Gus Cosio says so

Ideas on the Philippine Stock Market

The new trading system

6:50 pm  Monday  26 July 2010

Today was not a typical day at all.  Personally, my rhythm in following local stocks has become syncopated and I am still a bit uneasy with the new fluctuations.  It could take some time before getting used to.  The problem really is training the mind on how the new prices work and how your bid /offer strategy would be when you are getting in and out of the market.  On paper, it looks very simple; but when you’ve gotten used to doing things one way for most of your stock trading life, it does not feel that simple.  It probably will be after a bit of practice.  That was why brokers who seriously rehearsed for the cross-over to the new system were having an easier time than those who did not.

Bottom line, stock values will still be viewed the same way whether it is traded in the old system or the new.  If the stock is cheap, it will attract buyers.  If it is over-valued, it will encourage sellers.  The thing to do, then, is to look again at prices and get used to these narrower fluctuations.

I do not have much to say except that I will continue to follow the stocks that I was watching last week and see if the trend remains intact.  It is still a matter of value, no matter how you put it.

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July 26, 2010 - Posted by | Financial markets in Asia

17 Comments »

  1. “It is still a matter of value, no matter how you put it.” – well said sir Gus. The flucs were a bit disorienting, but I think most players took on a “watch & learn”, rather than “wait & see” mode. Hope tomorrow brings back the bravado that PSE has been beginning to establish in the recent past.

    Comment by jojo | July 26, 2010 | Reply

    • Jojo,
      I think you’re right. In a few days, if you just keep on following the quotes, you’ll get used to it.

      Comment by Gus Cosio | July 26, 2010 | Reply

  2. Ok, here are a couple of points regarding MPI based on what I saw on its books.

    pros
    1. Its involved in a couple of monopolies (Toll, Water, Electricity)
    2. Its bvps is about 4.xx or so. i.e. its trading below book value

    cons
    1. Loads of debt. Its interest expense just for last year was 4B. To put this into perspective, thats more than what CEU earns(net) in 10 years.
    2. No dividends (I love dividends)

    Well, I guess if someone has some extra cash it wouldn’t hurt to invest here. My problem is deciding between the various selections like this here MPI and RLC. Or maybe just split the funds. I dunno.. :shrug:

    Comment by jasper | July 26, 2010 | Reply

    • Jasper,
      It is good that you are processing the information. I could tell you what to do but that would be spoon feeding. I would rather that you decide for yourself whether or not the debt load of MPI made sense. That way, you could make a decision with proper conviction whether you walk away or decide to buy it.

      Comment by Gus Cosio | July 26, 2010 | Reply

      • Sometimes the more I study the more I get confused 😆 I think I might wait a few more days or even a week or two to see whats up.

        btw:
        Can you point me in the direction of what to study with regards to.. how do i put this, for example, you said you are of a conviction that MBT will rise to 70. How is one able to put a concrete number on a stock like that? Don’t worry, even if i learn how to do that, I won’t put up a blog titled ‘Jasper says so’

        Comment by jasper | July 27, 2010

    • just want to comment on your pros. i like water and electricity however they are also public interests in that nothing catches the ire of people more than increases/changes in these two services. both have adequate profit margins, water being better than electricity, so while there’s room to move try to keep the ceiling as far away from your head as possible. keep doing independent research because that is the edge you will have over others. consensus and hunting for tips always makes me uneasy. you also might want to use enterprise value in your analysis and comparisons.

      Comment by ed | July 27, 2010 | Reply

  3. The Market is GEtting BORing……The New system is good if you’re distributing/unloading stocks…

    Comment by dexter | July 27, 2010 | Reply

  4. jasper, i think sir gus has already answered your queries likewise you have already done your research. your only remaining problem is you are confused because as you have said the more you learned the more you are confused of what to do..you are not only one experiencing such emotion i have been like you before. what you have to do is to master your emotion and be convinced of what you have personally learned tru your own researches. sir gus advice and others are just reference. you yourself will be the one to decide for which you think is best for you.

