Gus Cosio says so

Ideas on the Philippine Stock Market

Economic outlook and ice cream

6:40pm   Tuesday  17 August 2010    Philippine Stock Exchange Index  3502.25 (+0.65%)

Earlier today on Bloomberg Television, Mark Mobius, the Singapore-based executive chairman of Templeton Asset Management Ltd.’s emerging markets group, said that he thought the global economic recovery is well in place and may accelerate as growth in developing nations counters a slowing pickup in Japan and the U.S.  He believed that “Going forward, the numbers will get better and better.”  Why is his view important to investors?  That is because he is one with very good track record in emerging markets and he understands smaller markets such as the Philippines.

Looking at the PSEi movement in comparison to the DJIA, I notice that when the U.S. index is positive, the PSEi is positive.  When it is negative, the local index may be negative but not as much, percentage-wise.  In some cases, it even goes positive.  When I look back at the quarterly moves, the local index was correlated to the Dow in the first quarter when the direction had been generally up.  It was not correlated when the DJIA was dropping in the second quarter.  In the beginning of the third quarter, when the U.S. index was rising, the PSEi was correlated.  Approaching the first week of August into the second week, as the U.S. softened, the local market eased but has recovered which cannot yet be said of the DJIA.

The observation and outlook of Mobius makes sense.  I have been thinking all along that there would be some divergence in views between the U.S. and Asia ex-Japan.  I believe that smaller markets such as Indonesia and the Philippines will follow the mode which emerging markets investors are expecting – an outperformance compared to the west.

Today, our market surged again with an even bigger gain than yesterday.  Investors, however, are still being very deliberate and are accumulating strong issues into their portfolios.  If you look at the most active list, four banks are there – MBT, BDO, UBP and PNB.  I think the sector move in banking is taking firmer hold.  I will not be surprised if we see more banks coming into the most active list in days to come.  Banks have been traditional beneficiaries of strong economic growth and the aggregate banking numbers recently released by the BSP provide indication that indeed the underlying economy is strong.  I would suggest that investors start adding to some banks to their portfolio.  I realize that many followers of this blog have been in and out of PNB.  It may be a time to give the others a try although PNB should benefit as well to the buying wave into the banking sector.  MBT is potentially worth 70 and I read someone call BDO close to 55.  The views that I’ve read on BPI is not so enthusiastic simply because MBT and BDO are outpacing BPI in loan growth.

Over all, I think our market is in good shape.  If there is in fact a double dip in the U.S., it is not as if it is an unknown quantity.  My take is that it is already in the prices of local stocks.  Fortunately, we have companies with very good fundamentals which can carry out rises in prices for sometime to come.

I’m glad that in the past few weeks there were a lot of skepticism over the ghost month and double-dip.  This had allowed investors to be more deliberate in their stock picks and position and cash management.  Most portfolios have their cash allocations still at comfortable levels.  There is a lot of buying power out there such that if this market goes through a slump, there would enough ice cream to scoop out of the can.  When I was a kid, we were happier with double-dips than people are these days.  Maybe because in those days only ice cream cones came in double-dips.

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August 17, 2010 - Posted by | Financial markets in Asia

47 Comments »

  1. Hi Sir Gus,

    Yes, I have been in and out of PNB… THANK YOU SO MUCH, YOU ARE HEAVEN-SENT. More power and God Bless you always!

    Sincerely,
    Cris

    Comment by Cris | August 17, 2010 | Reply

  2. Profit taking tomorrow…Buyback Lopez stock next week….

    Comment by jay | August 17, 2010 | Reply

  3. HI Sir Gus,

    Just wondering how the PSE will move in the coming days, especially now that 2nd quarter earnings are almost published. What are the catalyst to make it higher and lower.

    Last week, I bought MPI. I noticed that ist movement is sideways, except for yesterday. Any reason why investors are hesitant to scoop up its shares. I said this coz I compared it with LPZ,DMC,AGI,AEV whose daily volume ave. is good.

    Comment by Olive | August 18, 2010 | Reply

    • MPI has great volume today. Investors are back again. Even after their reports inline with most brokerages. I would like to thank everyone for their insights and comments.

      Comment by Foreign Investor | August 18, 2010 | Reply

  4. So far the vaunted “ghost” month isn’t doing anything to push down any of my target stocks at all. Or perhaps, instead of pushing back, its keeping it from going much higher?

