Gus Cosio says so

Ideas on the Philippine Stock Market

A critical look at positions

11:08 pm  Tuesday  16 November 2010

It appears that the bounce on Monday leaves conflicting views among readers.  One big mistake investors tend to make is to create their outlook based on their own existing position.  When investors are very long in their trading positions, they try to convince themselves that the market is going up.  Conversely, those who managed to lighten up their portfolios and have sufficient cash in their balances are happy to see the market go lower in order to start new buying round.  There is always the need to be objective especially when markets come to possible cross roads.  My best advise is to understand every item in your portfolio.  It is very possible that some stocks will decline while others become firm.  There is no substitute for having an objective look at the condition of every stock.

Here are a few stocks I would like to watch:

EDC – I think the stock has hit the bottom of its range.  I sense that it could range between 5.33 which was the recent low to 5.95 which appeared to have been a support level before it broke down last week.

DMC – I think the stock remains strong, I either sense or am hoping that it will ease further to 33.50 whereby a range could develop with a high of 36.50 and a low of 33.

FLI – Good fundamentals are being appreciated by investors.  The stock has shown strong support just below 1.30.

DGTL – I am holding my breath for this unappreciated telco.  Their business model is slowly gaining ground.  It may not be a star but it ain’t no dog either.

ORE – Monday’s price action on ORE should not be ignored as there appears to be no large seller of this stock.  We could surpass 4 by the time Nickel lists.  ORE seems to be shining under the halo of Nickel.

TEL – I like this stock for its dividend yield and proven stability in revenues and earnings.  I am afraid, however, that some portfolios are shedding TEL’s weight on their portfolios that I sense further selling.  TEL may no longer be on the way down, but I doubt if it will bounce up strongly.

I am sure there are stories for every liquid stock and different views.  What I want to highlight today is the idea that there are some stocks that look to be bouncing up from strong support levels  while there are others that have some price erosion to go.  One such stock could be SLI having broken through the 1.90 support.  I think AP could also be facing further correction although many will dispute this.  PNB is another stock which may see more downside if there is no follow through this week.  In contrast, I see URC and RLC to be continuing its strength in this consolidation.  For the mining sector, I believe AT and PX will benefit from the enthusiasm for NIKL.

All told, I believe it will not be an easy market for the rest of the week.  The thing that is going for us is that the 91-day T-Bill auctioned on Monday were taken at a yield of 1.48% p.a.  There is a lot of cash still floating around, and that is making stocks look really cheap.

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November 16, 2010 - Posted by | Financial markets in Asia

28 Comments »

  1. Hi sir gus,

    DGTLs 17Q just came out and it did post a profit compared to last year. However is this sustainable, ie. due to operations, or is this just a forex gain that will depend on the peso?

    This looks to be a long term play but how long should we be in for it before it breaches critical mass?

    Comment by kentwait | November 16, 2010 | Reply

  2. Sir Gus,

    DGTL’s results for the first nine months are out and they reported 800M net income vs. last year’s loss. Do you believe this is already the turnaround for DGTL or is this net profit driven more by temporary forex gains on the back of the strong peso recently?

    Comment by Kent | November 17, 2010 | Reply

    • 800M pesos is too much to attribute to forex gains. Its driven by higher wireless sales. 12B – 2B more than last year.

      But I think the question you have to ask yourself with regards to DGTL is if you are willing to have your money tied for a significant amount of time to wait for its value to be realized.

      If you’re the type of person who gets down when he sees other stocks soaring while his own seems to have a fixed price, perhaps some of the the other stocks might be better.

      The usual suspects like agi, vll, mpi, ore, etc.. may give better returns in the short term.

      but for someone like me, I really don’t mind waiting (I don’t get too down when stocks I didn’t buy goes up)

      Comment by jasper | November 17, 2010 | Reply

    • Kent,
      DGTL has obviously turned the corner in its business. I am betting that the trend will continue. I have no crystal ball that predicts this. I am only of the view that when the financial and operating conditions of a stock turns around, the price should follow.

      Comment by Gus Cosio | November 17, 2010 | Reply

  3. Unfortunately the Monday rise is nothing but a breather because of the deep plunge by the PSE last week. There is nothing but bad news out there so your only choice is to look at it at a stock per stock basis and study the support levels of the stocks you hold.

    The perspective right now isn’t that there’s a lot of people selling, it’s that there’s not a lot buying. So any kind of sell-off is magnified. There’s a lot of investors holding on to cash for now waiting for everything to bottom out.

