Gus Cosio says so

Ideas on the Philippine Stock Market

My friend Fred

11:30pm  Sunday  19 September 2010

Oftentimes, we underestimate the impact of economic statistics until we see their concrete manifestation.  Earlier this week, I exchanged emails with my friend, Fred, whom I had not heard from for 20 years since he had moved to the U.S.  We were both working in Hong Kong in the ’80s, and Fred asked his company to move him to the U.S, which they did.  Anyway, after a few years in the U.S., living in the Los Angeles area, Fred made enough money to start a business.  He moved to Las Vegas which was booming and operated a mortgage brokering business which had made him quite well off.  Unfortunately, the sub-prime fiasco came and brought about the worst financial crisis in history and his mortgage business went belly up and Fred had to file for bankruptcy.  He was in the business that was in the middle of the financial storm – home mortgages.

I’m telling you this story because it give some meat to the fears in the U.S. that the economy may not be poised to recover and may in fact recede again because housing is not recovering.  Surprisingly, Fred does not sound too dejected because he is able to work part-time as a dealer in a Vegas casino and manages to make rent payments and food expenses.  He says, he’s waiting for word on an application for a job in one of the major U.S. banks.  I think Fred has enough fight in him to make it.

The U.S. economic condition looks very real as seen from a guy who was one of the unfortunate victims of the recession.  The glimmer of hope, nevertheless, is in guys like Fred, though already in his 50’s, have not given up on making things work.  He tells me that he’d been in tighter spots before and had always managed to pull out of it.

My view, therefore, is that the U.S. will pull out of this quagmire of stagnation because they’ve got Americans like Fred, who incidentally is Filipino by birth.  I am of the view that most Americans do not give up because it is part of their culture to root for the underdog.

The reason why Philippine stocks have been very strong is because foreign money continues to be allocated here.  The PSEi has actually surpassed Indonesia and Thailand as the best performing market in the region.  Perhaps, what is going on in the minds of investors is whether stocks are becoming over-valued.  I would not be surprised if we did see a correction anytime soon, but I do not think it will be a deep one at all.

Should people be in a hurry to sell then?  Normally, people should be in a hurry to sell in a bear market not in a bull market.  If you observed, up to this time, it had been easier to sell any stock position because they there are a lot of buyers out there.  When it comes to buying, the dips come few and far between and you end up chasing the price.  My advice is to merely top slice or reduce allocations.  To completely be out of positions would be a waste of the good entry levels that you owned those stocks, unless, of course, you’ve already doubled your money.

I mentioned earlier the stocks that I saw to be consolidating and those would be the stocks which people should be top slicing.  For those who follow property stocks, I think that the sector will do pretty well so keep an eye on VLL which I think is the cheapest in the sector, and RLC which is a sure money spinner.  Of course, MEG, FLI, ALI and the third liners such as LND and ELI could go, but I would not place all my bets on them.

On the power stocks and the holding companies, LPZ may still have room to go, but my sentiment goes for MPI and DMC after they gone through some consolidation.  EDC, FGEN and FPH may be in for a play, but I think it would be better to be patient and buy tem on dips.  The only ones that I think should be bought soon would be DGTL and TEL and the mining stocks – PX, AT and ORE.  While LC and MA are pretty good bets, I just do not feel lucky owning them, so I’d rather pass them up.

Anyway, just like my friend Fred, I believe that hope springs eternal, and I also do my homework on the stocks I pick.  Things are actually looking better from where I sit than where Fred is at this moment, but if Fred is not giving up on the U.S. economy, the Philippine  economy is in much better shape so why should we fear any market correction.  As for me, I’m looking forward to it because I am in a position to take good advantage.

