Is greed good?
3:25pm Tuesday 12 October 2010
The market is consolidating. This is very good for all of us. One of our readers, Chris M. thinks that the market should correct around 100 points as investors make room for the Cebu Pacific IPO and the SMDC SRO which should sap out around 42 billion pesos from the cash balances of investors. Personally, I am hoping that the market goes down to as low as 3800. I am hoping that TEL goes down to 2600 where I would like to buy it again. Here are my other wishes: AP at 20, DMC at 30, MPI at 3.50, EDC at 5.75, RLC at 15, AC at 375, just to name a few.
Of course, this is wishful thinking and not a prediction. I am of the opinion that we’ll be better off if we see a correction now than if we see it later in the year because investor participation should be quite diverse as we approach the middle of the 4Q2010. Markets normally thin out at year’s end.
If there are stocks that look like they will be going the other way, I think one of these will be DGTL. We are seeing better volume for the stock today in spite of weakness in the market. In any market, there are special situations, and DGTL looks to be one of those stocks that have gone special purely due to market conditions on the stock. It may also be under the halo of JGS which will be benefiting greatly from the cash raised in the IPO. No doubt some of the debt that JGS will be wiping out will those that have been financing DGTL’s operations and capital expenditures.
The mining stock may be coming to a crossroad as further signs of weakness emerge in the U.S., but from what I have read as a sectoral strategy from global fund managers, many are accumulating positions on materials which include metals. PX looks to be falling out of bed, but i can’t get myself to dislike it given what I perceive to be a strong underlying demand for mining stocks. Of course, LC/LCB is a different story – a special situation. Unfortunately, I have been very unlucky with LC and as a sound portfolio manager, I do not want to push my luck. I will probably stick to stories I know, and the story that has sat well with me so far is that of ORE.
Now that the market has closed, my respected observers of this market are not fazed that we saw the index decline by 52 points today. I guess if you’ve made enough from the bull run, you wouldn’t mind giving some profits back to the market in order to make room for more down the road. It is like priming a pump of an artesian well – you have to give back some water to get more water to flow. Even Gordon Gekko in the latest Wall Street film has moderated his greed. Greed after all cannot be that good at all.
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Gus Cosio at the Merrill Lynch 2008 Rising Stars Conference in Singapore
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Gus Cosio says so 
sir gus,
thank you very much for this immediate post of yours 🙂
u think it would be better to sell now and buy at the bottom? or could we just keep it and wait till the market gets back to last week’s level?
Cliff,
I had been lightening up since last week.
Hello Sir Gus,
I also agree, we need a healthy correction, Have you also lightened up on ORE and SLI?
Thanks
To be honest with you Cliff,
I am actually adding to my position on both since they started their correction earlier than the large cap stock.
Cliff,
I think it is good to bank some profits. I do not know where the bottom is – it could be here, it could be further down. It is anybody’s guess. With me, it is always a matter of my level of comfort depending where prices are.
Hi Sir Gus,
The property stocks are almost out of the picture for the past few days. I’m surprised ALI went down as far as 16.80 today? What are your thoughts of ALI? It’s been trying to break at 18.40 last week and now its on a downtrend. 16.50 is pretty strong support don’t you think? I’ve been trying to lower my average cost per share since yesterday and now I’m out of cash. 😦
JC,
I agree, 16.50 is a strong support. If you believe that the bull market is still around, you should average down. Since you are out of cash, evaluate which stock in your portfolio you feel uncomfortable with. Sell it and move the money to ALI.
Hi! Is it ok to accumulate mining stocks like Ni and Cpm? I have noticed that they have been sideways to down lately, so I think this is my best chance to buy at the bottom. Do you think this is the right move. TIA! 😉
Cathy,
I cannot give you advice on stocks that I do not follow. I do not know what’s going on in NI and CPM.
Sir Gus,
Any thoughts on OM. Nothing has been going on for a couple of months now since it hit 0.014
Jacob,
I do not know anybody who follows OM. I can’t say anything about it.
Hi sir,
My average for MPI is at 3.17. This is my core in my portfolio and I was wondering, if I would profit take, at what % should I reduce my shares?
