Gus Cosio says so

Ideas on the Philippine Stock Market

Breathing in the sky and in the center of the earth

6:00 pm  Tuesday 26 October 2010

This week will be a short one and so will next week be due to All Saints Day on November 1.  Nevertheless, this week looks to be a most promising one.  Today, in spite of a strong opening, sellers tried to beat up the market by selling into its strength.  But lo and behold, when the market had gone lower, buyers of strong stocks once again emerged.  People who are holding their breath for a deep correction are probably turning blue already.

The debut of CEB was quite well received, but skeptics continue to abound.  What I find unreasonable is that the doubts about CEB is not at all about the company and the favorable promise it holds.  The jaded view is that of Big John Gokongwei who many still believe does not leave anything on the table for investors.  I would not want to be an apologist for the real Big John, but one has only to look at the performance of Gokongwei stocks over the past year or so to gain insight on how high CEB can go.

Look at URC which was trading as low as 5 pesos in 1Q2009.  Today, it traded between 44 to 45.  That was about a 900% return on your investment for about one and a half years.  That is not bad in any language.  How about RLC which was trading below 4 about the same time last year.  It now trades around 17 or over 325% return.  Compare to ALI which returned below 185% for the period or SMPH which returned around 85%; all three are mall operators but RLC outpaced in stock price.

Even JGS, a holding company which was trading around 2.50 at the start of the period.  It is now trading between 24 and 25, roughly a 10 bagger.  How does that look against other holding companies?  Well AC went from below 200 to just above 400, at least a 2 bagger;  SM was doing just 200 and is now trading between 500 to 550, between being a 2 or 3 bagger.  DMC (my favorite) was, of course as robust if not more rewarding – an 11 bagger.  By the way, AEV was also an 11 bagger.

What is my point?  A lot of local brokers and traders may have a jaundiced view of Gokongwei companies, but the numbers do not bear them out.  A lot of money had been made trading Big John’s companies.  If you still hold the stubborn view that the guy is just going to stuff his investing public again, well think again.  It is only the fool that does not change his mind.

I do not want to sound like a preacher for CEB, but I think the stock will eventually be seen from a different perspective by local investors given that foreigners view the stock favorably.  I cannot help but recall Singapore Airlines and Cathay Pacific which are very closely followed stocks in their home markets, as well as Thai Airways in Bangkok.  These are headline stocks in their countries and the Philippines had so far been deprived of a good airline stock to trade.  CEB will surely have a role in Philippine portfolios whether foreign or local because it will reflect a critical mass of the domestic transport and logistics sector.  Surely, a well allocated portfolio will usually find room for CEB at one time or another.

So much for the sky.  Now we go down deep into the earth.  I see a lot of opportunities going into the core of the earth, i.e., minerals and mining.  I think there will be no stopping ORE for the time being as people will be looking for something to trade while waiting for Nickel Asia to list.  I suspect that PX will start seeing sympathy buying as AT marches toward the 20 peso level.  Gold and copper may be taking a breather together with the broad commodities market, but once people catch their breath, they will be running with a lot of second wind.

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October 26, 2010 - Posted by | Financial markets in Asia

36 Comments »

  1. Hi sir,

    I agree with you. I remember one of my first stocks and core was JGS way back at 13. It has already given me significant returns and I still believe what others are saying that at year’s end it could breach the 30s mark. Btw, what are your thoughts regarding cebupac’s impact on JGS? I noticed some selling today. Perhaps people are re-allocating to cebu itself?

    Comment by Nico | October 26, 2010 | Reply

    • Nico,
      So far, the CEB IPO has already been discounted in the price of JGS, but with the price pulling back today and rebounding from24 leads me to believe that people are reassessing JGS. I believe JGS could move up some more.

      Comment by Gus Cosio | October 26, 2010 | Reply

      • I am just curious about where the news came from their “FIRST SHIPMENT” because if it was from the company directly in a news release, I haven’t seen anything. Their website is pretty lame too if you ask me. Last ACTIVE NEWS RELEASE was in November 2009……….isn’t this November 2010? I would fire my PR guy for keeping a website like that if they are trying to get active investors.

        SO! Where is the official news release that the first shipment of nickle ore will be sent out in December? I have proabably seen it, but I can’t remember where……or was it hear say?

        Don’t get me wrong, I am sitting on a huge amount of shares right now……….and I am hoping for the best.

