Gus Cosio says so

Ideas on the Philippine Stock Market

A ring, a ring a rosies.

With the outlook so rosy in Philippine stocks, it may be pre-mature to even take some profits. Personally, I think an assault at 4000 is pretty close at hand. Today’s 10-year FXTN auction fetched quite a low coupon and average yield – 6 1/8 and 6.149 respectively. This is one of the lowest coupons we have ever seen and what it tells me is that low interest rates will be around for some time to come.

Nevertheless, if you are inclined to take profits, by all means do so. I think some stocks are close to their run for the time being. I like DMC and AP very much, but I would not mind stop slicing my positions since in DMC, I have more than a two bagger already. I feel the same way for PNB which has paid for some of my mistakes and tucked in a hefty reward even. I have always thought that no one loses money by taking a profit.

I had talked about TEL a couple of weeks ago particularly when it hovered below or around 2400. I think that this is a cheap stock and will likely start forging ahead soon in spite of the sentiment that people have against telco stocks. I cannot walk away from TEL’s low P/E, high dividend yield and high ROE.

Another telco whose story I am quite keen on is DGTL. I mentioned before that this stock is on the way to recovery. I have the conviction that this company can triple its profit next year simply because it now has critical mass in its wireless business plus strong growth in its broadband business.

For property, I believe that VLL and SLI will start to catch up. These stocks had been shunned in the past, yet the fact remains that they have very good developments in their pipe-line with an impressive land bank to boot. There had been some comments on these stocks from some readers. I do not have their valuations readily at hand, but I have seen them from a colleague’s notes and they are quite convincing.

Notice as well that mining shares are now on the move. The CRB (Commodities) index has been moving up and even if gold prices are slowing down, copper and silver remain strong. The rise in the Manufacturing index in China is also giving encouragement to base metal prices. This is why the mining stocks have started to perk up again. PX has slowly been edging up, but AT has been a star. I think PX can head up to 14.50 while AT could challenge 15. If metal prices remain firm, I think it could even exceed these levels.

I mentioned ORE in the past and the information I am getting on the company is that it has had a good shipment record in the past and is now preparing to ship in November. It should be a good play for mining followers.

All told, I would like to suggest some portfolio rebalancing. I would encourage some profit taking, some rotation and even taking in more cash. However, I will discourage zero positions at this point. When the market is as strong as this, you should not be naked. Equity positions will surely pay off.

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September 14, 2010 - Posted by | Financial markets in Asia

20 Comments »

  1. Hi Gus,

    Thanks for your wisdom. I recover all my 12% paper loss that I have last year plus the 7% paper gain that I have as of this writing. I just wished that I browse this blog of yours as early last year but unfortunately that happens 1 month ago.

    I plan to add in my portfolio the petroleum company, PNX. What is your take on this? good dividends (40% stocks), SSS had investments on it, etc…(“,)

    On mining: GEO? is there a play on this one?

    Thanks for your insight on BPI, DGTL, AP, DMC.

    Comment by alssy | September 14, 2010 | Reply

    • Alssy,
      I have no insight on PNX excpet that it is not consistent in liquidity. If you like the fundamentals and can live with its lack of liquidity, it is not a bad idea. On mining, I am a lot more comfortable with ORE. I’ve had a person researching the company for some time already and the information i get is very good. I have no insight on GEO. In mining, PX still looks decently priced. I think it should go above 14. AT is also poised to move above 15. I know these three mining stocks so I feel comfortable talking about them.

      Comment by Gus Cosio | September 15, 2010 | Reply

      • Hello S’Gus,

        Good Day! All i can say is THANK YOU for the guidance, this helps a lot for those who are interested on stock investment, and i also noticed that you promptly answered most of the inquiries here, Thanks for that!!

        I am not a trader but an investor, can you recommend 2 or 3 stocks where i can invest on a medium to long term basis?

        Again Thanks and more power!

        Comment by Blogspot | September 15, 2010

  2. Hi Sir!

    The past 2 trading days have been very exciting! I am planning on taking profits from DMC and PNB and shift it to JGS and a power company. What would you suggest? I already have MPI, FLI, AGI and DGTL so I guess I can hold on to them for now.

    Thanks!

    Comment by Cholo | September 14, 2010 | Reply

    • Cholo,
      It is probably a good idea to take some profits on PNB and DMC. I think your idea to shift to JGS is also sound. MPI, AGI and DGTL are alright. FLI is a good trader but for value, you could probably give VLL or SLI a try.