    But whatever it is, some dips would be appreciated :/

    Comment by jasper | August 18, 2010 | Reply

  5. Hi Sir Gus,

    I’ve been following your blog silently for a few months now. I would just like to thank you for all your selfless efforts to educate the investing public. I’m sure a lot of us novices and even ‘experts’ have benefited a lot from your insights. Thanks again and more power!!!

    Comment by MJL | August 18, 2010 | Reply

  6. what do you think will be the PNB price range this week and next week?

    thanks!

    Comment by Newbie | August 18, 2010 | Reply

  7. Should have bought PNB yesterday when price was at 42.70 It seems that EDC is on the rise again.

    Comment by trixia | August 18, 2010 | Reply

  8. Hi Sir Gus and followers, As pointed by Aika in previous blog, MPI is forming a classic “cup with handle” features. I`m sure a significant number of technical analysts are now betting on this stock to move all the way up!

    The diversity in its institutional buyers during its decline to 2.60 is also a welcome development. While 323 and 333 are again accumulating today, in my estimate they released more than 1 Billion worth of this stock in the last two months.

    Comment by Chris M. | August 18, 2010 | Reply

    • Hi! whats the TP for MPI? short term (1 to 2 weeks). thanks

      Comment by Warrior Princess | August 18, 2010 | Reply

      • Hi Warrior Princess, Volume today is 270M! If it breaks its 3.25 to 3.30 resistance tomorrow and market sentiment remains positive, i see the TP of 4.0 by Sir Gus being reached in less than two weeks. Most active brokers both local and foreign are buying MPI today in 3.15 -3.18 range. Looking at these companies recent strategies, they typically hold till a 20-30% gain is realized. Deutsch (209) for instance is selling LPZ after a significant accumulation at 4.3, and buying MPI today. Of all the big traders out there, 209 is making the best decision so far in the last few weeks. I gained significantly following closely their money flow. 121 is the most out of sync recently.

        MPI is a long term hold for me with DGTL and AP.

        Comment by Chris M. | August 18, 2010

  9. Sir Gus,

    whats are your thoughts on JGS? when is the good time for entry? thanks and more POWER to you.

    Comment by Warrior Princess | August 18, 2010 | Reply

  10. Last week MPI was 2.92, VLL was 2.4, and EDC was 4.5. Now, they are significantly higher.

    (I placed my funds on DGTL instead. Timing, timing, timing. I should have placed my funds on the three instead, then I could be leisurely buying DGTL now.. But who knew?)

    Usually, when prices goes up one should be happy. But not me, not this time. I still haven’t completed my target volume. Hey you stocks, Waitjustacottonpickenmoment eh?

    Comment by jasper | August 18, 2010 | Reply

    • Oh wow! my buy order for MPI at 3.17 didn’t get any takers 0_x

      Comment by jasper | August 18, 2010 | Reply

      • Jasper, I say buy it tomorrow at its opening price if DOW is green tonight.

        Comment by Chris M. | August 18, 2010

      • whats a DOW?

        Also on your last comment:
        > Looking at these companies recent strategies, they
        > typically hold till a 20-30% gain is realized. Deutsch
        > (209) for instance is selling LPZ after a significant
        > accumulation at 4.3, and buying MPI today.

        How do you manage to know this information? 209 is Deutsch? And you know their buy/sell patterns too.. :puzzled:

        Comment by jasper | August 18, 2010

      • Dow Jones Industrial Average…Its what they call the exchange in the USA.. Here its the PSE..Philippine Stock Exchange

        Comment by Foreign Investor | August 18, 2010

      • With regards to the information thank god thats all public you can find this with your broker… especially online brokers I dont want to name any brokers here.. the PSE’s website also has alot of info on volume 30 moving day average…
        Hope this helps everyone

        More power to all of us

        Comment by Foreign Investor | August 18, 2010

      • Hi, Jasper. I’m buying MPI at its opening price tomorrow (a risk I am willing to take). I have already studied its chart pattern and I’m quite convinced that it’s due for a breakout. Not only that, it’s a fundamentally strong stock that is truly undervalued. 🙂

        With regards to your question regarding the brokers, there is a list available at the PSE website. Moreover, when you’re doing online trading, you get to see which brokerage firms buy/sell from/to other brokerage firms. During the run-off earlier today, for example, these were actually (323) CLSA, Phil and (279) that bought huge volumes of MPI at 2.17-2.18 range.

