Gus Cosio says so

Ideas on the Philippine Stock Market

Foreboding Psychology?

2:50pm Sunday 22 August 2010 Philippine Stock Exchange Index 3593.60 (Friday close)

The DJIA appears to be sagging as global investors are looking less at the stock prices which benefited from strong 2Q2010 earnings report to recent economic figures indicating weakness ahead for the economy.  One insight I got while reading the weak US jobless figures and an article on new US healthcare legislation is the disincentive for employers to hire new employees because of the burden of healthcare on employee cost.  It is not surprising that companies whose earnings are very strong are not tapping the job market fast enough.  The broader based S&P 500 is showing the same weakness and looks to be headed for further weakness if one considers technical indicators.

The PSEi on the other hand paints a different picture.  The technical indicators are showing underlying strength supported by positive macroeconomic fundamentals.  The latest OFW remittance report was an increase of 8.3%.  Remittances are a leading indicator because it presages a growth in consumer spending in coming months. The aggregate of beneficiaries effectively have effectively 8.3% more money to pump into the economy.  Of course, there is also the seasonal harvest in rice producing areas which bring more purchasing power into the countryside.  The GDP growth rate to be released on Thursday, the 26th, will likely reflect the underlying economic strength.  The scuttlebutt from brokers covering foreign funds is that appetite for Philippine stocks have grown bigger.  This is but natural since asset allocation into Asia ex-Japan has grown in leaps and bounds. Even if only 1% gets allocated into Philippine shares, that could be around US$1 billion coming into local stocks.  Value turnover has straddled the Php5 billion mark over the past week giving hint of added foreign money.

If you compare the PSEi to the MSCI Asia ex Japan, we have been outperforming the rest of Asia in the current quarter.  It is not unreasonable to think that more foreign and local capital will flow this way in the current quarter.  The large blue chips will be the most likely targets of foreign buyers.  This to me explains why in spite of JFC being expensive, had outperformed the PSEi for most of the current quarter.  JFC is a pure consumer play which reflects discretionary spending in the economy.  It also partly explains the strength of URC earnings as well as sustained revenue stream for TEL.  My take is that for the coming weeks URC and TEL will likely have strong buying support.

There have been questions about JGS, whether or not it is a good stock to buy.  Fundamentally, I would say categorically that it is an excellent company which has excellent companies in its portfolio, namely, URC, RLC, unlisted Cebu Pacific and Robinson Savings Bank, as well as companies obscure to many of us.  It also owns DGTL which has taken more than 15 years to turn around, but the recovery of the company already looks imminent.  The only problem of JGS is the stigma in the market that Big John, all these years, has not shown any concern for shareholders.  My opinion, however, is with what has gone about in RLC and URC over the past 18 months, the impression about Big John may be worth changing.  JGS should be able to trade properly in the months ahead due to good fortune in URC and RLC and possibly the favorable conditions for DGTL and an IPO for Cebu Pacific.  Will one lose money in trading JGS?  It would really depend on your timing.  Don’t forget GLO was such a good story last year, but look at where it is now.

In spite of the bad fortunes in GLO, AC looks to be a stock that foreign funds are buying simply because it gives them simultaneous exposure to the banking, communications and property sector in one go.  Such a psychology will bode well for stocks like AEV, DMC and MPI all of which have exposure to more than one industry sector.  That should also be good for MBT because of its universal bank status which has allowed it to have exposure in the power (Global Power), property (Federal land), insurance (AXA and Charter) and automotive (Toyota) industries.

The main story that investors are seeing is the strength of the underlying economy which is very different from the double dipping US situation.  Are we decoupling again? Compare both indices from the beginning of July and see for yourself.

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August 22, 2010 - Posted by | Financial markets in Asia

87 Comments »

  1. maybe the foreign houses pushes mpi to 7 or 8 eh.. lets hope. Hey 1b dollars is such a big amount of money it could easily happen..

    Comment by jasper | August 22, 2010 | Reply

    • Maybe in 2-3 years time?

