push through? I will hold then till that date..

        Comment by Cliff | July 13, 2010

  17. Hi Sir Gus, I think our Market is very lucky most Asian market slides only PSE goes up…..Your favorite PNB is leading the Pack….Godbless

    Comment by sophia | July 13, 2010 | Reply

  18. Hi Gus, in my portfolio right now are meg, acr and dgtl.
    I bought them because i see them as growth stocks. If meg closes above 1.44 does it mean it is a breakout? What do you think of my other stocks?

    Comment by Mark | July 13, 2010 | Reply

    • Mark,
      I think you have good fighting chances with MEG and DGTL. I wouldn’t pin much hope on ACR though. I heard that whatever was in the pipeline for the stock fell through for the time being.

      Comment by Gus Cosio | July 13, 2010 | Reply


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