Gus Cosio says so

Ideas on the Philippine Stock Market

It is no time to argue!

7:00pm  Thursday   19 August 2010   Philippine Stock Exchange Index  3560.39 (+0.72%)

Another strong day for stocks and what is even more encouraging is the fact that value turnover has been increasing.  We’ve had 4 straight days of gains which has been spread out over a relatively wide range of issues, and value turnover crossed the Php 5.14 Billion.   The scuttlebutt is that a few foreign funds are accumulating large cap stocks  in order to satisfy their allocation to the PSEi.  The traded value for TEL was approaching Php 1 billion while MBT value turnover was Php 871 million.  MPI turned over Php 722 million which is a pretty high volume for this stock suggesting that some foreign buying is going on in this stock.  One thing is for certain – institutions are buying with conviction.  Coming during the ghost month, it speaks volumes on how investment capital is flowing to our market.

I know many of us had taken positions in MPI given the very impressive 1H2010 results that the company reported.  To my mind, MPI may be viewed as the top infrastructure play in the Philippines because of Meralco, Maynilad and Manila North Tollways.  It is also developing other projects, but with future cash flows looking strong from these existing businesses and an equally cash rich affiliate in PLDT, MPI will continue to attract new players.  Momentum for the stock will likely carry it past 3,50 in the coming days with 4 as an intermediate objective.  I think holders of MPI can sleep pretty soundly over the next few days.

Looking at EDC, I notice that beyond 5, the price started to stall.  The stock had good volume so I do not think the play is over for the stock.  I think it should just be consolidating.  I would suggest some caution on EDC as it appears that profit taking is going on with these Lopez stocks.

For those following JGS, there appears to be some accumulation going on in the stock.  My only problem with JGS is that I can’t seem to get enough information to raise my level of comfort.  Unlike URC and RLC which are well researched, JGS does not seem to attract the analysts.  URC and RLC will continue to perform due to their good results.  DGTL, the most controversial member of the family, seems to be stuck around the 1.40 level.  What I like about its price action is that it looks well supported here and once more of the shares get put away into stronger hands, the stock can eventually make it move.  It will take some patience, but there are no free lunches.

One stock that has been going the other way of the market has been AP.  I am one who appreciates this move because I had sold the stock earlier on the idea that because it had increased almost 600% since April 2009, it is just too tempting to take profits.  The funny thing is that AP is very cheap, trading at 8.15X trailing PE and if you believe the forecast, it is trading 6.8X 2010 earnings.  There is no bargain better than AP right now.  I suggest that those entering the market in the next couple of days to seriously look at this stock.  The stock price is dropping which should make it easy picking.

I would encourage readers to look at stocks other than those being mentioned here.  It would be useful for readers to see how others feel about the different stocks.  There have been those asking about CHIB and RCB.  I think those stocks are worth a look.  For those that want to avoid volatility but want to get their feet soaked in the market, there is always AC and BPI and possibly ALI which are all large cap stocks and are in the picking menu of foreign funds.  For the brave of heart, you could study VLL and have a good look.  One fund manager tells me that it is trading at 0.57X Book Value and trailing PE is a very undemanding 10X.

I guess the message is that no one looks to be afraid of the hungry ghost and I will not argue the point otherwise.

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August 19, 2010 Posted by | Financial markets in Asia | 58 Comments