      Comment by Ram | August 22, 2010 | Reply

  2. Hi sir Gus. Can you give us your prognosis on DGTL. There seems to be a mixed review on its performance. Thanks.

    Comment by jojo | August 22, 2010 | Reply

    • Jojo,
      I’m not an analyst so my take on DGTL is based on information that is equally available to all of us. Analysts make their recommendation based on numbers they generate from their assumptions. I make my assumptions based on what I observe from both the numbers available to all of us and what I see is happening in the market. Analysts are wrong many times. I am wrong many times too. I just try not to stay with my mistakes.
      As for DGTL, I think it is too early for me to abandon my observation about the stock. The marked increase in their market share in all segments of business tells me that the old way of looking at DGTL is no longer valid. I am not suggesting that you stick with DGTL if market information does not leave you comfortable. I’m putting some of my money in DGTL simply because I think it will earn some money for me. That’s all I have.

      Comment by Gus Cosio | August 22, 2010 | Reply

      • I have followed DGTL since its inception of its wireless service. It took time for the unlimited call and text to fly due to its quality issues before. The quality may have improved as more people are using SUN now (11 Million)and it has been a capital intensive business in the past 10 years.

        You can see the revenues of DGTL has been increasing current quarter vs. prior quarter and current quarter vs. prior year quarter while its competitors had flat or negative growth. The more subscribers, the better for DGTL as from 2007 to 2010, it doubled its revenues. This is possible (revenues to double) for the next 3 years again.

        http://www.digitel.ph/financial.asp#quarterly_highlights

        The previous business model of subcriber first and network expansion later has now changed to subscriber growth only as DGTL has now the infrastructure in place. This will translate to revenue in the future. A bulk of the expenses (depreciation of 3 Billion) will add to the cash flow of the company as this are non-cash expenses.

        Comment by alexis | August 23, 2010

  3. I’m planning to add in my portfolio one financial related stocks. Which one do you personally prefer? CHIB or BPI?

    BTW, thanks for MPI:)
    Currently holding FLI and MPI and I wished it will fly more this week.

    Comment by alssy | August 22, 2010 | Reply

    • Aissy,
      I’m indifferent on the two, but I think the in the short run, BPI will be my choice. CHIB moves slowly and rarely, but when it does, it moves in a big way.

      Comment by Gus Cosio | August 23, 2010 | Reply

    • I was very happy when my CHIB stock and peso dividends came. I think someone with a very long time frame in mind would appreciate CHIB’s relative stableness and its dividends. The low P/E doesn’t hurt too (BPI has a high PE)

      I guess it would depend on your investing strategy. If your a PE/PB/FV guy all the numbers point to CHIB.

      Comment by jasper | August 23, 2010 | Reply

  4. Good morning gentlemen and Sir Gus,

    any insights on the surge of MEG’s price. it had broke the P2.0 level last friday. is it still worth more than P2.0?… thanks a lot.

    Comment by tatels | August 23, 2010 | Reply

  5. Lopez Stock is very over valued….I think Big correction is coming…When there is so much GOOD news its time to SELL…

    Comment by Al | August 23, 2010 | Reply

    • I dunno, it was below book the last time I took a view, and EDC is still below 5x which i think should be its fair price. It could correct, but I’m willing to take a view that, for EDC in particular it will go up to a reasonable price relative to fair value.

      Comment by jasper | August 23, 2010 | Reply

  6. Tatles,
    I do not have a good feel for MEG. It is really a traders stock. You just have to follow the technicals for this stock. If you are confident with your position then stick with it. If you think it has run its course, post at higher levels and see if you can get those prices, but put a trailing stop in your mind, i.e. if it touches 1.90, sell.

    Comment by Gus Cosio | August 23, 2010 | Reply

    • You very Correct sir Gus SELL Meg @ 1.9++…..trade the range + Momentum trade=Astute Trader

      Comment by Sam | August 23, 2010 | Reply

    • thank you very much Sir Gus…. i really appreciate your reply

      Comment by tatels | August 23, 2010 | Reply

  7. Dear Expert Guru,

    I am really happy sir for your blogs…thank you. Actually recommended ko itong blog niyo sa thread ko sa Kerygmafamily Forum and daming nag aapreciate. I have open a thread there about stock investing months ago, and you’re blog is really helpful..what an insight.