        Comment by Aika | August 18, 2010

      • I have been trading MPI for nearly a year now and one can observe that it needs to convincingly break the 3.20 resistance in order for the stock to really move forward. Upon seeing that the buy side volume is 16M for 3.18 (one of the largest I’ve seen in trading this stock), I’m optimistic that it will be able to break the 3.20 resistance tomorrow especially if the DOW Jones is GREEN tonight. Good luck for tomorrow!

        Comment by Anthony | August 18, 2010

      • @Aika: I think you have a typo… its supposed to be 3.17-3.18 range… anyways besides that… at what price are you willing to bid.. I was just curious since the current price is at 3.18

        Comment by Foreign Investor | August 18, 2010

      • Dear Foreign Investor,

        Yes, that’s 3.17-3.18, I apologize for the typo. If DJIA will close green tonight, I’m going to enter at whatever price MPI opens. I’m going to post around 9:28AM. It’s going to be a (relatively) long term investment. As has been pointed out by Jasper, Anthony, Chris M, and Sir Gus, it’s significantly low (FV) and it has strong fundamentals.

        Cheers!

        Comment by Aika | August 18, 2010

      • Hi Jasper, i believed they already answered your queries. Small investors (capital from 5000 – 5 Million) have the advantage of being in a “free ride”, so to speak, with bigger investors during momentum runs. Small investors can buy and sell stocks at will without affecting the market price, which is a good thing if you play it intelligently. They cannot sell 500 M in one sitting or accumulate billions in 1 TD. We can.

        Deutsche Regis Partners Inc. (broker 209) is the reason for 1/5 (~20%) of the transaction in the first six months (see PSE under the tab trading participants), with Macquari (broker 121) contributing 6-8%. Their accumulative contribution to the market is more than 25% in total in first half of the year. Understanding the variations of their strategies will allow us to win our own battles. Just rEcently, I ride with their strategy and earned a good profit in LPZ. I get out when they started moving out of LPZ and going into MPI.

        Comment by Chris M. | August 19, 2010

  11. Hi SIr Gus,

    Thank you for helping us here in your Site.. You are such a big blessing for us specially to me who are new in this Stock market. I got 49% gain in PNB because of you. thanx sir. What about AP I got it at 19.00 what is your forecast to this?

    Many thnx Ronald.

    Comment by ronald | August 18, 2010 | Reply

  12. I’m very pleased with the performance of MPI, PNB and EDC. Thanks for your insights, Sir Gus and more power!

    Comment by Anthony | August 18, 2010 | Reply

    • Ditto!

      Comment by Aika | August 18, 2010 | Reply

  13. Just looking at the “CAN” in CAN SLIM, I think JGS has really STRONG potentials. That is, if I’m reading things correctly.

    C – higher Current quarterly earnings per share
    A – significant increas in Annual earnings
    N – New product, new highs

    ———————–
    Six Months Ended June 30, 2009 vs. June 30, 2008
    JG Summit’s net income for the 1st half of the fiscal year 2009 amounted to P=3.61 billion, a substantial increase of 473.4% compared to last year of the same period. The 2nd quarter brought in record results as the Company netted profits of P=2.75 billion (compared to P=864 million in the 1st qtr) since the Company benefited from the initial signs of stabilization on the global financial markets front even as the peso depreciated during the period. Even excluding the effects of the financial and foreign exchange markets, our Company still showed marked improvement as our core earnings for the 1st six months increased 8.4% from P=4.90 billion in 2008 to P=5.31 billion in 2009. Likewise, our Core EBITDA for the period increased 24.3% from P=10.51 billion to P=13.06 billion.
    ———————–
    Six Months Ended June 30, 2010 vs. June 30, 2009
    JG Summit’s net income for the second quarter of 2010 amounted to P=3.34 billion, making our net profit for the 1st half of the year to P=7.75 billion, a 114.6% growth from last year’s P=3.61 billion. The remarkable performance of major subsidiaries of the Group contributed to the Group’s significant growth in its bottomline. The Group’s core earnings showed a 108.9% growth for the first half of the year from P=5.31 billion to P=11.09 billion during the period. EBITDA reached P=18.70 billion, a 42.9% increase from P=13.09 billion for the same period last year.
    ———————–

    I am not THAT sure though because of the low volume action in the past two weeks. However, prior to the volume dry-up, you’ll notice that there were actually two volume ups that happened in the last two weeks of July. Usually very constructive.