    Comment by richard | July 27, 2010 | Reply

  5. Hey sir gus!

    Just want to share my thoughts on the new system. I can’t seem to understand how this has been two years in the making and yet there seem to be so many glitches. I was surprised that value turnover does not seem to be accurate, I was checking my monitor and there were some stocks that had no ask or bid volume, understandable for illiquid companies but companies like SM and DGTL? really?

    I don’t think reverting to the old system is going to solve any of these problems to be honest(we do have to move forward), but i do hope they fix these glitches. I just don’t want to wait another two years to get all the glitches fixed.

    Norman

    Comment by Norman Go | July 27, 2010 | Reply

  6. Hi Sir Gus,

    Will you recommend illiquid stocks to invests in. Fundamentally, current valuation of RCM, ANS and V are cheap.

    RCM is a cash cow now and I am expecting them to double its dividends as it already paid most of its liabilities in 2009. This is also currently trading at PE of 7. It can also generate a net cash flow of 1.75 per in 2010 and currently trading at 4.5. However, the float of 7.5% means limited liquidity.

    V is trading at 0.75 BV with its assets mostly in equities/gov.t bonds and is currently buying back securities. The portfolio should be in good hands as the former treasury head of I-Bank is the one managing it, if I am correct.

    The value alone of ANS’s investments in AP (1B) and AEV (600M) as of 12/31/09 will exceed the capitalization of ANS. You are getting almost 5 billion of net assets for free (twice the market capitalization excluding treasury). This is not actively traded as well and subsidiary is buying back securities.

    My only problem is the liquidity. I can hold securities for 2-3 years but this will tie most of my capital. My portfolio is for my retirement money and can stay in the equities market for the next 20 years without touching it.

    Comment by alexis | July 27, 2010 | Reply

    • Alexis,
      You seem to be trying to convince yourself to buy these stocks. My only misgiving is that illiquid stocks always remain undervalued because without turn-over, one could not realize its value. Companies like these are usually able to realize its break-up value if the company breaks up and shareholders are paid off or if the main share holders decide they want to buy back the shares because it is very cheap. I got stuck with RCM for quite a while because there were no buyers, even if it was very cheap. If you decide to touch these stocks, you cannot simply wait for retirement. You must watch it for that surprising day when someone decides to buy it for some kind of M&A.

      Comment by Gus Cosio | July 27, 2010 | Reply

      • Sir Gus,

        Thanks a lot for the insight on not trading illiquid shares.

        Comment by alexis | July 27, 2010

  7. Sir Gus,

    Do you think that it would be a good idea to buy AGI instead of MEG, considering current prices?

    I’m a bit puzzled because while AGI is a parent company of MEG (thus there should be a discount), it has warrants on its MEG shares and McDonalds and the Casino Hotel, as far as I know, are cash (flow) cows. And yet, AGI seems to be trading at a discount relative to MEG from a 2010 and 2011 PE basis. My only explanation right now is that the market may be factoring a big discount on the forecast earnings of the casino?

    Your input would be most appreciated, as always.

    Thanks!

    Regards,

    Warren

    Comment by Warren | July 27, 2010 | Reply

    • Warren,
      You can actually play both stocks. In cases when you think AGI is cheap vs. MEG, buy AGI. Follow the spread because it may or not work. Personally, I enjoy trading AGI more than MEG.

      Comment by Gus Cosio | July 27, 2010 | Reply

      • With the new trading system, MEG might now have a better numerical base (love base price with the same tick intervals). But, I’ll probably trade AGI because it has been lagging MEG, for some reason. I hope that it is just aversion to the difficulty in forecasting the earnings from the casino. A positive performance could be the surprise that pushes this stock out of its rather long consolidation.

        Thanks for you input. At least I know that my observation about AGI lagging MEG is not imaginary.

        Comment by warren | July 27, 2010

  8. Sir,
    Strong NFB on AP, PNB, MPI,MBT and DMC. I’m thinking of re-entering with 80% cash just sitting. Any thoughts at current price levels esp. PNB and AP. Just worried about being trapped when ghost month starts.
    Mark

    Comment by Mark Anthony | July 27, 2010 | Reply

    • That’s on my mind too. I’m waiting for a pullback but the new flucs seem to make this wait interminable.

      Comment by Mal | July 27, 2010 | Reply


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