    I want to seek your advice if my portfolio is in the right mix, EDC 17%, MPI 14%; GMA7 14%; FGEN 5%; GEO 6%, DGTL 5%; PSE 10%; PX 4%; FOOD 4%, COAT, SPH, OM, NI, MA, V, I, IP @ 1%. I am not sure if my mix is correct or ideal, my bottom line is negative becuse i bought during the all time high in 2007. Am I correct for my TP for PSE @ 450, I have been holding this stock for more than a year. Thanks sir…Saludo po sa inyo…

    Comment by jerry | August 23, 2010 | Reply

    • Jerry,
      Thank you for your comments. I am happy that Kerygma Family knows about this blog because I have a special place in my thoughts for people who are “in the world but not of it.”
      On your portfolio: I think you have too many stocks for a personal portfolio. You can reduce your holdings of GMA and re-investit on something like VLL since you have no propert stock. You are correct in taking profits on PSE. Reinvest that in a banking stock, perhaps MBT, PNB, RCB, BPI or CHIB whichever you feel comfortable in. I would also sell GEO and replace it with another mining stock, ORE. I’ve had some primary research done and it looks like they’ll make their first shipment in November.

      Comment by Gus Cosio | August 23, 2010 | Reply

      • Does this mean that I have a lot of stocks on hand? when you say that I have so many stocks for a personal portfolio. I have just released my FLI and MEG that i bought below 1 peso level, likewise my CMT. I have a big negative in GEO 27% of my ave. cost. My problem is when to exit, the NTS really hurt me because the off hour orders is not allowed and there is a 4 hour time lag. Am I correct if I will hold DGTL for 2 year or more and also with MPI. I do not know if I am correct, I am using firstmetro for trading and BPItrade for long term. Included in my long term are FGEN, PSB, EEI, MPI, PX, DGTL, BPI…and some more. Thanks for your insight, God bless and long life.

        Comment by jerry | August 23, 2010

  8. I managed to get a couple more MPI’s. Its near the maximum ratio now, give and take a thousand stocks. Lets see this week if I can get that. I’ll probably get my last batch MPI if it goes to 3.3

    I bid for DMC@21.45. There were no takers. hehe.. Seems as if some folks really like this stock

    Comment by jasper | August 23, 2010 | Reply

    • MPI is loosing some momentum. It went as high as 3.46 but got sold down as low as 3.31 this is currently a very delicate state for MPI

      Comment by Foreign Investor | August 23, 2010 | Reply

      • The declining price is sometimes due to profit taking. For a stock to go up, it must consolidate within a period of time (sometimes a week or month) before it rises again. I think, for MPI, this is a healthy correction and MPI at this level is more safe than the high-flyers.

        Take DMC for example, this is a good stock and it continues to go up, but most of the time once it reaches its record 52month high, the next day it goes down as a sign of correction, which is basically needed for it to go higher

        Comment by Cliff | August 23, 2010

    • hmm, forgive my innocence but what is the correlation of ‘momentum’ with regards to stock trading? Is there some strategy there I need to be aware about?

      btw: I’ll be very very very happy if it goes down to 3 again.. hehehe..

      Now EDC needs to follow suit. It has gone up too like a rocket. A price of 4.65 will be sweet.

      Comment by jasper | August 23, 2010 | Reply

      • Momentum–volumes are decreasing in the past few days since volume was tremendous in the last week

        Comment by Foreign Investor | August 23, 2010

    • I think it’s a healthy consolidation. It was up 21.4% last week.

      Comment by Anthony | August 23, 2010 | Reply

    • If all goes right, what will happen to MPI is the exact same thing that is happening now to VLL. It shot up from 1.9 to 2.48, then it went to 2.33 and stayed there for a few weeks. Now VLL is at 2.8..

      Well, thats what I’m hoping anyway.. hence I am a happy camper at the moment.. :fingerscrossed:

      Comment by jasper | August 23, 2010 | Reply

  9. HI Sir Gus. I currently have MPI, DMC, DGTL and PNB. Am thinking of adding AP and AGI to my portfolio, since I recently sold EDC. What is your view on AGI though? You previously mentioned that MEG is a trading stock.. is it the same with AGI? Since I usually dont sell my stocks unless Ive realized 30% profit, a trading stock might not work well for me. Would appreciate your advice.

