Gus Cosio says so

Ideas on the Philippine Stock Market

Bullish, not foolish!

6:15pm Monday  22 November 2010

Of course the day’s highlight was NIKL which went to a high of 19 but sold off to 16.50.  What spurred others to sell was the selling activity of the three top underwriters – UBS, CLSA and ATR – presumably from foreign subscribers.  It looks like they put most of the shares in the hands of punters.  it does not look too good for the stock because if the market detects that there are no strong anchors for NIKL, it will languish among the dogs of the market.  That would have been a great disservice to the company which is the most credible nickel producer in the country.  Anyway, I am of the view that this is a temporary phenomenon and the stock will probably do better in the coming months.  I think the global mining story is still of interest because investors are anticipating some commodity inflation due to the QE2 in the U.S. and the liquidity driven bailouts in Europe.

The rest of the market looks to be in consolidation mode, in spite of the market recovery on Thursday and Friday last week.  This time around, I am confident that stock prices, even of the strong AEV, AP and DMC, will run away from us.  The mistake that most people will make is sell inside their own cut loss levels.  I think we may see 4000 again, but that should not worry us.  For me, I will be jumping with joy when I see DMC below 34.  I will be watching MPI and FLI because they are looking to be good trades again.  More than that, I will be rethinking what I will be keeping as core portfolio for the first half of 2011.  Right now, my candidates are CEB, VLL, MPI, SM, SMDC, and JGS.  I will likely revisit a lot of the third liners like RFM and even FOOD, COAT or SPH.

Anyway, I suggest a bit of care and a lot of conviction built upon good appreciation of fundamentals.  I am convinced that this bull market is still on a rampage.  This retracement period, no matter how long it takes, is merely setting the stage for a bigger more liquid market that will help a lot more people to make money in stocks for some time to come.

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November 22, 2010 - Posted by | Financial markets in Asia

65 Comments »

  1. Well I think you can expect some more punting if the CEB IPO is any indication. I’m sorry Sir Gus but if my money is already up 30% given the current market conditions I’m gonna cash it. Especially since its fundamentals is not clear as CEBs so I’m truly not sure where it’s true support level would be.

    The PSE is currently in lockstep with the global market. And as I said in one of your previous blogs, the November trend is mimicking the August trend and this week’s start is proving me right which means we should expect further consolidation for the rest of the week with a slight bounce up on and after Thanksgiving. What it portends tough (hopefully) is that it will lead to a December bullish surge just like what happened in September.

    Comment by Mars | November 23, 2010 | Reply

    • At the very least, expect a rough Tuesday. The PSE should challenge 4100 but hopefully it provides decent support. But that support won’t survive the rest of the week. I think it’s gonna challenge 4000 before it bounces up and settles at 4000-4050 at the end of November. And as Sir Gus said, look at those with strong fundamentals because it’s going to be very undervalued. December is gonna be a different month. I’ll bank my money on it. 🙂

      Comment by Mars | November 23, 2010 | Reply

    • Mars,
      You should not be sorry about anything. You should really take your profits anytime you’re satisfied with the return. I shared in this blog in the past that “nobody loses money by taking a profit.”

      Comment by Gus Cosio | November 23, 2010 | Reply

      • Well at least NIKL seems to have found good support at 16.50. But with the Koreans stirring trouble Wednesday is gonna be even rougher. PSE was able to find good support early allowing it to hold steady at 4150 later on but I think this time (Wednesday) it will blow past by 4100 and we may have to look at 4050 for support. Personally I’m sticking with bond funds and cash for now and wait for everything to settle down. There should be a lot of undervalued stocks to choose from late in the session.

        Comment by Mars | November 24, 2010

  2. good day Sir Gus and the many followers of your blog…. Sir just want to know if you have updates of DGTL… it seems stuck on its current level…. thank you.