      Comment by Gus Cosio | September 15, 2010 | Reply

  3. Hi Sir!

    I’m not really into stocks but probably will do soon. I have php100,000 now and I want to invest it (as its been sitting in the bank for 2 years now!). I want to try mutual funds specifically balanced fund of FAMI (which has the best result for 2nd quarter of this year). I checked history of its NAVPS and realized that if only I’ve invested it in balanced fund January this year, I would have earned 49k this month already!( as compared to 34k if invested in equity fund of FAMI)

    My question, with the way the market is going on, do you think its good to invest in mutual fund, or I’d rather go for stocks? Or i’d rather wait for the market to “stablize” then invest in mutual fund?

    Thanks,
    Sam

    Comment by Sam | September 14, 2010 | Reply

    • Sam,
      It really depends on how much time you have in your hands. If you cannot follow stocks daily, I would recommend just putting your money on mutual funds. Of course, my recommendation is for you to put it into FAMI Save-and Learn Equity Fund (SALEF) because I believe the equity market has some way to go. Personally, while I was able to get a good return on my personal portfolio, the FAMI equity and balanced funds outperformed me simply because the funds are managed by full time managers. In my case, because of my work, I cannot be around all the time to trade my portfolio.

      Comment by Gus Cosio | September 15, 2010 | Reply

  4. hello sir gus, ISM has announced that SEC has approve its change PAR from .01 to P1. Having said that SMC is planning to acquire ISM assets within this year. Do you think this is a good stock to buy at this point in time? Thank you.

    Comment by richie lim | September 14, 2010 | Reply

    • I have also been following ISM because I’m also in the Information Technology industry. With the major progress in network communications and internet, this may just be another company waiting to strike gold. But then again, I have heard only little news about this company prior to SMC. Maybe the SMC news and its promotion to the P1 par level would attract attention?

      Comment by Martin | September 14, 2010 | Reply

      • A follow up.. Last news that I have heard about ISM was their plans of selling their 77% stake of Eastern to SMC. I do not know if this was scraped and instead replaced with selling the whole company but if i’m right, then ISM would have lost a major asset in their portfolo.. I am now wondering why would they unload Eastern to SMC?

        Comment by Martin | September 14, 2010

  5. my broker advises me to sell some staggardly while your comments says otherwise should i sell to take some profit for a buy back until the next correction whenever that is or just hold on tight till we break the new high 4,000 psei pts….. superman would say “up up and away”.

    Comment by gerald | September 14, 2010 | Reply

    • Gerald,
      I would sell selectively into this rally, but I would not sell my entire portfolio. I would raise my cash balance and shift some cash into mining stocks for the time being because global commodity indices are starting to move up.

      Comment by Gus Cosio | September 15, 2010 | Reply

  6. “I have always thought that no one loses money by taking a profit.” – Nice one Sir Gus!!! I always enjoy the humor in your blogs 😀

    I sold 50% of my holdings since I’ve already hit my target profit for the year.

    Comment by virtual_walker | September 14, 2010 | Reply

    • Virtual Walker,
      I think that is prudent money management. Remember that at the end of the day, it is all about the money.

      Comment by Gus Cosio | September 15, 2010 | Reply

  7. sir gus,

    coming from your post, what do u think about a correction? is it still happening?

    Comment by cliffhanger | September 14, 2010 | Reply

    • Cliff,
      I have no doubt that there will be a correction. When it will come, I do not know exactly. My bet is that it will happen before September ends.

      Comment by Gus Cosio | September 15, 2010 | Reply

  8. Sir Gus,
    In your previous blogs, you said that with MPI’s fundamentals and strong/able leaders you wont be surprised if its value would follow DMC. Both are infrastructure play. MPI is +10% market capitalization vs. DMC. What does it take for MPI’s stock price to be valued as DMC? Do you see it happening in the next 12-18 month?
    Thanks

    Comment by Mark Anthony | September 15, 2010 | Reply

  9. CEB IPO will Push DGTL price much higher in the weeks to come……

    Comment by Lance | September 15, 2010 | Reply

    • Lance,

      If I may, what made you say that DGTL will be significantly affected by CEB’s IPO? Apart from being Gox companies, I don’t see any other relation between the two.

      Thanks!

      Comment by richard | September 15, 2010 | Reply

  10. Good day Sir Gus!
    I’ve been reading your blog for two weeks now and I found it very informative and with sense.

    I just want to give it a try to know your opinion on SMDC.
    I got it @ 7.9 and it is going up until today’s correction.

    Do you think this property stock’s market price will continue to go up given it’s good H1 result and upcoming SRO? But now, it is already trading at its highs for the last few years…

    Thanks and God bless!

    Comment by Aldrien | September 15, 2010 | Reply


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