Gus Cosio says so

Ideas on the Philippine Stock Market

Bad news bears or bulls?

10:30 Friday  15 October

This may sound a bit twisted to some but I am actually happy that the market is down.  I would have been more exuberant had stock prices dropped much lower.  Some readers had asked about MBT because it dropped to a low of 68.90 at one point today.  If you recall, MBT sold Php 5 billion of shares earlier this year, and yesterday, MBT said it aims to raise another Php10 billion via a special rights offering.  Shares fell over the past 2 days as investors took profits and to clear positions in order to take in new MBT shares from a rights offering. With the chart showing some kind of resistance above 75, it was easy to see why many foreign funds sold it down.  Some quarters see it as revulsion by foreigners who were surprised that MBT is raising funds again.

Personally, I would like to have more of these things.  Just two trading days ago, we saw a placement of Php 6.55 billion of SMPH at 11.50.  That is really what bull markets are all about – so that companies will be able to raise new capital and generate wider shareholder base.  I think a lot of MBT investors should have been very well rewarded already since this stock had come from 45 no more than 5 months ago.  I think the downside might be 65, but I reckon smart money should be picking up slightly below this level.

For followers of ORE, my sources have determined that there is nickel in the mine and the shipment in November is almost a certainty.  I think this stock will gather a lot of confident investors in the next few weeks.  Personally, this was the last bit of news I had been waiting for to add to my position.  Surely, there were quarters that were trying to keep interest in the stock.  That is why it looked to be a stock that was being jockeyed.  With the verification of the mine site, the question now is the mine’s profitability and I think further research will bear that out.  I am of the belief that buoyant metal prices should attract a lot of interest in mining shares.  Even now, an analyst tour of AT’s Carmen mine in Toledo, Cebu is being organized.  Surely, mining looks to be the brewing story for 2011.

The Banks

With the big decline in MBT over the last couple of trading days may have made some MBT holders feel a bit jittery.  I do not blame them.  The normal knee jerk reaction of portfolio managers to a rights issue is that they are being hit for money again, i.e. not very  attractive when you’re not ready to put in more money.  Nevertheles, I was speaking to an analyst over the weekend on the MBT SRO and he puts the adjustment to be between 2.50 to 3 pesos.  Cosnidering that MBT was tading between 72 and 74 before the SRO was announced, the adjustment to 69 was probably just about right.

I forsee MBT trading sideways to slightly weaker for a day or so.  This could be a good buy opportunity for the stock.  One thing I am inclined to do is add to weighting of banks in my portfolio since even banks like SECB, CHIB and even BPI are presenting decent buy prospects.  There looks to be some interest in RCB as well, which should be a reasonable bet.

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October 15, 2010 - Posted by | Financial markets in Asia

47 Comments »

  1. Hi Gus,

    Does that mean that MBT will go down further at 65? I just bought earlier at 69.50. Thanks.

    Comment by Brent | October 15, 2010 | Reply

    • Brent,
      When I said 65 is a good support, I do not mean that it will certainly get there. What I am thinking is that if I buy MBT today at 68.95, my downside risk is probably at 65 where many buyers should be enticed to come in.

      Comment by Gus Cosio | October 17, 2010 | Reply

  2. These are the times really that the market is real unpredictable (as if it has not always been unpredictable. LOL). I don’t know what to do. Just stay as is maybe?

    Comment by Topmace | October 16, 2010 | Reply

  3. hi sir gus!

    can you do a post on all of your experiences with IPOs? what happened, and how you handled these different situations? thanks sir gus!

    Comment by cliffhanger | October 16, 2010 | Reply

  4. Hi Sir Gus,

    What is your take on SLI? It has been down lately. Are you still holding this stock? Can I also ask about your opinion on PO. Why is this stock rising a lot lately? They say that this is a holding company of Manny Villar. How true is this? Thank you!

    Comment by poorguy29 | October 16, 2010 | Reply

  5. Hi sir gus, any thoughts on AT?

    Comment by jovy | October 16, 2010 | Reply

    • Jovy,
      Personally, I thought that it was a buy below 15, but it went up quite fast. Perhaps, the range might be 15 at the low and 20 at the high. Fundamentally, it is a legitimate mining stock. From what I hear, its Carmen mine site has a very rich copper ore body.