        Regards,

        Comment by Juanito | October 26, 2010

      • Hello Juanito,
        This is the link to the news regarding the shipment of ORE
        http://business.inquirer.net/money/breakingnews/view/20101026-299850/First-nickel-shipment-eyed-by-December

        Comment by Foreign Investor | October 26, 2010

  2. I have a question regarding ORE. why does it need to be jockeyed until recently? And why do people jockey stocks? (Of course the obvious reason is they buy it cheap, jockey then sell when the suckers come in.. but in this case perhaps something else is driving it).

    Comment by jasper | October 26, 2010 | Reply

    • Jasper, we share the same query.

      Comment by Steve Jobs | October 26, 2010 | Reply

      • I think that the jockey(Even the jockey new the true value before the news came out about ORE)- jockeyed it so that they earn first before the the whole market comes in..and we cant say anymore that ORE is a jockeyed stock because its true value is coming out. And they aren’t selling to suckers at all. But in the market the buyer wins or the seller wins. With ORE it looks like both are winners. Just my opinion

        Comment by Foreign Investor | October 26, 2010

    • Jasper,
      You have to keep in mind that all stocks are pushed by interested parties. If nobody pushes, nobody becomes interested. The degree of push may be as little as talking about it or as heavy as “market making” intervention. Nevertheless, when a stock has a life of its own already, then it makes its own moves.

      Comment by Gus Cosio | October 26, 2010 | Reply

      • why do i get the feeling that Mining is the next bubble…

        Comment by cliffhanger | October 26, 2010

      • cliff i suggest you download then nickelasia prospectus. I think you will be pleasantly surprised.

        Comment by jasper | October 26, 2010

      • ok gus, ill take a look

        Comment by cliffhanger | October 26, 2010

      • i mean jas hehe

        Comment by cliffhanger | October 26, 2010

  3. btw: to all interested about nickelasia, i am already able to download their prospectus: http://www.nickelasia.com/IPO/download.php

    I think if you are interested, you can view that file and then form your own opinion.

    As for me – I’m sold. The fundamentals seems good so, where do I sign? 🙂

    Comment by jasper | October 26, 2010 | Reply

    • Sold too!

      Comment by Mark Anthony | October 26, 2010 | Reply

  4. Sir, any thoughts on Nickel Asia IPO? will the IPO lead to dumping of ORE and/or PX? Saw the prospectus and its a headturner.

    Comment by Mark Anthony | October 26, 2010 | Reply

    • Mark,
      I think Nickel Asia IPO will just increase attention of institutional funds both local and foreign to mining shares in the Philippines. A wider range to choose from makes a sector more robust as dynamics of financial markets go. Investors do not want to live in a one stock sector. They want to be able to both diversify and compare and possibly even arbitrage.

      Comment by Gus Cosio | October 28, 2010 | Reply

  5. Wow…Thanks for the summary Sir Gus! Gokongwei is really killing it! He might overtake Tatang Sy if he keeps this up…I sense the next thing he will float is Robinson’s Bank now that he has the commercial banking license..

    Comment by James T. | October 26, 2010 | Reply

  6. Sir Gus,
    Can I have your opinion or point of view about SLI regarding that they have a plan to have Follow On offering. What will be the effect of SLI current price if the plan is settled? Can we be safe now to enter at a current price to anticipate the play? thank!

    Comment by ron | October 26, 2010 | Reply

    • Ron,
      SLI’s follow on offering was approved by the PSE board with a condition to offer 10% of the new float to local investors. Earlier, they only wanted to offer it to foreigner. That is likely to be the reason for the price adjustment lower. Nevertheless, I think the pricipals would like to see a higher offering price of the foreign placement. For that to happen, SLI will have to go higher. I do not think that the assumption is unreasonable given the value that they attach to their land bank and on-going development.

      Comment by Gus Cosio | October 28, 2010 | Reply

  7. Hi Sir Gus,

    My luck’s been well with ORE, I was able to buy it at 3.03 and hold. I’m very interested in the Nickel Asia IPO, and I was wondering if I should sell my ORE shares and reallocate to Nickel Asia or should I keep it and have both stocks in my portfolio.

    Also, what do you think will happen with VLL? It’s been moving sideways for the past few weeks, do you still think it’s a good stock?

