Gus Cosio says so

Ideas on the Philippine Stock Market

No reply

9:47 am Tuesday  9 November 2010

It appears to me that the much awaited consolidation has come.  Obviously, it is being led by TEL which had been the traditional direction setter in the market for many years except this year.  TEL is no longer as influential and its role which used to be one-third of the index is diminished to half of what used to be.  I welcome the development because institutions both local and foreign have come to diversify well out of TEL.  Rightly so, since stocks like AEV have become more representative of the country’s macroeconomics and combining this with DMC, SM, MPI, MBT and JGS, you’ll come up with a portfolio that captures the wide range of sectors contributing to the growth of the economy.

Surely, mining is a very important sector, particularly at this stage of the global cycle.  While the signs of recovery are slow to show up in the U.S. and the developed economies, emerging markets which really constitute a critical mass base of global manufacturing, will be taking a lot more of materials and metals in their inventory to supply the demands of their local economies.  We are seeing this happen in China and perhaps India and in various of Southeast Asia, Latin America and Eastern Europe.

The IPO subscription period of Nickel Asia started yesterday.  I believe that this will be an issue that is generous to its subscribers.  I believe it is priced to leave enough money on the table for punters.  What is more significant to the market is the enthusiasm it could bring to the mining sector.  So far, the good plays have been AT, PX, and ORE.  LC/LCB was a play for a brief moment, but I think many have given up on this stock because they are distrustful of existing management.

Nevertheless, I think that in spite of the market correcting, mining stocks will continue to go better.  That is the beauty of a market that is starting to diversify, correlations start to become disjoint and sectors begin to trade on their own.

It could be time to look at some third liners that have been ignored but have started to show some life.  A few weeks back, one reader had asked about RFM to which I replied that I was not following the stock.  having been alerted by the reader, I noticed a marked change indirection of both the stock price and its underlying fundamentals based on disclosures with the PSE.  I asked a fund manager about it and he agrees.  I think it would be good if RFM develops a following because it will beef up the market’s consumer sector.

I cannot help but mention DGTL today.  One of our followers, Jasper,  commented yesterday “2. double DGTL” which I think, given the recent price stability and the price and volume spike yesterday, makes a lot of sense.  I am also thinking of a buy program for TEL, something like a peso cost averaging because if it is trading at 2400, it should be cheap and will provide steady returns of around 20% over time.

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November 9, 2010 - Posted by | Financial markets in Asia

40 Comments »

  1. congrats to jasper! haha

    Comment by cliffhanger | November 9, 2010 | Reply

    • im famous! hehehe..

      Comment by jasper | November 9, 2010 | Reply

      • hahaha!!Way to go!

        Comment by Cholo | November 9, 2010

  2. I just sold half of my rcb stake to raise funds for nickel. hope i bet on the right horse this time.

    the correction is too shallow imho. the only one that went down to a comfortable level is tel. the others just shaved a few centavos here and there. I mean, last week mpi and vll jumped 7%. a -1% correction at this point is nothing.

    Comment by jasper | November 9, 2010 | Reply

    • whew! fortunately i was able to raise enough cash for NKL without selling any of my current positions. that was a relief. =)

      Comment by Sonn | November 9, 2010 | Reply

  3. CEB is moving. =)

    Comment by John | November 9, 2010 | Reply

    • ….and moving fast.

      Comment by Sh3rwin | November 9, 2010 | Reply

  4. Good day Sir Gus!! With today’s correction, do you think AGI is already a buy? Tnx and more power!!

    Comment by Den | November 9, 2010 | Reply

    • Den,
      For as long as your horizon is longer than one week, AGI should grant you good reward.

      Comment by Gus Cosio | November 9, 2010 | Reply

      • Thank You Sir Gus!!

        Comment by Den | November 9, 2010

  5. Sir Gus, you did not mention AGI in your article. Is this still a stock worth investing in right now? Or has it reached its tipping point? Thank you very much.

    Comment by dark_half | November 9, 2010 | Reply

    • Dark Half,
      AGI has a long way to go, but there will be blips up and down. The company is accumulating a huge cash flow from its operations and I usually do not argue with cash.

      Comment by Gus Cosio | November 9, 2010 | Reply

  6. Hi Sir, Im currently looking at banks which I can add to my portfolio since I already sold PNB way way back. Which do you think is the most promising.. RCB, UBP or SECB?

    Thanks! More Power!

    Comment by Cholo | November 9, 2010 | Reply

    • dont forget CHIB

      Comment by cliffhanger | November 9, 2010 | Reply

    • 1. RCB has a very low p/e(8x) and has +30% earnings for 2010. It has the highest NPL ratio among the three(or might have the highest among the top 10 bank i think)
      2. SECB has a moderately low pe(11x or so) and has +30% earnings for 2010. It has the lowest NPL ratio among ALL the large banks (1.xx%)
      3. CHIB has a moderately low pe(11x or so) and has +15% earnings for 2010. It gives stock+cash dividends though and will expand from 255 to 400 branches next year.

      I don’t follow UBP. its income is flat for the first half, but i heard it will have better figures by the year end.

      Comment by jasper | November 9, 2010 | Reply

      • FYI, UBP is an aboitiz company

        Comment by cliffhanger | November 9, 2010

      • nice one Jasper!

