Gus Cosio says so

Ideas on the Philippine Stock Market

Levels of comfort

10:22 pm   Sunday  25 July 2010

Looking at how the global markets are behaving, it seems that the U.S. indices are all bumping up on their respective 200-day moving averages.  Ominously, the VIX is resting atop its 200-day.  In the next few days, we will likely see the direction as a tug of war between weak economic indicators and positive earnings surprises continues.  In the local market, a steady supply of earnings reports are already queued up.

Late Friday, EDC disclosed 1st half 2010 income of  Php 5.74 billion, up 113%.  Core income was Php 4.85 billion up 89.2%.  This is more than just recovery, this is a sure growth spurt which may overshadow planned redevelopment expenditures on newly acquired capacity.  EDC had been gathering support below 4.60 and this earnings report may just give the encouragement for the stock to start heading to its fair value of 5.60.

This week and next, MER, GLO, AEV and AP will be doing their 2Q analysts briefing so there should be some excitement coming.  Then, there will be the ongoing saga in the banking sector in spite of denials coming from the PNB president.  There would be at least some realignment due to the raised valuation levels that the second tier banks such as UBP, RCB and PNB are receiving.  If you recall, CHIB saw its price adjustment already just over a month ago.

With PNB and RCB having spiked up strongly last Friday, I think players will continue to be attracted to the game.  After all, PNB has to reach its full potential yet while RCB may be shrugging off its stigma of the last few years.  Nevertheless, when a story on a stock starts to emerge, lots of players are wont to place their bets, especially now that some momentum has come behind RCB.

UBP is one that cannot be likewise ignored.  It will be reporting earnings next week together with the AEV analysts briefing.  It is not unlikely that they report earnings surprises since the past quarter was a good one for treasury operations due to some volatility in the foreign exchange and debt capital markets.

The week will probably start slow as floor and on-line traders get used to the new trading system on the PSE.  Hopefully, most of the kinks have been fleshed out by trading participant during their rehearsals last Saturday.  I do not doubt that within hours, these guys will come to a level of comfort with the new system.

Of course a lot of ears will be trained on what President Aquino will be saying in his state of the nation address, but that will be trading hours are over.  I am confident that there will only be favorable policy announcement toward business and new enthusiasm should arise.  In the meantime, the best advise I could give is this: ask yourself if you would be willing buy the stocks in your portfolios again at tomorrow’s prices.  If your answer is yes, then you should remain comfortable with your positions.  If not, then do some top-slicing so as to money manage your position.  Remember, a good poker player makes money not because he is always holding a winning hand, but because he knows when to put money in or take it out of the table.  The same rule applies to stock market investing, except with stocks, the time horizon is longer.

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July 25, 2010 - Posted by | Uncategorized

19 Comments »

  1. I’ve just started trading last January. I am treating this year, and maybe the next, as a kind of learning the ropes episode. Getting my feet wet and seeing how it goes.

    Right now, I’ still thinking if I’m gonna concentrate more on being a value investor (ex.price should be below book, p/e should not be too high), or put some emphasis on growth and revenue.

    As for the stocks I’m studying, RLC, VLL, SHNG, and GMA7 have prices below book so I’m taking a look.

    I guess I can add MPI to that too.

    Hmm.. so many choices, so little funds.. hehe..

    Comment by jasper | July 25, 2010 | Reply

    • your choices are ok except SHNG cuz there is no liquidity in it and it has nothing much going for it.

      Comment by Gus Cosio | July 26, 2010 | Reply

  2. Hi Sir Gus,

    is this part of the new system? I’m seeing PNB being traded at 42.20, before it used to have increments of .50 hehehe

    Comment by wren | July 26, 2010 | Reply

  3. yea, I wonder why there’s .20 hehe… Gus do you think the price for PNB will stop at 44 ? or what would be the price to sell PNB?

    Comment by kier | July 26, 2010 | Reply

    • Kier,
      I still believe that PNB is worth 48, but whether it will get there is a matter of whether the market agrees with me. By the way, there are analysts that see 54 or 55.

      Comment by Gus Cosio | July 26, 2010 | Reply

  4. sir gus, question on REIT…does the law strictly distinguish between participating companies that OWN and operate income-producing real estate assets, and those who has LEASEHOLD RIGHTS to an income-producing real estate asset?

    I ask because we currently have a deal with the government on the LONG-TERM LEASE of one of its properties. It currently house a retail component but we intend to add more structures to it (including residential, hotels, etc.)

    Can we have this particular real estate property part of our planned REIT company?

    Comment by vicoy | July 26, 2010 | Reply

    • Vicoy,
      I am not an authority in the REIT law, but it actually works with property with regular rental income because it is really the income which people are buying.

      Comment by Gus Cosio | July 26, 2010 | Reply

  5. This new system is good for the market..from 3400 to 3800 in 1 trading day…..maybe tomorrow will be @ PSE4000….

    Comment by newkidonthestock | July 26, 2010 | Reply

  6. It’s part of the new trading rules. Stocks in the price range of 20.05-50.00 now has a 0.05 flucs.

    Comment by herecomesthebaby | July 26, 2010 | Reply

    • @herecomesthebaby:
      Yes their are new fluctuations its also shown in Brokerages websites.
      The movement now of shares wouldnt be so fast like what we have been seeing in the past few days with RCB, PNB its more like the fluctuations in the U.S Market.. quite slower

      Comment by Foreign Investor | July 26, 2010 | Reply

  7. Sir,
    MER @ P179. I remember in your previous note MER will be good buy below P180. PNB down P1 @P42.50. Do you see more consolidation? DGTL holding at P1.48. Would appreciate your thoughts on these.

    Comment by Mark Anthony | July 26, 2010 | Reply

    • Yes Mark,
      I thin MER is going into buy region, but observe and see where it is trying to settle. Don’t worry that stock prices will run away. Buy when you start feeling comfortable after watching how prices behave.

      Comment by Gus Cosio | July 26, 2010 | Reply

  8. Hi Sir Gus,

    Thanks for giving us guidance. It help us a lot. What’s your insight on MBT? Is it a good buy at 58-59 range? Do you still think it will reach 70 within the year?

    Thank again!!

    Comment by Jun | July 26, 2010 | Reply

    • Jun,
      I am of the conviction that MBT will hit 70, perhaps in a few weeks or a couple of months. It takes time for the market to appreciate value.

      Comment by Gus Cosio | July 26, 2010 | Reply

  9. What’s your take on MEG?
    It continues to trend up.
    Remember the time maybe few years back when Andrew Tan said that he will take MEG to 5 pesos?
    Is this the time?

    Comment by Mark | July 26, 2010 | Reply

    • @Mark
      Where and when did Andrew Tan said this?
      Its quite hard to see that happening for this year. Since they have never moved up 300% or more in a span of 5 years

      Comment by Foreign Investor | July 26, 2010 | Reply

      • Actually, they did in less than 18 months, MEG’s bottom was 0.46 around Feb or March last year. Now they are at 1.62 as of this writing. The price has tripled already. Unfortunately instead of holding MEG long term, I went in and out and didn’t get the maximum potential returns…

        Comment by Sonn | July 27, 2010

    • Mark,
      Be careful when the main shareholder talks this way. Better that the market decides value because it is more objective than that of the owner who is trying to sell you his shares.

      Comment by Gus Cosio | July 26, 2010 | Reply

  10. i think it was 2 years ago if i’m not mistaken

    Comment by Mark | July 26, 2010 | Reply


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