    Comment by tatels | November 23, 2010 | Reply

    • Tatels,
      what I observe of DGTL is that while it is not surging ahead, it is well supported above 1.50 which to me is a good sign. I am one who is very patient with this stock because I see very little downside risk.

      Comment by Gus Cosio | November 23, 2010 | Reply

      • thanks a lot Sir Gus for your reply… as they say… it pays to be patient…

        Comment by tatels | November 23, 2010

  3. Hi sir,

    Could you please explain more on how to deal with loss levels? I’m just wondering if you’re convinced with the fundamentals of a certain holding, should you sell despite the current loss? or does this strategy apply only to speculative trades?

    Thanks

    Comment by Mitch | November 23, 2010 | Reply

  4. hello Gus, you mentioned about good appreciation of fundamentals. im a newbie here & really wants to learn about it. do you have any book you can recommend that i can read to for starters like me. 🙂

    btw, really enjoy reading your blog. reading it is already part of my morning rituals.

    Comment by sdrobob | November 23, 2010 | Reply

    • Hi sdrobob, I suggest you read a book by Benjamin Graham regarding value investing… It’s a pretty good book to read… 😉

      Comment by Perocho | November 26, 2010 | Reply

  5. Hi Sir Gus!

    This may be off topic, but I have stock certificates under a closed brokerage firm called “Jesus R. Jayme & Co., Inc.” Would you know where I can find a contact number or address of someone who knows this brokerage? Need some documents from them to certify that the certificates I have are authentic.

    Thank you so much!
    ec

    Comment by ec | November 23, 2010 | Reply

    • Hi, it seems the one to do the certification and check aunthenticity of your stock cert will be the transfer agent. Even if you lost the certs but you are a shareholderon record in their books should be no problem getting it sold or replaced.

      Thanks

      Comment by alex | November 23, 2010 | Reply

      • For the transfer agent to verify, I need to show them the Articles of Inc., By-laws, Sec’s Cert, SEC reg, Board reso of the authorized signatories of the stock brokerage… I also thought it was the transfer agent’s job but apparently, they don’t store files with them.

        Comment by ec | November 23, 2010

    • EC,
      Wow, Jesus Jayme was a friend of my dad. If he’s the same guy, he migrated to Canada in the 70’s. Those shares must be very old. I’m afraid you’ll have to go to the SEC for help, or at least consult a lawyer. I’m afraid I can’t help you.

      Comment by Gus Cosio | November 23, 2010 | Reply

      • You’re right, he’s the same guy! Ok, will try my luck with SEC… No one seems to know where to find any contact number. Thanks!

        Comment by ec | November 24, 2010

  6. Hi Sir Gus,

    Any thoughts on URC? Is below 40 a good buy? thanks.

    Comment by Kristin | November 23, 2010 | Reply

    • Kristin,
      I think URC is a great stock. It has had a good run for about 18 months so it should move sideways for a while. I suggest you buy it on dips, if you like the stock.

      Comment by Gus Cosio | November 23, 2010 | Reply

    • i agree..URC has a low p/e ratio..

      Comment by cliffhanger | November 23, 2010 | Reply

      • considering it came from 5 pesos…….better think twice……..!! no matter how low the p/e…….in a bear market…..walang p/e sa vocabulary……..

        Comment by mike | November 23, 2010

      • actually p/e will always be in the vocabulary even if its a bull or bear market if you are in it for the long term..

        Comment by cliffhanger | November 24, 2010

  7. Hi Sir,
    What is the best stock to buy now? And is SMDC @ 8.90 a good buy?

    Comment by Allen | November 23, 2010 | Reply

    • Allen,
      I do not know if it is the best stock to buy, but SMDC is certainly a good stock and 8.90 should not be so bad.

      Comment by Gus Cosio | November 23, 2010 | Reply

      • I definitely agree… 😉

        Comment by Perocho | November 26, 2010

      • I have exercised my rights for the SMDC offering back in Sept and I think I made the right decision. When I had a chance to visit Manila this November, the reports about the aggressive marketing of SMDC is correct. It wasn’t like this for SMDC 2 years ago. The proceeds of the rights offering went to buying more land to boost their land bank. Those are tangible assets that may appreciate over time or developed soon… below 9 price should be ok…I think. HTH..