      Comment by Gus Cosio | October 19, 2010 | Reply

  6. Hi Gus,

    If MBT goes to 68, and only 68.. would it be a more compelling stock than RCB? Given that RCB has a very low PE right now (7x I think).. I’ve still not taken a look at MBT’s finances so I’m a little lost in the dark about it..

    Comment by jasper | October 16, 2010 | Reply

    • Jasper,
      The reason I will favor MBT is the fact that MBT had a larger following than RCB. MBT has a very good balance sheet as well. Many analysts would put its balance sheet condition far ahead of RCB at this point in time. That is not to say that RCB cannot see improvements down the road. Let us just say, MBT is less of a risky stock than RCB.

      Comment by Gus Cosio | October 17, 2010 | Reply

      • Thank you gus for the answer.

        It seems that I have a lot to learn. I see RCB’s figures and see nothing wrong there. It doesn’t seem to be behind MBT for me. But I have to take another look at it since I might be missing something.

        A 7x pe is hard to ignore though (MBT’s pe is about 16x). Although MBT is the country’s biggest bank with lots of different concerns – I see some ads for condominiums and it says its part of the MBT group.

        Maybe I should hedge my bet and split between RCB and MBT 50/50?

        btw: To all DGTL holders, Globe insists on postpaid leadership. Totoo kaya yun? hehe.. don’t know whose figures are correct.. :/

        Comment by jasper | October 17, 2010

      • RCB is aggressive compared to other banks. They had the Lehman Bros and Globe Asiatique. That means a lot to their risk management teams.

        Their president is doing his best to improve RCB

        Comment by alexis | October 18, 2010

      • I just bought some RCB. I think I may have to go follow my gut on this one. It might not be the strongest bank in the country, but its relatively cheaper compared to the others. I think the law of averages will catch up to it and raise its price to at least near industry pe.

        Comment by jasper | October 18, 2010

  7. Good Day Sir,

    Thanks for the input on ORE,hope to feel price moving upward soon!

    Would you think that AT (Atlas) would be a promising stock as well? Seems to be that this stock is in good position both technical & fundamental. Any comment on this?

    Comment by Blogspot | October 16, 2010 | Reply

    • ORE is being jockeyed at present. I have been observing it since it lows. For now and until its shipment begins, its rise will be dependent in the hands of the jockey not unless it will be supported by strong hands. Traders are quite past to book their gains, then buy back again.

      For now, ORE is standing at its support of 3 to 3.05.

      Comment by Olive | October 17, 2010 | Reply

  8. Hi Sir Gus!

    Unfortunately, I do not have the time to do stock trading on my own. Have been wanting to open a FAMI SALEF account but do not know when I should do it. Do you know if it’s best to open one at the start of the year? Do you know of any studies which support that I should open one on a certain day of the week or open one on a certain month of the year?

    Your guidance on this will surely and tremendously help me. Thank you and more power!

    Comment by ec | October 17, 2010 | Reply

    • EC,
      Mutual funds are managed by fund managers with a view of deriving market returns on the average. Some managers are lucky and astute such that they can consistently perform as well or better than market. Buying a mutual fund is like hiring a fund manager. There is no real difference whether you hire a fund manager in a declining market or a rising one. Timing the purchase of mutual funds is not as important as hiring someone who is reliable and responsive to market developments. It is the fund manager’s responsiveness and prudence in managing his portfolio that brings benefits to investors. In short, pick a good fund and leave the rest to the manager.

      Comment by Gus Cosio | October 17, 2010 | Reply

      • Thanks so much for your response! Really makes sense!
        To add to my inquiry, if there is a compelling reason to open a balanced fund vs. an equity fund during these cautious times, please do let me know. Again, thank you!

        Comment by ec | October 17, 2010

      • Hi EC,

        FAMI is OK but check the NAVP on the day you place your investment.. they used a higher NAVP for my placement which resulted to less no. of shares. I was told there was a typographical error .. they used the NAVP for another date.