    Thanks Sir Gus, more power! Btw, DMC is also now my favorite, I was able to topslice before at its peak of 35, and now the remaining shares are making me money.

    Comment by C | October 27, 2010 | Reply

    • Hi Sir Gus, in relation to C’s post.. i also have some VLL. And am not worried about it moving sideways recently, I know it will eventually go up.

      But am thinking if its better if I sell it for the meantime so I can add more ORE, DMC or my super favorite AGI (which do you think is more rewarding?), and then just get back to VLL when other investors start to take notice.

      One more thing sir, maybe you could inform us in your post when you’re gonna have tv guestings/interviews so me (and some friends who follow your blog) can tune in. We always miss all your tv guestings kasi.

      Thanks!

      Comment by Cholo | October 27, 2010 | Reply

      • Hi Cholo, I might do that too, sell some VLL to reallocate to other stocks. I might get more of CEB, since it has been flying and making me and many people happy, and also ORE and DMC. What do you think sir Gus, would that be a good idea?

        MBT is also doing good right now, I’m very happy with this stock. Is this a long-term hold?

        Comment by C | October 28, 2010

    • C,
      I continue to be constructive on VLL. Just like any seasoned investor, you must learn to be patient. It is great to be lucky, but luck is not a long lasting partner. Patience, however, is an ever enduring trait.

      Comment by Gus Cosio | October 28, 2010 | Reply

      • Thank you Sir Gus. With every mistake I make, I learned that it could have been avoided if I had been patient.

        So stocks teach us about real life too. 🙂

        Comment by C | October 28, 2010

    • i got lots of VLL in my portfolio as well as FOOD. patience, patience… investing in stocks really teach me well how to have patience!

      Comment by RmR | November 1, 2010 | Reply

  8. Is ALI a buy at 16.5 level? Thanks!

    Comment by trixia | October 27, 2010 | Reply

  9. MBT has blown up to 79p. And to think just last week I had the opportunity to buy this for 68.

    Although I’m happy with RCB but you know, if I had to do it all over again, I’ll have done it differently 😦

    buhuhuhuu..

    Comment by jasper | October 27, 2010 | Reply

    • its simply the way we interpret and use the common information that we have that makes the difference.some more time jasper and you are about to master your skills in trading.goodluck!

      Comment by richard | October 27, 2010 | Reply

    • Thanks Richard,

      btw: I’m beginning to understand why Gus is always looking at the volume and the number of followers a given security issue has.

      Comment by jasper | October 27, 2010 | Reply

    • dont grind too much over it jas, u knew RCB was more undervalued than MBT. MBT may be the winner now but RCB has more room to grow.

      Comment by cliffhanger | October 27, 2010 | Reply

  10. Hi Sir Gus, do you think RCB will continue to go up tomorrow? how about JFC? there’s a disclosure regarding china food chain acquisition. i’m planning to buy some tomorrow.

    Thank you.

    Comment by newbie | October 27, 2010 | Reply

    • Tomorrow? There are no sure thing in stocks i think. We only deal in varying degrees of probabilities.

      Something like- “This should be worth more than its price today. But whether it goes up tomorrow or next year, we cannot say. Only that it is highly possible”.

      Or the alternative thought- “This issue is fully priced. Therefore the chances of this going down is lesser than the chances of it going üp”.

      Comment by jasper | October 27, 2010 | Reply

  11. All-in PX today…gogo PX..will make profit for second time around…

    Comment by Sophia | October 27, 2010 | Reply

  12. Sir Gus, among the stocks you follow, which do you think are overpriced?

    Comment by C | October 28, 2010 | Reply

  13. with 16% gain of my ORE next is to run, profit is profit. i will get more of PX for the bzness potentials in the long term, with AT. MBT, BPI and MPI are the best, wonder why many are putting substantial funds in stocks with no fundamentals to rely on, merely relying on shipment rumor..no..no…i knew how they pay the broadsheets…just to run a story..if i have stocks from unknown getting 5% ..run as fast as you can….pocket your gain..

    Comment by art | October 28, 2010 | Reply

  14. my fellow traders, we stand here right now with an overwhelming gratitude on the markets has returned in our investments, i hope that all of you could give back to the community as i have. please lets help those that have been devastated by the storm in the north, in what ever capacity that you can help.

    Comment by gerald | October 28, 2010 | Reply


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