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September 19, 2010 - Posted by | Uncategorized

65 Comments »

  1. http://etfdb.com/2010/coming-soon-from-ishares-philippines-etf-ephe/….. Talking about more foreign funds coming in… US investors like me will get chance to invest in the PSE…

    Comment by gabe rapatan | September 20, 2010 | Reply

    • Gabe,
      Surely, the Philippine ETF in New York will pour in more money into Philippine stocks particularly the large cap ones. That also means that in the short run, market PEs will rise a bit due to the additional demand from the ETF. Stocks that will surely benefit from higher PEs would be AC, MBT, SM, JGS, BPI, ALI, AEV and similarly high profile stocks.

      Comment by Gus Cosio | September 20, 2010 | Reply

  2. wow! 🙂

    Comment by chris m. | September 20, 2010 | Reply

  3. Hi Sir Gus,

    Does this mean DGTL and TEL and the mining stocks will continue to increase its value, while the other undergo a correction? My plan is to buy DGTL for short term and VLL and MPI (after the correction) for long term. What do you think?

    Comment by C | September 20, 2010 | Reply

    • C,
      I am confident of TEL’s and DGTL’s intermediate move to higher prices simply because they are cheap stocks and money is pouring into the market. VLL and MPI are not only cheap stocks, they also provide strong growth prospects. I think they should be bought.

      Comment by Gus Cosio | September 20, 2010 | Reply

      • Thanks Sir Gus!

        Comment by C | September 21, 2010

  4. Good morning guys…. thank you very Sir Gus for continuously sharing your thoughts. I had bought ALI but unfortunately i did not wait enough for its correction. I recommended your link to my friends (newbies like me).

    Comment by tatels | September 20, 2010 | Reply

    • Thank you Tatels. Do not worry about ALI, it will pull through.

      Comment by Gus Cosio | September 20, 2010 | Reply

      • thanks Sir Gus

        Comment by tatels | September 20, 2010

  5. MPI Buy on Dips, sell on rally LPZ and Abs….

    Comment by butch | September 20, 2010 | Reply

  6. Hi Sir Gus!

    AGI has been flying high and I’m thinking of top slicing to protect some of my profits and use it to reallocate to other stocks. Would you recommend using the proceeds on MPI, for instance?

    Comment by Sonn | September 20, 2010 | Reply

    • Sonn,
      Going from AGI to MPI is not a bad trade.

      Comment by Gus Cosio | September 20, 2010 | Reply

      • Thanks sir Gus! At what price do you think AGI will peak before it stales?

        Comment by Sonn | September 20, 2010

      • I was thinking 10? Thats what our chart says..

        Comment by Noel | September 20, 2010

      • I sold MEG instead of AGI to buy MPI. I hope I get a match

        Comment by Sonn | September 21, 2010

      • Sonn,
        I think that was a good move.

        Comment by Gus Cosio | September 21, 2010

  7. Hello there Sir Gus,

    I was wondering if you can give me your insight on the FV of mpi i’ve read very wide ranged from 4.5-7.5… Also MPI is now at the 3.6-3.59 levels… any idea why? thanks sir!

    Norman

    Comment by Norman Go | September 20, 2010 | Reply

    • Norman,
      Future values are estimates and that is why the range is wide. I cannot narrow it down for you. One thing is for sure though, and that is at 3.77 MPI has more room to go.

      Comment by Gus Cosio | September 20, 2010 | Reply

      • MPI has more room to go? That is indeed good news!

        Comment by jasper | September 20, 2010

  8. theres a big block sale on MPI at 3.5.

    What is your opinion about block sales? does it usually become a new support level?

    Comment by rodimus | September 20, 2010 | Reply

    • Rodimus,
      If you get a chance to buy MPI at 3.50, you better grab it. I doubt if it will come cheaper.

      Comment by Gus Cosio | September 20, 2010 | Reply

  9. DMC is something that, I expected to rise, but did not expect to rise this fast. I bought at around 20 thinking that by next year, it could go to 25.. but its barely a month and look at it now..

    Same thing with PX. It was just 9p a few weeks ago. But the price action is so strong.. 50% increase in a month? Wow..