Thanks
Btw, I was already able to sell some at 4 but if the trend continues, I would like to have more cash at hand…
AP@20 seems to be improbable at this point. Out of the 18 stocks I follow, it was the only one who rose today. The AP freight train is like.. incredible.. man, I wish I had bought this when it was at 18 😦
@cliffhanger
I understand what you’re saying regarding pb. However, I think we need to understand the context in which Graham wrote his book. It was 1955, the nature of the companies are very different today than it is now.
Take the company I work for, for example. A software service company. We don’t own a lot of assets. A few hundred computer and software licenses, some servers, cables, office cabinets, etc. I think you can buy all this, accounting for depreciation, for less than 30M pesos. So -going purely by book value – Is the company worth at most 60M? (2x book value). We easily earn 10x that amount. The real asset of the company is in the relationships it managed to forge during its long year of existence and not on the tangible assets.
This is also Warren Buffett’s addendum to Graham’s teachings. Something he commented on when he liquidated Berkshire’s looms and mills (Machines that were on the book for $100k++ had to sold for scrap – about $1k)
Although, if someone has no time to analyze companies and will purely just be a defensive investor, well sure. I think its safer for that person to look for companies with low pb multiples.
but imho, its importance becomes less of an issue depending on the company in question (Monopolies, or companies with a brand. i.e. Coke)
Hola sir Gus,
Can I have your opinion on ACR & AT? What prices would you be comfortable in buying both stocks?
Sir,
I’ve just cashed-in 90% of portfolio (namely : MPI,AP,DMC,PX). In the absence of a more predictable level of consolidation or corrention, my instinct just told me to cash-in at intraday-high level and enjoy the profits. So far it worked and current values are 1-3% lower during the time I sold. I did manage hold on DGTL and ORE. I believe there is a deeper and good story on DGTL in particular.
In your opinion, would it be best to re-enter after CEB IPO or slowly pace re-entry even prior to the IPO….the NFB’s on above issues seem to keep prices from further correction 😦
Yes Mark, Keep cash handy for after the IPO.
HAHAHA I felt honored you mentioned me on your latest entry! Indeed, take things in moderation even GREED. =D
Gus, I’m still torn…Some of my friends are recommending I get the CEB IPO subscription which they themselves also subscribed. However, a very seasoned trader has told me not to push thru saying CEbu pacific’s books doesn’t support the 125 price. I can still cancel my IPO subscription by thurs. Hope you can give me your opinion whether to get the subscription or cancel it. Are you getting CEB on subscription too , Gus? Thanks for sharing! As always, coz GUS COSIO SAYS SO! cheers! Glad you enjoyed my new movie!
Gordon old pal,
I like Cebu pacific for a few fundamental reasons such as their being one of the lowest cost per seat kilometer and their being the highest revenue per seat kilometer. Their figures also show that their margin per seat is 44% which translates to excellent profitability when you consider that in a few years, they may be the only inter-island carrier around, not to mention the increase in their market share to destinations in East Asia. I also believe that there is little downside risk for the issue because the only supply is coming from the IPO and most portfolio managers who receive an allocation will likely keep it in their portfolios for at least 3 months. JGS will also be selling a good portion of their holdings which means that if the shares tank, they will most likely be there to buy it back.
If there is little downside, the upside arises from the idea that budget airlines is in fashion among fund managers and the growth story in the Philippines may just be a story compelling enough for fund managers to add to their positions after a few weeks.
I already subscribed to the IPO with a view to hold on for a re rating of our entire market. If the PSEi is rerated to 16X 2011 earnings, who knows where Cebu Pac could go?
Thanks for the tip and assurance Gus. I feel more confident now with my subscription. hehe Let’s see what happens in the next couple of weeks.
Oh no! Gordon Gekko is confused with an airline company again! Last time, it was with Bluestar Airlines. Now, It’s with Cebu Air Inc! Hahaha! Good luck Gordon! 😀
I don’t know, Kenny…. I have a phobia with Airlines ever since that BLUESTAR got me sent to prison in 1987. So I guess my hesitation with the Cebu Pacific is kinda natural. Hehe. Hope you got your subscriptions filed. I sure want to ride CEB’s flight especially with those Dancing FAs. hehe
That’s great Gordon, I believe Bud will make a killer out of this 😀
Sir Gus,
With the excitement on CEB IPO, why is it that JGS seem to have been flatened in the last 3 weeks. JGS will benefit from this IPO right?