        Comment by Newbie | October 18, 2010

      • I worked before as a Fund Accountant and saw every single movement of mutual funds. Our clients were big ones if I may add. I just want to say that if you are comfortable trading at your own, it is better than placing your money in these funds. The fees charged (Fund Manager, Administrative, Transfer Agency, etc.) based on a percentage of the NAV for the day I personally think is too high. Aside from that, I saw some pretty insane fixed expenses which were also charged to the fund. If still you want to leave your cash in a Mutual Fund, pick a fund with a good Fund Manager.

        Comment by Doctor Mundo | October 18, 2010

      • I placed my money before on a mutual fund. They took 6% off at once for ‘fees’. After 3 years they managed to earn those 6% again..

        I’m never going to place money on a fund again. I’ll just try to learn and study and then go on my own. Much better to manage my own money.

        Just my opinion

        Comment by jasper | October 18, 2010

      • Thank you so much for all your inputs! So if I am going to open a mutual fund, I have to pick a fund with a good fund manager. I know that past performance is not indicative of future performance, but is it ok to base my decision on the 3rd quarter performance of Mutual Funds/UITF? How I wish I could do my own stock trading, especially with such great inputs from everyone here 😀

        Comment by ec | October 18, 2010

    • Different mutual funds have different fees. FAMI, for example, charges a front load of 2% maximum. This means, if you put in 10,000 pesos, you get charged 200 pesos up front leaving you 9,800 as your net investment. If you put in a higher amount, say 100,000 pesos, the front load declines to 1.5% and so on and goes down to 0.5% for 1 million and above. Perhaps some mutual funds charge as high as 6%, but they are normally foreign funds. Nobody in the local market charges more than 2%. The thing is, if you get a good fund manager, the front load would be easily diluted by the performance. FAMI for instance returned 25% compounded over 5 years. Two percent over five years is only one half of one percent. How does that compare?

      Comment by Gus Cosio | October 18, 2010 | Reply

      • hmm.. we’ll if those are not fees and they worded it differently, then they still lopped off 4k from my 100k placement. – Oh wait, its 4% and not 6%.. but i remember this vividly because i was so disappointed. When I pulled out my investment 3 years hence, i got my original 100k back.

        Comment by jasper | October 19, 2010

  9. I think banks have good potential right now. I’ll probably buy some RCB and MBT with a 60/40 ratio mix. I’ll wait though till the price is just right.

    Comment by jasper | October 18, 2010 | Reply

  10. Sir Gus,

    I am seeing the wave of companies raising money (SMDC, FDC, MBT and RCB) can be a signal that these companies are seeing their shares as fairly valued.

    RCB, MEG, EII, FLI and MBT raised money in 2007. Are we seeing history repeating itself when these securities went down during the crisis?

    I am 60% cash right now and happy with the return that I had during the year.

    Comment by alexis | October 18, 2010 | Reply

    • Alexis,
      In market such us ours, companies use bull markets to rise capital. This is really what the market is all about. I saw the same thing in Hong Kong in the ’80s, but look at these companies now. They are business giants that are very well capitalized. Long term, i think this is good for the market. It also widens the investor base and improves market liquidity further.

      Comment by Gus Cosio | October 18, 2010 | Reply

      • Sir Gus, I do agree with you. I do like SMPH for the long-term as their malls appreciate in value while they are earning rent, plus a company well managed. AMC is currently trading at PE of 5, yielding at 4% and its net income jumped the past two years due to the favorable price of milk, but is not actively traded and trading at twice the book value. SECB has always been in my radar as it is the bank that trades below 10, not aggressive and has sufficient provision of its loans.

        I am waiting for a correction to re-enter the market again, maybe in two weeks time before the release of earnings or after the bull market has settled. I am not sure if I want to chase the prices now as I still have RCM, VLL and DGTL comprising 45% of my portfoio.

        Comment by alexis | October 19, 2010

  11. hi sir gus, what do u think about UBP?also single digit p/e ratio as of 2010..

