Gus Cosio says so

Ideas on the Philippine Stock Market

Keeping my Fingers crossed

6:35 pm  Wednesday  18 August 2010  Philippine Stock Exchange Index  3534.80

What is useful to note at this point in time is that the rises in the market in the past three days have gone higher.  It was around 10 points on Monday, 22 points on Tuesday, and 32 points today.  That is a sign of a strong trend.  It comes quite unusually given that this is the ghost month.  I guess the listless performance of prior weeks had manged to put investors fears into the price.  Now that there is enough cash in investors hands, it seems that the fear is not to be invested in a market that is cheap.

Notice also that even if there had been marked daily declines the major markets, our market remains resilient giving further credence to the values that investors can find in local equities.  Today, stock like EDC and MPI were solidly being bought.  The Lopez suite continued to attract money as volume and prices were all up.  I am happy that EDC is starting to outperform because I still see it as the growth driver for the remaining Lopez power business.  Of course FGEN will be a big beneficiary of EDC’s fortunes and so will FPH be.  People are asking whether or not EDC will break the 5 peso level.  My hunch is that it will since my valuation of the stock is at least 5.60.

MPI is probably the main infrastructure play in the Philippines given the breadth of its portfolio.  I am not surprised that it is forging ahead.  It will likely continue into the rest of the week.  I was suggesting that people take positions on the stock after I attended their investors briefing 2 weeks ago.  I believe in trading on sound information and I think we received a very good picture during that briefing.  Will we eventually be moving towards 4 in this stock?  I believe so.

PNB finally hit 45 today on strong institutional buying after an announcement of Allied Bank’s 10% increase in 1H2010 profits.  People should be reminded about what the score is.  PNB is worth at least 48, and some even hold the view that the dynamic valuation should go as high as 55.  Anyway, the long and short  of it is that PNB is still undervalued given the emerging strength of its operations.

UBP also sae a big jump while MBT and BDO have kept the momentum received from the beginning of the week.  This solidifies the view that the banking sector would be a strong beneficiary of the good GDP figures for the 2nd quarter that is due to be announced on the 26 August.  I will suggest additional weighting in your favorite banking stock given this outlook.

GLO is gathering some support below 770.  I will continue to be wary of GLO until they present figures that show a reversal of business trend.  DGTL appears to be facing some hurdles as the total telco picture has become to look crowded.  My only take on this stock is that it is one that is gathering support at the 1.40 level.  I need to look deeper into what the company is doing but I believe taking a small position in the stock may be rewarding.

Overall, I think we have a market that seems to be defying common notions.  We are not that sensitive to the U.S.  We have stocks that are bargains by any textbook analysis.  There is a lot of money sloshing around the economy.  Consumer and business spending continues to grow.  Government is trying to put its act together.  No wonder common notions are being defied; things are actually changing in this country.  I’m keeping my fingers crossed (and my prayers silent).

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August 18, 2010 - Posted by | Financial markets in Asia

42 Comments »

  1. […] From the blog of Sir Gus Cosio, he believes that this stock will hit 4.0! Gus Cosio says so […]

    Pingback by It's MPI Once More.... | A Pinoy trader in Singapore | August 18, 2010 | Reply

  2. sir Gus, thanks for your inputs really appreciate your unceasing dedication to post your opinions here. I hope you can enlighten me as regards SCC, is it still wise to chase it at their price? I don’t know it’s current EPS taking into consideration it’s 1H earning since it’s pse EPS is last March yet. Appreciate your reply.

    Comment by beginner | August 18, 2010 | Reply

    • Beginner,
      SCC is a strong stock because of the certainty of its coal revenue. Most of the production is already contracted to coal fired power plants in the Visayas. Secondly, export prices of coal within their grade and quality remains buoyant. Thirdly, the Calaca power plant they acquired is costing less to upgrade and maintain than they budgeted for. All of this will translate to good earning. My colleagues place fair value of SCC at 145 which is about 13% above today’s price. In my case, I played SCC through DMC which owns the majority of SCC. DMC is 21.30 today and I think its fair value is 30. That is a 40% gain which to me is a better risk reward ratio.

      Comment by Gus Cosio | August 19, 2010 | Reply

  3. Hi Sir Gus, Do you still maintain the view that DGTL will hit 2 in the short term? I bought some DGTL and am thinking of shifting it to MPI instead..

    Comment by Jude | August 18, 2010 | Reply

    • Hi, Jude. Please allow me to quote Sir Gus below. This was from his post titled ‘Economic outlook and ice cream’. Cheers!

      “For DGTL followers, I do not think that it is not a short-term play. In buying DGTL, you are taking a view that its value will emerge due to its turn around in business results and possibly sustained earnings from here going forward. That is a view that I am willing to take. It make take a bit of a wait, but it is a wait worth doing if I see at least a 40% move. It is like my view on PNB last year. I have the same sentiment for MPI. For this reason, my strategy for both these stocks is to accumulate rather than buy my position all at once. I am willing to be patient and even peso-cost average until returns are substantial.”