    In the end if you believe in the fundamentals of your stock, the best way to help it recover faster when the market sentiment improves is to hold on to those stocks.

    Comment by Mars | November 17, 2010 | Reply

    • I am holding on to my AGI DMC and JGS. I hope these three stabilize in the next few weeks

      Comment by James | November 17, 2010 | Reply

      • Hey James,
        Those are very strong stocks. I would not be afraid of holding them.

        Comment by Gus Cosio | November 17, 2010

  4. what happend to the private placement of sli you mentioned at 2.80, which was approved a couple a weeks ago by PSE?

    Comment by mike | November 17, 2010 | Reply

    • The private placement from what I heard will be done in January. You can visit the PSE website.

      Comment by Gus Cosio | November 17, 2010 | Reply

  5. I too have been holding SLI.. and its progress in price looks very slow for me. Do you have any TP for this stock sir? in the year end and for next year? I also believe that this is one of the daily stock picks in FAMI.

    Thanks. Sir, you missed out a letter ‘t’ for ‘critical’ in your blog title. More power and God bless you

    Comment by pikachu | November 17, 2010 | Reply

    • Pikachu,
      All I can say is that you buy a stock because you like it and eventually it will give you a pay-off. SLI’s price today is quite far from my cut-loss level so I just have to watch it.

      Comment by Gus Cosio | November 17, 2010 | Reply

  6. What about MBT sir? Has it’s juices ran out?

    Comment by C | November 17, 2010 | Reply

    • C,
      Fundamentally, MBT should be good value. Banks of its quality should be trading close to 2X book value. It is not yet there so I believe there is more juice.

      Comment by Gus Cosio | November 17, 2010 | Reply

      • Thank you Sir!

        I thought I missed the opportunity. The COL research said the target price is 84, and it already reached that amount before the big dip of last week. I sold all my MBT earlier for minimal profit, worried that it will go down further. Newbie move, I guess. I have to understand more of the stock market jargons, and read more on the fundamentals so that I can make sound judgements next time.

        Thank you sharing your knowledge Sir Gus!

        Comment by C | November 17, 2010

      • C,
        I believe you still can buy back at 68-70 levels

        Good Luck

        Comment by Foreign Investor | November 19, 2010

  7. u finally mentioned FLI sir gus

    Comment by cliffhanger | November 17, 2010 | Reply

  8. What do you think of eschewing PSE stocks, for the moment, in favor of cash? Do you think T-bills and BSP SDAs are a good bet for now?

    The market in general doesn’t look right to me. It’s made a lower high and a lower low, already a short-term downtrend.

    Comment by abitrade | November 17, 2010 | Reply

  9. SLI won’t go down below 1.80. By Dec 10, this will fly.

    Comment by poorguy29 | November 17, 2010 | Reply

    • Could you explain your statement more? why 1.80 and why Dec. 10? unless you can’t back this up by numbers, for me, this is hyping.

      PD: Have SLI and FLI for property stocks

      Comment by alssy | November 17, 2010 | Reply

    • Most probably this is because of the follow on offering..
      I’m just waiting for SLI to stabilize @ 1.7-1.8 levels before I get in

      Comment by Foreign Investor | November 17, 2010 | Reply

    • Poorguy,
      I do not know where you got the date or its significance. Is there anything about Dec.10?

      Comment by Gus Cosio | November 17, 2010 | Reply

    • @poorguy29 – SLI @ 1.70

      Comment by Sonn | November 18, 2010 | Reply

    • Haha the hypers are now on Mr. Cosio’s site. What’s the basis for those numbers and dates?

      Comment by Average Joe | November 18, 2010 | Reply

  10. Hi Sir gus,

    What do you think of AT? I AT at 18 aep, thinking of cutting losses before they grow too big.. AT reported net loss this quarter because of interest expense.

    Comment by CVG | November 17, 2010 | Reply

  11. Hi Gus,

    Do you have the support level for AT? I bought it this November at 18. I wasn’t able to cut-loss since it fell too fast and too deep. Thanks.

    Brent

    Comment by Brent | November 18, 2010 | Reply

  12. SLI will hold a special stockholder’s meeting on Dec 10 wherein they will deliberate the price of the 2PO. Look it up in the PSE website.

    Comment by poorguy29 | November 18, 2010 | Reply

    • Hello Poorguy29,

      Is their news on how much will this be priced at. Since that is very vital

      Thanks

      Comment by Foreign Investor | November 19, 2010 | Reply

  13. You have to wait until they make the disclosure after the Dec 10 meeting.

    Comment by poorguy29 | November 19, 2010 | Reply


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