Gus Cosio says so

Ideas on the Philippine Stock Market

Banking on excitement

7:20 pm  Thursday 22 July 2010

The market simply took its cue from the negative sentiment in Wall Street, and Wall Street simply took their cue from Fed Chairman Ben Bernanke who testified in the U.S. Congress that the economy is still in the tank.  Most Asian markets eased in sympathy except China and Hong Kong which are mutually benefiting from easier capital movement rules between them.  While it did not fuel any aggressive selling in the PSE, there was a reason for some people to take profits.  I am just relating some of my observations.

The volume spike in MPI the yesterday and prices holding around 2.60 today gives some reassurance that the stock is at the bottom of its trading range.  If this does not hold, I think the support is not far behind.  My guess is that it is at 2.40.  I suppose people are wary of the company’s debt load; but don’t forget that most of its assets are in infrastructure which is long gestating, but when they do they become cash cows.  Debt is an integral part of any infrastructure play.

MER, a sister company of MPI, may be worth watching as it approaches 180 which is where its 50 day moving average lies.  I think there are a lot of interested parties waiting for it to touch 180 or lower to accumulate positions.

The sell off in MBT suggests to me that a consolidation process is going on.  I do not think that the next earnings reports will be negative for MBT.  I suspect that major portfolios are just making room for other banking issues given the new excitement has been generated by PNB.  I expect bustling activity in banking stocks soon after floor traders at the PSE become comfortable with the new trading system.

With SCC soaring some more, it is no surprise that DMC continues to be strong.  The interest in SCC continues to grow as more information on the excellent results of the Calaca acquisition flows to the public.  Some analysts see SCC to be worth at least 126 which leads me to believe that DMC, even at 19.50, is poised to move higher supported by further strong buying.

Another stock that is gathering support is EDC.  At around 4.55, EDC looks to be bottoming although range could be narrow with upper range only at 4.80.  Its grandparent, LPZ,  could have run its course already.  People are looking to take profits at 3.80, and there is no new impetus to take it higher.

The nervous trading in DGTL with a wide price range today is nothing to be worried about.  With volume rising as it is, I think it may be worth the risk posting at 1.44 to 1.46 even if foreign selling is detected in the stock.  You could get lucky because I think new players will be coming to have a look.  There are lots of reasons to be hopeful on Philippine stocks.  You just have to choose them right.

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July 22, 2010 - Posted by | Financial markets in Asia

37 Comments »

  1. Hi Sir,

    I already have increased my holdings in DMC, JGS, DGTL and PNB. All seems to be going strong for these companies. Since i still have extra cash left, what would you suggest that i add to my portfolio if my goal is to look at it after 1 year? I was thinking of adding some more to my current holdings but maybe you could recommend a stock worth studying and holding for the long run? I was thinking of FGEN since it has reached its low point and i still believe that our power sector has great potential..

    Thanks! 🙂

    Comment by Long term | July 22, 2010 | Reply

    • Long term,
      If you have a one year horizon, I would recommend that you pick up MPI at today’s levels. I believe this stock is has value all the way to 4.20. It is an infrastructure play so it is ideal for a one year play. You must also watch your PNB because if there is a merger, you must take your profits and switch to the next best story.

      Comment by Gus Cosio | July 23, 2010 | Reply

      • i agree with you sir gus, so far based on my analysis and info, mpi plan for 2nd half of 2010 is looking really good, the hospital tie up their into are starting to generate income, infrastructure as you mention is doing well also, only problem is their investment on maynilad / manila water which DMC is their partner also in this venture, hence, in my opinion it will be ideal to take profit from PNB and shift investment to MPI… 2.9-3.2 is very potential in one month time.

        Comment by draco23 | July 23, 2010

  2. Sir Gus,

    You probably mean 4.55 instead of 3.55 for EDC’s bottom.

    Sir, i have some RLC in my portfolio. What’s your take on this stock? Is it poised to move higher? I have EDC(power), DGTL(telecom), PX(mining) and RLC(real estate) in my portfolio. Any thought’s on my stock picks sir?

    Thanks! 🙂

    Comment by KennyV | July 22, 2010 | Reply

    • Kenny,
      You have a good looking portfolio. I think RLC has the most potential among property stocks. You can rotate into DMC or AP from EDC at some point. I think that among power related stocks, these two have the greatest potential. EDC to me is a trading position only.

      Comment by Gus Cosio | July 23, 2010 | Reply

  3. What’s your take on GMAP sir Gus, a Broker friend of mine tells me that it might go as low as 3/sh next year because of decreasing revenues..

    Comment by willy | July 22, 2010 | Reply

    • Willy,
      I think below 6, GMAP starts to become interesting. My personal price trigger is 5.50 before I start considering buying.

      Comment by Gus Cosio | July 23, 2010 | Reply

  4. With the market’s uptrend mode and plenty of exciting news, should we be afraid of the approaching ghost month?

    Thanks for your guidance.

    Comment by herecomesthebaby | July 22, 2010 | Reply

    • I’m always wary when the month of the hungry ghost arrives. While I do not believe in it, so many others do that it becomes self-fulfilling. The exact date in the Chinese calendar is August 10, I think.

      Comment by Gus Cosio | July 23, 2010 | Reply

  5. Sir Gus,

    How should I analyze banks fundamentally? What should I look at in its balance sheets? I find it easier to do some study on other companies but with banks, I am confused.

    Was wondering if you could write a short article how to go about it? If that is not too much :-).

    I think there might be a lot of newbies who would want to learn how to. Maybe PNB would be a good subject.

    Comment by yvoj | July 22, 2010 | Reply

    • I’ll try.

      Comment by Gus Cosio | July 23, 2010 | Reply

  6. Hi GUs!

    It’s been awhile!!! I follow your advise and I’m holding PNB for a year now 🙂

    What’s the price for PNB for SELL? what would be the peak price?