    Comment by jasper | September 20, 2010 | Reply

    • Good for you Jasper,
      DMC may soon be going ahead of itself, but it is a stock that has a lot of substance. As for PX, the stock is in play because of potential acquisition. My guess is that it will go to its recent high of 21, but that is just a guess.

      Comment by Gus Cosio | September 20, 2010 | Reply

  10. Hi Sir Gus, Most of my stocks are distributed among diff industries (AGI, DMC, PNB, MPI, VLL) except mining. I have some extra cash left from the sale of PNB, where do you think should i place it? ORE, PX or AT? For AT.. wouldnt I be chasing the price since I remember it was only around 10.8 last week and its now 15, do you think it still has some room to go?

    Appreciate your insights as always.. Thanks!

    Comment by Cholo | September 20, 2010 | Reply

    • Cholo,
      AT may move up further, but beyond 15 is a bit too rich for my taste. I would go for PX or ORE instead.

      Comment by Gus Cosio | September 20, 2010 | Reply

  11. Hi Sir Gus. Is SCC a good keep? What is its target price? Thanks

    Comment by Shan | September 20, 2010 | Reply

    • Shan,
      SCC isa good keep, but as a normally say, I do not have a target although 150 appears to be fair value for the stock.

      Comment by Gus Cosio | September 20, 2010 | Reply

  12. Historically September-December is the best time for GOLD it always peaked during this 3 months period. resourceinvestor.com/marketoracle.co.uk

    Comment by jenny | September 20, 2010 | Reply

    • Thank for your observations, jenny

      Comment by Gus Cosio | September 22, 2010 | Reply

  13. Hi Gus,

    I would also like to know your opinion on EEI.

    Thanks!

    Comment by Neo | September 20, 2010 | Reply

    • Neo,
      EEI from what I gather has a long order book. as a trading stock, it does not have good liquidity. I get into this sotck when it is at a huge discount to the rest of the market. There is very little analyst coverage on this stock so it is tough to follow.

      Comment by Gus Cosio | September 22, 2010 | Reply

  14. Sir, what do you think about PAX? Phil. peso will still appreciate up to December where OFWs pour more dollar for there families, would it affect the companies income and its stock price?

    Comment by Lyndon | September 20, 2010 | Reply

    • Lyndon,
      Unfortunately, I have no insight on PAX.

      Comment by Gus Cosio | September 22, 2010 | Reply

  15. Sir Gus I posted this in an earlier blog only to find out that there are newer blogs so you might not have seen it.

    Sir Gus, I noticed that SLI has been highly recommended by so many gurus. One setback that I observed is its low free float at 2.8%. Would this make the stock not liquid in the future?

    Comment by Nel | September 20, 2010 | Reply

  16. Sir Gus,

    May I have your opinion on SMPH on the short and medium term. I sold my shares at 12.76 (cost of 11.16) and bought them again at 12.24. I plan to further increase my holdings on this stock should it go down further. Is that a good move? Thanks.

    Comment by Nel | September 20, 2010 | Reply

    • From my observation, SMPH is still good value. Among the Henry Sy stocks, my best bet is SMDC because of the strong outlook on property.

      Comment by Gus Cosio | September 22, 2010 | Reply

  17. Hi Sir Gus, whats your take on digitel this week? I’ve been holding this for quite some time now and believe on fundamentals but seems its movement is really slow. Is it still ok to hold all my shares (80% of my holdings) or transfer half of it to other blue chip/2nd liner stock?

    Comment by Mayhem | September 20, 2010 | Reply

    • Mayhem,
      I do not have a take on DGTL for this week. I just think that it is a good and a very cheap stock.

      Comment by Gus Cosio | September 21, 2010 | Reply

  18. Sir Gus,

    Would it be a good Idea to sell AT and move the funds to ORE? Thanks Sir!

    Comment by KennyV | September 20, 2010 | Reply

  19. Sir,

    I expect some extra cash to invest first week of October. Do you think it’s wise to reserve that money for CEBU’s IPO? Or is it wiser to buy its sister companies?