    Thank you!

    Comment by Cholo | August 23, 2010 | Reply

    • Cholo,
      I think both AP and AGI are good additions to your portfolio. AGI has the earnings of MEG plus the windfall profits coming from the tourism related operations particularly gaming.

      Comment by Gus Cosio | August 23, 2010 | Reply

      • But sir is it still ok to get AGI at its current price? (6.83-6.90)?

        Comment by cholo | August 23, 2010

      • Cholo,
        If you’re simply punting, I don’t know. But if you want something that might go 30 to 50% over the next 6 months or so, I believe AI can.

        Comment by Gus Cosio | August 23, 2010

  10. hmmm JGS
    – PB: 1.36
    – PE: 9.86
    – ROE: 15.4
    1H profit +114.6%. Seems good. Don’t have no more money though.. :holeinpocket:

    Comment by jasper | August 23, 2010 | Reply

    • jasper,
      i noticed you are a value investor and a follower of ben graham. it is a good attitude set up. my foundation were also based on that inspired by warren buffett success.since you are not a day trader you may also invest a portion of your money in a mutual trust fund i am quite happy with its result year to date is more than 30%.
      i set aside a little portion of my trading gain to trust fund and considered it as a reserved cash for future reinvestment in stocks.just choose well your trust company, if you will ask me its fami that gives me this result.
      this is just my idea sharing and i am not promoting this company.

      Comment by richard | August 23, 2010 | Reply

  11. Hi gentlemen and Sir Gus,

    I am new to stocks and I’m still going to start, I hope I’m not yet late. Sir, If you were to buy 4 stocks today, what would it be? Let’s say I can keep my money for around 6 months-1 year in the market. Thank you Sir!

    Comment by Vance | August 23, 2010 | Reply

    • Hi Vance,
      Off hand I would suggest DMC or MPI, AP or AEV, VLL or RLC and PNB or CHIB. Then you can follow how other stocks go.

      Comment by Gus Cosio | August 23, 2010 | Reply

  12. dagnamit.. sikat na naman ang pinas due to this hostage taking and stupid action by our so-called elite SWAT…
    do you think this will somehow affect prices of stocks tomorrow?
    i’m still waiting for bargains.. i thought after that 2-day loss (-201.92) ng dow eh magcocorrect na rin tyo, but still, we continued to trend up… indeed a good sign..

    Comment by Sasuke-kun | August 23, 2010 | Reply

    • I think PSEi will be down tom. =( damn our police officers, first the torture videos, hostage taking and now bloodshed…. haaaayyyy …. Lets offer our prayers to the victims and their families…

      Comment by raymund | August 23, 2010 | Reply

      • add to it the live media coverage….

        Comment by tatels | August 24, 2010

  13. firstmetrosec is down again. I’ve been experiencing times like this time to time. I like the fmetro broker site and everything but I guess its time to take a look at citisec. Perhaps a single online broker simply can’t assure service is there when you need it the most.

    Comment by jasper | August 24, 2010 | Reply

    • Yeah..it loads the log-in screen after waiting for sometime and nothing happens after. Sigh! its a great time to buy pa naman. I wont give COL a try though, Ive read lots of rant as well about them.

      Comment by Dex | August 24, 2010 | Reply

      • i have col account it’s good but transfer fund is not that fast like firstmetro superb…col transfer will take 2 days before you can trade…and be careful, they are recommending a lot to buy that for me is misleading..its only my view…

        Comment by jerry | August 24, 2010

    • I didn’t have a problem logging into First Metro just now.