    Comment by cliffhanger | October 18, 2010 | Reply

    • Cliff,
      UBP is definitely a fundamentally good stock. It is , however, not as liquid and as actively traded as MBT, SECB or BDO. If you want a bank to hold for 6 months or so, you can follow UBP and pick it up whenever it trades down. That way, you can manage your return on the stock.

      Comment by Gus Cosio | October 19, 2010 | Reply

      • i noticed too that its not that active in the trading floor. do u know what the advantage is to other banks sir gus? do they have a unique position in the market?

        thanks!

        Comment by cliffhanger | October 19, 2010

  12. Hi Gus,

    just a quick advice from you. What’s the best buying price for PX this week as consolidate.

    Thanks!

    Comment by JOEY DELEON | October 18, 2010 | Reply

    • hi! joey, for me the best buying price for px is 10php but if you look on px today it’s too high. so, you’ve missed it already but if there’s a chance it goes down to 12php I think you can gain some if you buy on that level. But i don’t think it will go down to 12php this year.

      Comment by joppy gwapo | October 18, 2010 | Reply

    • Joey,
      My pick up level for PX was 12 and below, but I don’t know if it will get there in this round.

      Comment by Gus Cosio | October 18, 2010 | Reply

  13. Hi sir Gus, I bought some shares of DMC at its current price. I’d like to add some more when it consolidates. At what price level would you be comfortable buying DMC? Thanks in advance!

    Comment by Sonn | October 18, 2010 | Reply

    • Isn’t DMC consolidating already? It lost a few pesos since the last time i think. How much lower do you think it will go?

      Comment by jasper | October 18, 2010 | Reply

      • As I recall, Sir was hoping for it to reach 30 flat but thats on the really optimistic side.. I was hoping for maybe a 32 last week but still to no avail. Maybe id just settle for it at 33 level price? What do you think?

        Comment by James | October 18, 2010

      • Jasper,
        DMC is consolidating but there seem to be a lot of people waiting below 33.

        Comment by Gus Cosio | October 18, 2010

      • DMC peaked at 35.20 but it’s been flat at 33.8 since I bought it. Getting some at 30 would be nice. But I don’t know if it will go that low. =)

        Comment by Sonn | October 18, 2010

      • Based on technical data, it should be Php 32.00

        Comment by Raymond | October 18, 2010

  14. Sir,
    What are your thoughts on ORE today? Volume at 20-day high. Do you think its the right time to commit and/or add position to this stock.
    Regards

    Comment by Mark Anthony | October 18, 2010 | Reply

    • Mark,
      The stock has more to go. I decided a while back to keep this stock for a few months as long as commodity and metals demand is strong in the world markets.

      Comment by Gus Cosio | October 18, 2010 | Reply

    • Mark,

      I suggest that you don’t dwell on the volume that much on such a stock that I believe is being jockeyed up. I’ll buy this stock when “110” is not in the top 3 of having the most buy and sell volume.

      Kurt

      Comment by Kurt | October 18, 2010 | Reply

  15. whats ur take on meralco???

    Comment by gerald | October 18, 2010 | Reply

    • Gerald,
      I think MER will be trading in a range between 235 and 210. If you want to trade the stock, you can probably post for position around 215. Fundamentally, I like MER, but it is not an easy stock to trade.

      Comment by Gus Cosio | October 19, 2010 | Reply

  16. MBT is nearing 68p (68.25 now). I’m torn between buying this, or if I will buy my second batch of RCB..

    Comment by jasper | October 19, 2010 | Reply

  17. Dear Gus,

    Both MEG and ORE showed a reversal in the MACD and their Average DMI is between 29 and 30. Between the two, would MEG have an earlier swing to the upside rather than ORE within the next week?

    Hoping to get a reply from you.

    Sincerely,

    Ray

    Comment by ray_b | October 19, 2010 | Reply

    • ray_b,
      your guess is as good as mine. MEG is a real trader and if it is not at all correlated to ORE you can trade it side by side.

      Comment by Gus Cosio | October 19, 2010 | Reply


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