    Comment by Kier | July 23, 2010 | Reply

    • Kier,
      It is tough to catch peaks and bottoms. I think PNB has room to go, but if you have a hefty profit, you could bank some in by selling half of your position at these levels. It is called money management. If you have such holding power, why not pick up some DGTL or MPI with the proceeds. If you can hold those two for a few months, you’ll end up happy again, I think.

      Comment by Gus Cosio | July 23, 2010 | Reply

  7. Wow! PNB now @ 41! Thank you sir Gus! If not for you, I might have missed this run. =)

    Comment by Sonn | July 23, 2010 | Reply

    • Its at 44 now amazing

      Comment by Foreign Investor | July 23, 2010 | Reply

  8. I sold all my FLI/TEL lugi na 20K invest sa PNB 🙂

    Comment by Kier | July 23, 2010 | Reply

  9. Hi Sir Gus,

    FGEN seems to be tanking. Would you advise buying additional shares to lower my average cost? I plan to sell my FGEN shares within a 6-9 month timeframe. Thanks in advance!

    Comment by Sonn | July 23, 2010 | Reply

    • Sonn,
      I suggest that you not focus on FGEN only to improve your position. You can choose other stocks to cover your loss in FGEN. If you want to stick to the FGEN story, you could buy some EDC. alternatively, you could buy AP or MPI which to my mind has better potential than FGEN.

      Comment by Gus Cosio | July 23, 2010 | Reply

      • Thanks sir Gus! I also have EDC already. I’ll be watching movements of MPI and AP.

        Comment by Sonn | July 23, 2010

  10. Hi Gus,
    It’s a good trading day today for PNB holders. Thanks for all your advise on this stock. What’s your suggested action plan on PNB for the following weeks? Also, I have three stocks in mind right now: EDC, MPI and DGTL. What’s your take on how these stocks should be prioritized?

    Comment by finch | July 23, 2010 | Reply

    • Finch,
      May I suggest that you follow the PNB action and sell when you are convinced that it has run out of steam. As for the stock you own, I like them all. You may want to pick up some DMC.

      Comment by Gus Cosio | July 23, 2010 | Reply

      • Thanks a bunch, Sir! Reading your blogs has become a part of my daily routine. You are truly a blessing for us pinoy traders. I admire your view on being a pinoy stock trader as a patriotic act. Mabuhay ka, Sir Gus!

        Comment by finch | July 26, 2010

  11. sir,
    finally… PNB, the sleeping giant woke up..hehe i took my profit today and shift to MPI at 2.60, i just want to thank you for all the opinions, whether market is up or down we can always count on you, please continue because you are really a blessing!!! for MPI i do believe all is good and by end of this year it can hit 4.5 level. God bless sir

    Comment by draco23 | July 23, 2010 | Reply

    • More power to you, Draco. I think MPI will do better later this year.

      Comment by Gus Cosio | July 23, 2010 | Reply

  12. sir gus rcbc kept on creeping up, any suggestion for those who failed to catch it today? thanks and good health to u sir!!!

    Comment by migs-ron | July 23, 2010 | Reply

    • Migs,
      I will put RCB on my radar screen. I haven’t been following it but I think the coming weeks will favor movements in banking stocks. Watch RCB on pullbacks.

      Comment by Gus Cosio | July 24, 2010 | Reply

  13. HI Sir Gus!

    I entered PNB late. I average around 39, what do you think is the better move? should I hold it until the merger? or sell at the current level? (around 43 to 44?). Really value your thoughts. Thank you so much!!

    Comment by Jude | July 23, 2010 | Reply

    • Jude,
      My view is to hold PNB until merger and possibly slightly beyond unless something compelling comes up.

      Comment by Gus Cosio | July 23, 2010 | Reply

  14. Hi Sir,

    You recommended MPI for a long term hold. Is this a better option compared to choosing TEL based on the dividends and possible capital appreciation?

    Thanks 🙂

    Comment by Long Term | July 23, 2010 | Reply

    • Long term,
      I am a holder of TEL and a buyer of MPI at the same time.

      Comment by Gus Cosio | July 23, 2010 | Reply

  15. Hi Sir,

    I have suddenly seen lots of articles about the worsening unemployment rate in the US and decline of commodity prices which could lead to deflation. Would you think this is a serious threat considering our market is reaping well despite these claims? I have also read that the US may again result to another stimulus package which would then increase the nation’s already criticized debt standing…

    Thanks 🙂

    Comment by whats next? | July 23, 2010 | Reply

    • Whats next,
      It is good that there is a lot of bad news in the markets because that means that a lot of people are keeping their cash. When all the good news start to come, they will be the one coming in to buy stocks at higher prices.

      Comment by Gus Cosio | July 23, 2010 | Reply

  16. Sir Gus,

    is it a good time to buy TEL shares now since they usually declare div around August?

    Thanks!

    Comment by cholo | July 23, 2010 | Reply

    • Cholo,
      TEL is not too much in favor, but I still like it. I’m holding on to my TEL for sometime to come yet. Yes, I like the dividends.

      Comment by Gus Cosio | July 23, 2010 | Reply

  17. Sir,

    I bought pnb at 43.50 today. 😦 Do you think the price will go down a bit before the merger? I plan to buy, at least, lower than 43 to average down. Thanks!

    Comment by trixia | July 23, 2010 | Reply

    • Hi Trixia. Its RSI (87) is now at OVERBOUGHT levels. It should be due for correction. But I maintain that MOMENTUM is still on our side. Good luck.

      Comment by jojo | July 23, 2010 | Reply

      • Trixia,
        I’ll have to agree with Jojo.

        Comment by Gus Cosio | July 23, 2010


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