      Comment by Aika | August 18, 2010 | Reply

      • I think Sir Gus’ first sentence in the quote doesn’t really agree contextually with the following sentences in the same paragraph. I think he meant that it IS NOT a short-term play, didn’t he? Because Sir Gus mentioned that “it may take a bit of a wait.” Now I’m confused. Apologies. 😐

        Comment by Aika | August 18, 2010

      • don’t be confused..for now buy MPI because of the trend then if you are ready to sell MPI with a gain, then buy DGTL…cheers!

        PD: have MPI and DGTL (konti lang muna)then accumulate.

        Comment by alssy | August 18, 2010

      • Allsy, thanks for that. Actually, what I meant was that I was confused with Sir Gus’ statement. The double negative: “I do NOT think that it is NOT a short-term play”. hehehe

        Comment by Aika | August 18, 2010

      • My mistake, it should be “I do not think that it is a short term play”; I’ll edit the original.

        Comment by Gus Cosio | August 19, 2010

    • Jude, I have also accumulated DGTL over the past months up to last week. I am not worried about its present condition because I have seen its reports and business plans and they seem very well thought off. Of course these plans would need time to mature until they would start doing good for the company. My take on this is about a year before the stock would truly appreciate. If you are after short term gains, may I suggest some companies which are gaining strong attention such as LPZ,DMC PNB and MPI. Consider also JGS since it entered a slump… These companies hopefully would give you sure gains over the next 2-3 months.

      Comment by Mike | August 18, 2010 | Reply

    • Jude,
      To set the record straight, I think DGTL is NOT a short term play. I already corrected my earlier statement. I apologize for the mistake.

      Comment by Gus Cosio | August 19, 2010 | Reply

  4. Hi Sir Gus,

    Thanks for MPI. Im thinking to add my stock portfolio by buying financials: namely BPI and CHIB or PNB.

    which do u think I should prioritize of these 3.

    Comment by alssy | August 18, 2010 | Reply

  5. Hi Sir Gus,

    On how many months do you foresee the rise of DGTL?..I have invested in it since the 1st time you told that it will go up to 2.00. I bought it at 1.46 with almost 100% of my cash. Now I’m trying to cost-average by putting small amounts on this stock. I’m just waiting for August 26, 2010 for some good news about this stock however, doubt might surpass this thinking and make a cut-loss to invest the cash on other stocks. Sir, please give some truthful advice on what to do given the current market situation. Thank you

    Comment by Chad | August 18, 2010 | Reply

    • Just my opinion:

      1. Basically, some of the expectations are unrealistic. 1.46 to 2p means a 36% increase. It might go there, but it will not be in a day. Even if someone sold their position in DGTL right now and tried to invest in other stocks, it will still be the same.

      Actually, I’m ok if it goes to 2p in 4 years. 36% increase in 4 years is equivalent to putting it in a bank with 9% annual yield.

      2. Having a single stock portfolio is very dangerous. No one is right 100% of the time. Not even Mr. Gus. Even Mr Buffet picks the occasional dud now and then. Heck, I was so convinced GLO will lead me to the promised land. So you have to ask yourself before you buy ‘What would happen if I’m wrong this time?’.

      I don’t know about the other players but for this reason, I’ve a 20% limit. If a stock is already at 20% of my total holdings, I will not buy anymore no matter how tempting.

      btw: I hope you’ve been doing your own research and not just buying on Mr Gus’s recommendations.

      Just my opinion alright. Don’t kill me. :peace:

      Comment by jasper | August 18, 2010 | Reply

      • i do agree with your comment jasper… as the famous line goes “don’t put your money in one basket”…. and if i’m not mistaken Sir Gus had also encouraged that.

        Comment by tatels | August 19, 2010

      • Jasper,
        Your points are very sound and should be well taken. Thanks.

        Comment by Gus Cosio | August 19, 2010

    • Minimize your greed, as for me I have a limit of 30% of my total holdings.

      Comment by Ryan | August 19, 2010 | Reply

    • Chad,
      It was very dangerous that you put everything in DGTL. In my case, I am slowly accumulating, so I post when I am comfortable. Even at that, I am not going to put all my cash in DGTL. In fact, I will never put all my money in one stock. I even make it a rule to invest only 80 to 85% of my portfolio at any given time. I only go to 100% when I am close to adding cash to my portfolio.

      Comment by Gus Cosio | August 19, 2010 | Reply

      • Sir,

        So, most likely, it is advisable to cut loss in dgtl and just invest it on other stocks?

        Thanks in advance Sir Gus.

        Comment by chad | August 19, 2010

      • Chad,
        I mentioned earlier that I think it may take some time for DGTL to move. It is really difficult to time these movements so you just have to decide to buy a good stock and wait for it to move. For one, I am accumulating a position in AP because it looks good value at these levels. It could go down some more which means I could buy some more at lower prices, but my horizon goes beyond the next few months and I am looking for a 40% return by then.