    Comment by Aika | August 18, 2010 | Reply

    • Aika,

      we seem to have very different strategies. Although maybe MPI is a common stock for us both. I don’t look for volume or pattern or anything of that sort at all. I look if its significantly below its FV, it the company has good prospects, earnings are good, etc.. and buy whenever money’s around. (But wonder what Gus does)

      Well, goodluck to us.

      Comment by jasper | August 18, 2010 | Reply

      • I totally understand your point. Although, looking at the chart and volume patterns could give us a hint as to when we should enter (buy/sell) at exactly the right time! 🙂

        Comment by Aika | August 18, 2010

      • I think the best strategy is a combination of both your styles. Buy stocks based on FV and fundamentals. And taking a look a charts(for volume, moving averages etc). Charts can help you to a certain extent determine the best entry(and exit) price to maximize profits.

        Comment by Anthony | August 18, 2010

      • I think I understand.

        After all I bought VLL at 2.48 then watch it immediately tank to 2.3 the next day (My heart went bump). I heard charts could have helped me there..

        But for selling: There is only one reason I’m gonna sell. Its – if the reason I bought at the first place isn’t valid anymore. No matter how high or low it goes, if the reason holds true, then I’ll still keep it.

        Comment by jasper | August 18, 2010

    • hi aika,
      im a follower of jgs since it was below 10 per share and i agree with your observation. to some it may be within its fv but for me as long as the trend is there i am willing to hold it but today i lighten up to take some handsome profit but willing to add back again when it goes down further.

      to our fellow new investor this is my advice try to simplify your approach, since our guru and some followers are continuously giving their insight and are very vocal as to what stocks they are interested in, just give it a try in a averaging peso cost way. stay with the trend. then just watch it and do your lifetime study… by reading you learn the science and by watching you may learn the art of investment until you mastered them both.

      good luck to all of us and may the race of our guru multiply among us, all for the name of our nation.

      Comment by richard | August 18, 2010 | Reply

      • very well said richard

        Comment by Foreign Investor | August 18, 2010

      • Cheers!

        Comment by Aika | August 18, 2010

  14. I’m actually almost fully committed at this point. I have only my last 5% to buy. It was gonna be for my last 1000 shares of EDC and then maybe a few CHIB.. but EDC has gone up as fast as/faster than MPI.

    Anyway anyone of them will do. Lets see tomorrow. I usually buy at around 11:30am. Hope we can get a good price eh.

    Comment by jasper | August 18, 2010 | Reply

  15. Hi Sir Gus,

    I bought ANI last year at 30, now its down to 14.60. What do you think should I do? Sell now and revert to more profitable stocks or kill myself since I feel so miserable?

    Thank you.

    Comment by Ben | August 18, 2010 | Reply

    • hi ben,

      I’m not Gus, and this is just my opinion so take it with a
      large grain of salt:

      losing in stocks – It happens to the best of us. I just lost some last week too. :pat:

      But what was the reason you bought ANI? I think you should sell the day the reason you bought was no longer valid. Or alternatively, if you found another stock with more potential.

      If you’re convinced a stock is a dog, just sell and eat the loses. It will hurt a few days (I know too well), but in the long run it will be better.

      Comment by jasper | August 18, 2010 | Reply

  16. Sir Gus,
    With the rise of MPI, EDC and PNB, would you recommend to add more positions in these stocks? Im looking at 2-3 months holding period before changing my mix or take your previous reco to divest PNB until full potential is achieved. PNB is 50% of my portfolio while MPI 20% and EDC 5%. Balance is a mix of AP, DMC, DGTL and cash.

    Comment by Mark | August 18, 2010 | Reply

  17. btw aika,

    whats “SLIM” in “CAN SLIM”?

    Comment by jasper | August 18, 2010 | Reply

    • Got this directly from Wikipedia:

      The seven parts of the mnemonic are as follows:[1]

      * C stands for Current earnings. Per share, current earnings should be up to 25%. Additionally, if earnings are accelerating in recent quarters, this is a positive prognostic sign.

      * A stands for Annual earnings, which should be up 25% or more in each of the last three years. Annual returns on equity should be 17% or more

      * N stands for New product or service, which refers to the idea that a company should have a new basic idea that fuels the earnings growth seen in the first two parts of the mnemonic. This product is what allows the stock to emerge from a proper chart pattern of its past earnings to allow it to continue to grow and achieve a new high for pricing. A notable example of this is Apple Computer’s iPod.

      * S stands for Supply and demand. An index of a stock’s demand can be seen by the trading volume of the stock, particularly during price increases.