Mark, It looks like all the info on Cebu has been built into the price of JGS. People are now profit taking.
Sir Gus,
I have meg AEP 2.37 do you think it’s already ready to bounce or should I just cut loss? TIA
sir
do you have any thoughts on APM? The stock rights offering ex date 27 Oct 1:11.7241. i don’t have any idea of APM, please share your inputs. i want to test this stock if i have something to digest. thank you.
Sir Gus,
Heard from the market that CEB is “cold” with the retail investors but “hot” with the institutional investors, specially the foreign ones. (E.g. 2x oversubscribed). According to Sir Junie, there’s little upside for the stock. (Our analyst’s valuation of the issue resulted in a 17% upside). I’m guessing that CEB is more of a long-term investment?
sir Gus, what can you say about cmt? is it expensive at its current level?
thank you
If we are looking at a major correction…I wish I had more cash to spare… 😥
I’m stuck with paper losses in MEG & VLL but I’m willing to hold. I wish I had more cash to average down on them when a major correction comes along
tell me about it hehe
we have the same holdings, check my portfolio.. although im thinking of selling one of them today.. im thinking of keeping vll because it has better numbers in terms of value investing..
Hi Cliff! except for FLI, we almost have the same portfolio. I’m about to dump MEG to average down on VLL. I’m just waiting for MEG to breakeven. If MEG eventually flies high, I’m still invested in MEG indirectly via AGI.
If you bought the MEG @ 2 or more than 2. For me,It’s not good to sell it because there is still a november wave i believe. Traders who’ve been long in market from june to october will definetly come back on the game and play big before the yearly clearing. That’s is just my opinion. it’s still up to you. btw, i made a research on manhattan garden last july i think and most of the unit are filled.
i actually changed my mind at the last minute.. i think most of the disturbance this week was due to people setting aside cash for the cebu pac IPO, with the property sector taking the biggest hit especially because of the added news that the REIT will be postponed..
holding on to my MEG, VLL, and FLI!
Hi joppy! Highly appreciate your input. I think I bought MEG at a relatively high price (2.34), and I also have AGI anyway so I would still be invested in MEG if ever I sell. Plus, I don’t really wanna pass on the opportunity of averaging down on VLL (which I bought at 3.32). =)
@Cliff – I didn’t make the cutoff time. Still have MEG currently. =)
It’s good to be flexible sometimes. Maybe you’re correct Cebu pac may affect the market but for me it’s really not.im sorry because cebu pac is not on my list for now. i need to see 1year performance record first.hehe After winning a bit in AGI, JGS, MEG last sept. I sold them all for 40% div. of phoenix. Now, seems phoenix is not showing me good performance except more demand of oil in global market. Probably, I’ll sell phoenix after the payment of div. and go back to MEG.lolz And by nov. I like to try my list of prospects.
Woooo.. tis falling, tis falling. Hmm, lets see if it goes 100 points down. As Gus said, the Cebu Pac IPO is creating some sort of warping effect.
Hi Sir Gus,
What’s your take on RCBC? At 26.85 per share, it is the cheapest bank stock to date. TIA.
Finch,
RCB should be ok.
i agree, RCB is actually the cheapest
Hey, you read my mind! I was looking at RCB and is thinking the same thing. I’m going to put something in there if by the end of the week it goes down further.
RCB@25 or so would be good imho
I had a feeling that Gordon Gekko would somehow make a cameo on this blog at some point.
Hi Sir Gus,
I have 30% cash in my portfolio, I have DGTL and ORE of which I am very comfortable. I’m tempted to pick some VLL, do you think It’s a good idea? Or should I wait a little more? Thank you Sir! You’re right, It feels good to have cash in a correcting market.
Kenny,
I like VLL. You should pick up a piece already.
Sir Gus
ACR went up today despite continued consolidation. Any news on what’s going on here? I have wanted to get in this stock but you mentioned you were skeptical with it.
DGTL meanwhile went down a bit still looks strong with adequate volume.
KUDOS to Guru Gus and Dr. Chris M., barely a month in the market but gained enough (6%).
Thanks for continuously sharing your ideas…
Walakum-us-Salam Wa Rehmatullahi Wa Barakatuh