      Comment by Sonn | August 24, 2010 | Reply

    • fmetro is throwing some weird exception error.. it seems it has outdated SSL or something.. maaaannnn.. i need to see my account :shivers:

      Comment by jasper | August 24, 2010 | Reply

  14. Yeah it is working now. I was able to enter few moments after my post above. It is just terribly slow but its better than nothing 😀

    Comment by Dex | August 24, 2010 | Reply

  15. ABS @ 54/sh is very overprice with 24+ pe ratio i think this stock will go down to 30 in the coming months….Buy Gma7 instead…

    Comment by Cindy | August 24, 2010 | Reply

  16. i don’t know what happen to firstmetro i sold my abs and mbt, with my surprise my cash position was negative…fortunately, i have the number of one of the trader that i have to sms…hoe they will fix the system so we will not be mislead..

    Comment by jerry | August 24, 2010 | Reply

  17. Hi Sir Gus,

    I just sold a majority of my MEG shares to protect my profits. I’d like to reallocate the proceeds to 2 other stocks. I might avarage down on my positions in DMC, EDC or RLC. Or simply buy AGI or AP. What would you recommend? Thanks in advance!

    Comment by Sonn | August 24, 2010 | Reply

  18. Target stocks are significantly lower today. A perfect time to buy. MPI@3.3, DMC@20.90

    But I couldn’t connect.. So what I did was to run around and go look for a net shop so I can try from another PC. I finally found one. But it was 12:05!! Market’s closed.. :cries:

    Comment by jasper | August 24, 2010 | Reply

  19. Sir,
    What’s your take with the plunge today? down [82pts / -2.28%]. Hostage taking related? or just merely correction, ghost month or GDP lower vs. Q1?
    Regards

    Comment by Mark | August 24, 2010 | Reply

  20. Hi Guys/Sir Gus,

    Im just curious.. What are megw1 and megw2? Theyre also stocks of Megaworld right, so whats the difference? What are warrants?

    Thanks!

    Comment by Cholo | August 24, 2010 | Reply

  21. was able to connect to fmetro at last :grumble2x:
    But whoa! ALI lost 15% value in a day? -_x Don’t think this is a correction.. All my monitored stocks are in red.. should have been a perfect day for accumulation.. ruined, ruined! :rawr:

    Comment by jasper | August 24, 2010 | Reply

    • I heard in the news that there a major brokerage firm made an error in placing the price of 800k shares to 14. I’m not sure though if it was an error or a deliberate attempt to lower the stock price.

      Comment by Anthony | August 24, 2010 | Reply

      • If it was an error, would it be ouch for the trader? or would there be a way to correct it?

        Comment by joseph | August 24, 2010

      • @Joseph
        Your right it is an ouch for the trader. To correct it we would be seeing the reaction in the market tom if buyers are willing to buy it at a higher level

        Comment by Foreign Investor | August 24, 2010

  22. sir gus,

    i would to extend my sincere sympathy with you and your family for the demise of your beloved father.

    nakikiramay po ako, aking minamahal at ginagalang na guru. kaisa nio po ako sa panalangin para sa kapayapaan, katahimikan at ganap na kaligayahan ng kaluluwa ng iyong ama.

    salamat po,

    richard

    Comment by richard | August 24, 2010 | Reply

    • My condolences Mr gus.

      Comment by jasper | August 24, 2010 | Reply

    • our condolences Sir Gus…

      Comment by tatels | August 24, 2010 | Reply

      • Our deepest condolences Sir Gus

        Comment by Foreign Investor | August 24, 2010

    • Our condolences to you and your family Sir Gus.

      Comment by gp | August 24, 2010 | Reply

    • My deepest condolences Sir Gus

      Comment by KennyV | August 25, 2010 | Reply

    • Our deepest condolences and prayers, sir.

      Comment by herecomesthebaby | August 26, 2010 | Reply

  23. My deepest sympathy.

    Comment by Keith | August 24, 2010 | Reply

  24. Sir Gus! Hope you and your family are ok, will include you in our prayers. Our deepest condolences.

    Comment by cholo | August 24, 2010 | Reply

  25. My condolences to you and your family sir.

    Comment by Mark | August 24, 2010 | Reply

  26. My deepest condolences to you and your family.

    Comment by bob r. | August 25, 2010 | Reply

  27. My condolences, Sir Gus. You and your family will always be in my prayers.

    Comment by Anthony | August 25, 2010 | Reply

  28. We included your father, you and your family in our prayers at mass this morning. Our deepest sympathy and condolence on your father’s passing.