      * L stands for Leader or laggard? O’Neil suggests buying “the leading stock in a leading industry”. This somewhat qualitative measurement can be more objectively measured by the Relative Price Strength Rating (RPSR) of the stock, an index designed to measure the price of stock over the past 12 months in comparison to the rest of the market based on the S&P 500 or the TSE 300 over a set period of time. [2]

      * I stands for Institutional sponsorship, which refers to the ownership of the stock by mutual funds, particularly in recent quarters. A quantitative measure here is the Accumulation/Distribution Rating, which is a gauge of mutual fund activity in a particular stock.

      * M stands for Market indexes, particularly the Dow Jones, S&P 500, and NASDAQ. During the time of investment, O’Neil prefers investing during times of definite uptrends of these three indices, as three out of four stocks tend to follow the general market pattern.

      Cheers!

      Comment by Aika | August 18, 2010 | Reply

      • Hi Aika,

        Am I right when I say that you use both fundamental and technical analysis for your investment/trading decisions? May I know what investment style do you give more weight to when making your decisions? Thanks!

        Comment by gp | August 18, 2010

      • Hi, gp. Interesting questions. They got me to thinking.

        For the first question, it is only recently that I started using BOTH fundamental and technical analyses in deciding. Before, I was just blindly copying what everyone says here, which by the way are almost ALWAYS CORRECT (esp. Sir Gus’ suggestions and analyses). However, as a science student, I am more inclined to look at things in a more quantitative way just like my colleagues Anthony and Chris M who are also avid followers of Sir Gus’ blog. If nothing else, the numbers and the chart patterns make us more confident about our decisions. It tells us when to enter and leave the market at the right time, more or less. Case in point, MPI’s recent dynamics. We already knew weeks (even months) ago from the information provided in this blog that MPI has strong fundamentals and that it is undervalued. (Many thanks to Sir Gus for that.) However, what most of us didn’t know was when we should start buying and accumulating MPI shares to maximize our earning opportunity; this is especially critical for investors like me who have very limited funds. This is where the charts and the numbers (volume action, tight prices, etc.) come in. Last Monday I noticed something interesting about MPI’s chart pattern. I even posted my observation here. 🙂 Then two days after, today happened. 🙂

        Ultimately though, I go for the fundamentals. You can never go wrong when you decide based on the fundamentals. I learned this from Sir Gus. Sometimes though it can be very frustrating especially for someone who is emotional and impatient.

        Furthermore, my decisions are heavily influenced by Sir Gus and my colleagues Anthony and Chris M.

        I am very new in stock trading. And I am really learning a lot just by following this blog and the comments that follow, talking to fellow amateur investors at work(hehe), and reading investment books. Hopefully, a year from now, I can already concretely tell you what my investment style is. For now, I am still learning the ropes.

        Cheers!

        Comment by Aika | August 18, 2010

      • Thank you very much for explaining Aika. That made a lot of sense. Btw, I like how you go about your investing, by reading and actually putting it to practice. As they say, experience is the best teacher. I had to read several books before I finally made the decision to start investing. Hehe. I still read whatever I can get my hands on regarding value investing. I hope you find an investment style that suits you.

        Comment by gp | August 20, 2010

  18. Hi, Chris M,

    How do you monitor the actions of Regis and Macquarie? Thanks.

    Comment by jovy | August 19, 2010 | Reply

    • Hi Jovy, I diligently look at the daily motion of stocks i`m monitoring esp. those in the most active list. Deutsch and Macquarie will never reveal their strategies, you have to analyze and figure it out for yourself. That is the science part of this game.

      I typically grab the buy-sell transaction in my window and compare the daily and weekly priuce actions. I`m meeting some PSE officials handling the data on the 27th of August. I will see the legality of obtaining this data and see if it can be made public at least for the 30 most traded stocks. I will keep everyone updated.

      Comment by Chris M. | August 19, 2010 | Reply

  19. thanks Chris M.

    I hope pse makes this available. If they really want the number of people investing/trading in stocks, they should provide these information and more. As well as provide information in a timely manner.

    One reason many people do not like to invest/trade is because they feel like they are in the dark because of lack of data/info. People feel the playing field is not level with small investor/newbies.

    I guess PSE want people to pay for the data they provide, but if they provide it free more people will invest/trade providing more revenue than what they can expect from the data being paid. I hope they see it that way.

    I hope PSE can also provide the nfb/nfbs alongside their 30 day history.

    Comment by jovy | August 19, 2010 | Reply


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