    I have some hesitation with Cebu because some said it pricey? Do you think so? Thanks.

    Comment by herecomesthebaby | September 20, 2010 | Reply

    • Hey Baby,
      If this stock is placed into strong investor hands, it could go further. Fund managers seem to like the budget airline story.

      Comment by Gus Cosio | September 21, 2010 | Reply

  20. Sir Gus,
    Congratulations on your TV guesting!

    Comment by charmagne | September 20, 2010 | Reply

  21. very well said….

    Comment by andrew | September 20, 2010 | Reply

  22. Hi sir gus,

    I’ve been following your blog for quite sometime now. And I do appreciate the insights and wisdom you provide. I have been trading now for a few months and I believe it’s something I want to be passionate about. I know that who you are today has been built in years of experience but for newbies like us, what steps would you recommend for those who want to take the same path and to be someone like you in the future? Thanks and you are truly a blessing.

    Comment by mimi | September 21, 2010 | Reply

    • Mimi,
      I am an advocate of market understanding, that is, understanding the dynamics of demand, supply, and price. I think if one takes enough time understanding the price mechanism, one can gain good understanding in trading any market.

      Comment by Gus Cosio | September 21, 2010 | Reply

    • There are seminars that PSEC conducts about a. fundamental analysis and b. Introduction to the stocks in the Philippine market.

      As gus said, we need to know what exactly were dealing with here. e.g. What are the stocks and the companies behind them, etc. and then after that, to know if a particular security is worth buying in the first place (If the only reason for buying is ‘this baby is going up’- most probably its a way to losing money)

      Then you can buy books. ‘Íntelligent Investor’ by Benjamin Graham, and ‘One up on wall street’ by Peter Lynch are good starting points.

      Then monitor Gus’s blog. But pay attention more on his reasoning why a stock is good rather than on whether a stock is gonna go ‘up’. Try to get a sense of the ‘why’. In the long run we will be better of if we understand that instead of just asking for a hot ‘tip’.

      Comment by jasper | September 21, 2010 | Reply

  23. Care to share your thoughts on AP? It has trailed DMC whereas previously they were neck and neck. It had a good first semester 2010 of EPS of 1.71. Any bad news that makes it a laggard compared to DMC?

    Comment by lurker | September 21, 2010 | Reply

    • Lurker,
      AP has gone up six fold from 18 months ago. DMC has gone up four fold. I would say DMC is just catching up with the faster growth that AP had up to earlier this month. My suggestion is to top slice on your existing positions. This means taking profit on a portion of your portfolio without winding down your positions completely. You should not be without stocks because the market is bullish. There is no bad news that I know of for both stocks.

      Comment by Gus Cosio | September 21, 2010 | Reply

  24. Hello Sir Gus,

    Currently I’m holding shares of MPI, EEI, FLI, ORE, MEG, SLI.
    What are your thoughts on these?, I’m holding these for about 1-3 weeks already. I see potential(fundamentally) with these companies, especially MPI, EEI, FLI, MEG for about 6 months. And ORE and SLI for this year.

    Can you also please share your ideas on if we will still correct to below the 4000 levels? Since we are having mid day corrections almost everyday for the past week and this week?

    Thanks for sharing..hopefully all your readers learn from your blogs 🙂 Have a great day

    Comment by Foreign Investor | September 21, 2010 | Reply

    • Ram,
      Among the stock you mentioned, the ones I like are MPI, ORE and SLI. FLI and MEG are okay while EEI has very little liquidity. On the PSE index, Yes I think it could correct to 3800 in the coming weeks. I will be patiently waiting.

      Comment by Gus Cosio | September 22, 2010 | Reply

  25. Hi Sir Gus,

    Thanks for your opinion! After reading your latest entry, I feel confident in what I am holding right now. Decided to add more MPI in my portfolio while holding DGTL in the long haul.

    More power to you!