    Comment by Bobby | August 25, 2010 | Reply

  29. Dear, Sir Gus, my condolences to you and the Cosio family. You’ll be in my prayers.

    Comment by Aika | August 25, 2010 | Reply

  30. Our thoughts and prayers are with you sir Gus.

    Comment by Dex | August 25, 2010 | Reply

  31. My condolences, Sir Gus.

    Comment by Mal | August 25, 2010 | Reply

  32. I’ve completed MPI acquisition I think. Its doubled in size relative to my portfolio now. Then took a small position in DMCI just because I felt guilty buying too many MPIs that I decided to ‘diversify’.

    But I wasn’t sure so I place a low bid of 20.75 when the asking price was 20.80 only to find out that its now 20.25.

    I really should stay away from bidding so early in the morning :/

    Comment by jasper | August 25, 2010 | Reply

    • isn’t aug 26 a big day for our market? If the report indicates positive performance, then this dip would be just the one we needed to avg down?

      Comment by joseph | August 25, 2010 | Reply

      • i’ve also had those early morning bids and later find out it was too high. But sometimes it would go the other way. Take for instance MPI the past couple of weeks. We just weren’t able to anticipate the double whammy of the DOW sinking along with our hostage crisis… ouch! good thing there is something to look forward to tomorrow…:)

        Comment by michael | August 25, 2010

    • hmm, I think that the real increases of my holdings will take effect next year. Maybe around Aug next year, I’ll have a two bagger by then :hopehope:

      Comment by jasper | August 25, 2010 | Reply

      • Most probably you are talking about MPI or AP

        Comment by Foreign Investor | August 25, 2010

  33. My sincere condolences to you and your family, Sir Gus.

    Comment by finch | August 25, 2010 | Reply

  34. Condolence po sir Gus.

    Comment by ronald | August 25, 2010 | Reply

  35. Please accept my condolences Sir Gus.

    Comment by thewingedpalate | August 25, 2010 | Reply

  36. Condolence din po Sir Gus.

    Comment by abetrj | August 25, 2010 | Reply

    • Abet,
      This cannot happen here because there is a tax when you sell, and it is a final tax.

      Comment by Gus Cosio | August 26, 2010 | Reply

  37. My deepest condolences Sir Gus.

    Comment by jong | August 25, 2010 | Reply

  38. My deepest condolences Sir Gus.

    Comment by Paul Vincent | August 25, 2010 | Reply

  39. Sir Gus, condolence to you and to your family for the death of your father. I just offered some prayers for the eternal repose of his soul.

    Comment by Nel | August 26, 2010 | Reply

  40. http://www.nydailynews.com/ny_local/2010/08/24/2010-08-24_thought_you_had_irs_problems_failed_daytrader_nailed_with_172m_bill.html#ixzz0xcaSNfyW

    Will this happen here? Do we need to file our income from stock? Any comments?

    Comment by alex_cc | August 26, 2010 | Reply

  41. Our deepest condolences master gus.

    Comment by roberth | August 26, 2010 | Reply

    • Our condolences to you and your family, Mr. Gus.

      Comment by tolits | August 26, 2010 | Reply

  42. Condolence sir Gus.

    Comment by kier | August 26, 2010 | Reply

  43. 2Q GDP registered growth of 7.9% YoY (vs. expectation of 6.1%), 1.3% QoQ. 1Q GDP growth was also revised upward from 7.3% to 7.8%. The last time the Philippines experienced +7% GDP growth in consecutive quarters was in 2004. This brought 1st half GDP growth to 7.9%, higher than the NG’s target range of 5-6% for 2010 and highest since 1988. – NCSB

    Comment by marts | August 26, 2010 | Reply

  44. My deepest condolences sir Gus.

    Comment by Sonn | August 26, 2010 | Reply

  45. Good day!

    Your blog is very informative and would probably stick to your site for market reviews. I am new to the market and would like to seek help/suggestions on what stocks to buy, long term (2-3years) and short term (1-6 months). thank you for putting up this site, again.

    Cheers!

    Comment by ijav | August 26, 2010 | Reply


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