        Comment by Gus Cosio | August 19, 2010

      • Hi, Chad. If I may, I suggest that you loosen your positions. Maybe trim it down to half. I’d like to believe that DGTL is a good stock, in the long run. I am also invested in it. But, if you’re really not comfortable with it, maybe it’d be better for you to let go for the moment. Whatever makes you sleep well at night, that is still the best way to go. Cheer up!

        Comment by Aika | August 19, 2010

      • Sir,

        Thank you for your advices Sir. I really appreciate it a lot. Actually, I’m a newbie in the stock market and gain confidence in investing on stocks that professionals like you invested in.

        Comment by chad | August 19, 2010

  6. ^agree. Divy up, it will prevent sleepless nights

    Comment by iLikePassiveIncome | August 19, 2010 | Reply

  7. If u want to make a profit….Use Range Bound Trading….it gives me 20-40% profit for the past 4 months

    Comment by mike | August 19, 2010 | Reply

  8. MPI’s initial bid is at 3.20 :/ I’ll try to view later today. Hope it doesn’t go up to much.

    Comment by jasper | August 19, 2010 | Reply

  9. Good day Sir Gus!
    I’m planning to use my hard-earned savings in stocks. Any suggestion on how I should begin? I try to catch-up on the terms you and your followers are using in this blog.
    Thanks for always sharing your thoughts…God Bless!

    Comment by Totoy | August 19, 2010 | Reply

  10. Hi Gus,

    I got some extra and would like to seek advice on what stocks to buy?

    thanks

    Comment by kier | August 19, 2010 | Reply

  11. hi jasper. you just misspelled mr. buffett’s name. its a curse. hehe

    Comment by buffetteer | August 19, 2010 | Reply

  12. Hi Sir, whats your take on JGS and AP now at ther current prices?

    Comment by Cholo | August 19, 2010 | Reply

  13. Sir Gus,

    In the technical perspective, it seems MPI just had a break out from it’s 3.2 resistance. Please correct me if I’m wrong sir! Tia! 🙂

    Comment by KennyV | August 19, 2010 | Reply

  14. Hi Sir Gus,
    AP seems to be very cheap at these levels, but prices are too close to the second support. Do you think it’s dangerous to buy AP at this time?

    Comment by CJ | August 19, 2010 | Reply

  15. anyone who bought MPI at 3.3+ price level?

    Comment by trixia | August 19, 2010 | Reply

    • I did, I sold EDC and got MPI@3.34 thinking that it’s a breakout. Hope I’m right 🙂

      Comment by KennyV | August 19, 2010 | Reply

      • Absolutely a breakout i was accumulating the past few days in the 3-3.15 levels i posted an order this morning at 3.25 but sadly it wasnt hit.. I dont regret that I chased the price their are still alot of cheap issues out there technically speaking..

        But that was a good decision for me since EDC will still break out in a few days- or even a week.. 🙂

        Comment by Foreign Investor | August 19, 2010

      • I mean i didnt chase the price

        Comment by Foreign Investor | August 19, 2010

    • Accumulated MPI last week and averaged up at 3.26 and 3.30 today. Keeping my fingers crossed but I’m confident that the trend is intact judging from the closing price near it’s peak price today.

      Comment by Anthony | August 19, 2010 | Reply

    • i bought MPI at 3.42. Hope i made a good move. If target price is 4.00, it’s still a 17% profit.

      Comment by trixia | August 19, 2010 | Reply

  16. DMC’s FV is at 30? I havent looked at their reports yet, but if this is true we might have found a potential winner. I am just wary since it already doubled this year. And I don’t know about the PE ratio yet. I’ll try to see later this week.

    I didnt get a chance to buy MPI. I went on a meeting and when I went back its already through the roof.. :/

    Comment by jasper | August 19, 2010 | Reply

  17. MPI doing 3.41 … gogogo… Thanks Sir Gus for your unselfish and accurate advise on MPI at 2.6

    Comment by alexyc | August 19, 2010 | Reply

  18. Do I buy some of these at these prices?
    AP@18.6, DMC@21.20, MER@179.70
    Or do I just place it at MPI (I’m still comfortable buying it until 3.5p)?

    I already have 8 different stocks. Perhaps I should just ride them till next year and save my money until that sweet deal comes along. Still can’t accept that I wont be able to buy that last couple thousand MPI shares though. Dang, it was so near…

    Comment by jasper | August 19, 2010 | Reply

    • Jasper,
      I like AP at 18.60 although it could come a tad lower yet. See if you have good profits in one of the 8 stocks you own or identify a stock that has been a dog. Sell it and start a position in AP. It is very good value close to 18.

      Comment by Gus Cosio | August 19, 2010 | Reply

    • I’ve started a small position in DMC @ 21.20 today, will accumulate more on any pullback so that it can be part of my long-term portfolio.

      Comment by Mal | August 19, 2010 | Reply


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