    Comment by Leo James | September 21, 2010 | Reply

  26. I’m tempted to sell my SECB and shift it to something else. Maybe DGTL or maybe MPI. My reason is, I’ve already gained over 60% from SECB and feels that a further increase would be unlikely. It could rise but only relatively smaller. Might not have enough for another +60%. Whereas if some of the other stocks, I feel has some the potential to do that..

    But then, I’m already not that diversified now as I’ve sold my SHNG finally.

    What to do? :thinking:

    Comment by jasper | September 22, 2010 | Reply

    • Jasper,
      It may not be a bad idea to sell your SECB and sit on the cash for a while until something compelling turns up. On the cash you raised selling SHNG, have a look at SLI or VLL, both very good property stocks.

      Comment by Gus Cosio | September 22, 2010 | Reply

  27. Hi Sir Gus,

    I sold AGI, MEG, and MWC yesterday. Then I bought MPI.

    Right now, my current holdings are: MPI, VLL, FGEN, DMC, and DGTL. I’m looking to buy SMDC to ride with its SRO but I’m also considering getting more DMC or MPI shares. What’s the better short term play sir?

    Comment by Sonn | September 22, 2010 | Reply

    • We have a lot of stocks in common – MPI, VLL, EDC, and DGTL. Although the point of entry might be different as I bought mine a few months back.

      Lets hope these particular securities makes us happy eh.. 🙂

      Comment by jasper | September 22, 2010 | Reply

    • Sonn,
      Just try to be cerebral. If you’re making money on your portfolio already, don’t worry about staying long. We are in a bull market. Enjoy the ride and, with your portfolio, I will not be in a hurry to sell.

      Comment by Gus Cosio | September 22, 2010 | Reply

  28. I recently sold all my PNB to rebalance my portfolio. With our new forecast of it going as high as 115, is it still worth re-ourchasing? I already have MPI, DMC, DGTL, VLL, SMDC, JGS, FLI, AGI and ORE. I noticed I have a lot compared to others but I am confident with what im holding. Was just wondering if adding PNB would be ok or should I just focus and add to what I have?

    Comment by Jude | September 22, 2010 | Reply

    • Jude,
      I am not aware of a 115 forecast for PNB. I do not see any basis for this number yet, at least not this soon. The other stocks in your portfolio are all good. When you have enough profits on FLI, learn to take it. Otherwise, your portfolio looks great. learn to be patient.

      Comment by Gus Cosio | September 22, 2010 | Reply

  29. guys,

    Do any of you have an idea whats going on with PNB??? its now 60 and closed the day with 700k Biding at 60. I have read a report from the PNB treasury that says 85 is the FV. Any thoughts? Maybe we can still ride this train and earn a little more =)

    Comment by Gordon Gekko | September 22, 2010 | Reply

    • Sir Gus. Is it still ok to average up on PNB?

      Comment by Cholo | September 22, 2010 | Reply

      • maybe you should sell, then buy on dips..

        if ever it will go up to 85, it wont go up right away, it will take occasional dips before it gets there, your 60 now would probably be a high for the week. im thinking that this strategy of selling and buying on dips should be better than averaging up…

        Comment by cliffhanger | September 22, 2010

      • Cholo,
        I really don’t know. PNB far exceeded my expectations. My willingness to own it was only at 55. My mistake was selling too soon and I’ve missed the last 10 or so pesos. I’m fine with what I made. I will not push my luck anymore from here. I think at 60 PNB is no longer cheap.

        Comment by Gus Cosio | September 22, 2010

    • No idea, Gordon. I sold earlier and I try not to cry over spilt milk. I’m not going to chase it. I’d rather buy a stock that I am convinced is cheap.

      Comment by Gus Cosio | September 22, 2010 | Reply

  30. Gold is peaking………….To all those who buy PX pls read or google BROWN BOTTOM…..It’s all about GOLD….

    Comment by jenny | September 22, 2010 | Reply

  31. Hi Sir GUs,

    I like to seek your opinion on what would be the PNB max. price to sell? thanks! Im still holding it.

    Comment by Kier | September 23, 2010 | Reply


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