        Comment by Raymond Sison | November 9, 2010

    • Cholo,
      I think SECB has the strongest potential, but rcb being very cheap may give good returns as well but over a longer horizon. I have no doubt as well that UBP should do well, it’s just that I think SECB may be the faster horse to bet on.

      Comment by Gus Cosio | November 9, 2010 | Reply

  7. Hi Sir Gus,

    Thanks for mentioning RFM, (significant part of my Portfolio which I entered when it was at 1.7 & 1.8). I’m keeping it for the medium term. I’am also watching DGTL for an entry position on a meduim term.

    Comment by Ralph | November 9, 2010 | Reply

  8. Hi Sir Gus, Chinese leaders is voicing their anger on QE2 because of so much liquidity in Emerging Market..My Question is will China raise interest rate in the near future as a countermeasure against Qe2.

    Comment by Sophia | November 9, 2010 | Reply

    • Sophia,
      They already have. Actually, China is merely doing lip service in this instance. at least, that is how I view it. Look at the Shanghai Composite; it has been rallying in spite of QE2.

      Comment by Gus Cosio | November 9, 2010 | Reply

  9. I only got 1/3 of the shares i requested for Nickel Asia!!! *#&(#$*$#*$&*!!!!!

    Comment by Cholo | November 9, 2010 | Reply

    • hey cholo, where did you request? i went through first metro sec online but i don’t have any news yet. i’ll probably follow up tomorrow

      Comment by sdrobob | November 9, 2010 | Reply

      • Did anyone request through BPI Trade/Securities? Haven’t heard from them yet…

        Comment by blue7 | November 9, 2010

      • I requested from rcbc sec.. they only gave me 1/3. I called them by the way.

        Comment by cholo | November 9, 2010

  10. hopefully, the correction will end soon.

    Comment by marketbeginner | November 9, 2010 | Reply

    • u should be happy when theres a correction because its an opportunity to buy

      Comment by cliffhanger | November 9, 2010 | Reply

      • i already buy what i have to buy.lolz aev and ore

        Comment by marketbeginner | November 9, 2010

  11. Sir:
    MWC had a strong performance for the 3rd qtr with 18% increase in revenue and 30% increase in net income. The gorwth of 8% in the number household served was registered. Looking at the price it seems it was stagnant at 18.80-19.00, any taught on this sir? Being one of the Ayala companies, can we expect more from MWC?

    Comment by art | November 9, 2010 | Reply

    • mwc has a pretty good value on the market if you ask me..current p/e ratio = 11.72, p/bv = 2.10, product (p/e)*(p/bv) = 27..people may not be interested now but i guess thats the time to invest, when no one is paying attention..

      Comment by cliffhanger | November 9, 2010 | Reply

  12. Yesterday, I lost php2,500…today I lost php3,500..to give you info, I placed huge money in fami almost a month ago and earned php31k so far…i’m beginning to get nervous though*lol*..tell me guys…should I pull-out or when should I pull-out..or should I be buying more shares?

    Scary Investor

    Comment by Scary Investor | November 9, 2010 | Reply

    • Scary Investor,
      Judging from your monicker – scary investor – you may be better off being in mutual where your worries are taken cared for by the portfolio manager.

      Comment by Gus Cosio | November 9, 2010 | Reply

      • I think his name should be “scared investor”. Let me share with you a story when I still didnt know the meaning of cut loss. My first mutual fund investment was back in march 2007. I bought 5k worth of fami’s equity fund at 2.13. In feb 2009, its navpu was below 1.5 already. I didint get scared and held on to it. Now its navpu is around 3.6.

        Comment by Sonn | November 10, 2010

    • there will always be up and downs in the market to balance buyers and sellers.. no need to fear in a bullish market.. patience and courage and konting ingat pwede na 🙂

      Comment by pikachu | November 9, 2010 | Reply

    • stock market is driving to hell this week. See how my money at fami decreases starting mOnday this week:

      Nov 8 -2,540.4078
      Nov 9 -3,566.1069
      Nov 10 -7,550.9096

      php13,657.4243 in 3 days!!!

      And to sing that song from SmallVille…”somebody saaavvveee me!!!”…when will this end??

      Comment by Scared Investor | November 10, 2010 | Reply

      • Scared Investor,
        If you do not have the stomach for trading stocks, Just buy an equity mutual fund and just check its value every quarter-end. Otherwise, you must be prepared for volatility such as this. Over time, as long as you choose stocks with solid fundamentals and you are with the trend, you’ll surely do well in your investing. If you are a panicker, I assure you, you will definitely lose money.

        Comment by Gus Cosio | November 11, 2010

  13. Good day sir Gus,

    Given the rise in Gold prices, where will you put your money? AT or PX? Thank you and more power.

    Comment by jaayem | November 9, 2010 | Reply

    • Jaayem,
      I would go for PX.

      Comment by Gus Cosio | November 9, 2010 | Reply

  14. I’m not Sir Gus, but at current prices, PX looks more attractive.

    Comment by KennyV | November 9, 2010 | Reply

  15. What’s the buzz on ALCO? Is it a passing fancy? Also what’s your thought on IP and ORE?

    Comment by AbysmalSpecter | November 11, 2010 | Reply


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