        Comment by Perocho | November 26, 2010

  8. What’s up with SMB? Almost went to the ceiling today and up 8 pesos as of this writing!

    Comment by Shank | November 23, 2010 | Reply

  9. Sir Gus, do you believe in technical indicators? Right now, ORE is in the confirmation stage of the dark cloud cover. Is this the start of a minor retracement for the next trading days? Thanks!

    Comment by Seth | November 23, 2010 | Reply

  10. Sir Gus, how about SMC for next year?

    It seems to be the current “in” blue chip right now especially with the releases about a 150-200 reissue next year.

    By the way, do you have any idea what’s with all the SMC and -related stocks today? SMB and PCOR going through the roof and PF and GSMI showing strong upward bias.

    Thanks and more power to you sir!

    Comment by Kent | November 23, 2010 | Reply

    • Yes..SMB and PCOR for me are market leaders today. And hopefully, it will go up another 40% and 20+%. lolz PCOR bcoz of demand of oil in global market.

      Comment by marketbeginner | November 23, 2010 | Reply

    • Kent, the reason why SMB,Pcor, PF, & Gsmi are shooting through the roof and strong is bec. “they” are propping up the valuation of SMC in lieu for next year’s IPO which is between 150-200 so that SMC value will be more attractive to foreign funds. The higher the valuation, the higher they can set the IPO price. Remember, SMC is taken out from the INDEX so EVEN if the price for the IPO is P200. It will not exasperate the price of the Phisix. But I am pretty sure that after the IPO next year, SMC will surely be included in the index once again.

      Comment by richie lim | November 23, 2010 | Reply

    • The only fundamental play there is that SMC now, according some sources, has the largest power generation capacity in the country. This, along with its remaining interest in its food and beverage businesses will provide the cash flow to venture into businesses with higher return but with less stable earnings. So SMC is now in between a blue chip with a lot of potential for growth. The two questions are 1) How much of this speculative growth has been priced in and 2) Will the speculative investments (mining, etc) succeed.

      In my opinion though, forget fundamentals until after they sell their shares to the pubic. Right now, the stock is going up because they are pushing it up to help them sell their shares at 150. So just go with the momentum and have a predetermined cut loss price to protect capital.

      As for the other subsidiaries, I think that these are just being pushed to help SMC.

      Good luck.

      Comment by Warren | November 26, 2010 | Reply

      • Hello Warren,

        This is a good insight and I’m not updated with SMC because I was so disinterested with it considering that since 2006 the price is between 70 – 80… and then I find myself priced out now that its trading at 100+. Just want to check with you, isn’t it that it’s just venturing to power generation through PCOR? would you know what are the other power generating assets that they have now?

        thanks…

        Comment by Perocho | November 26, 2010

    • Isn’t it that SMB also plans to acquire GSMI?

      Comment by Perocho | November 26, 2010 | Reply

  11. Hi sir,

    Would you think the actions of North Korea affect our market for the next couple of weeks? (Latest news indicates the north began firing artillery towards the south just today). I know that Korea may not much be an influence to our economy (or am i wrong?) but if this persists, this war may drag on other countries in particular, the US, which I do know makes a big impact in our eco. I also remembered reading a part about wars in the intelligent investor…

    Thanks

    Comment by Ria | November 23, 2010 | Reply

  12. Sir:
    I want to put more on FOOD and SPH considering the value of the enterprise. They have a very good fundamental but what made these two so sluggish?

    Comment by art | November 23, 2010 | Reply

    • poor performance in recent quarters

      Comment by rodimus | November 24, 2010 | Reply

    • if you are into fundamentals, both SPH and FOOD are speculative.. both overpriced.. p/e ratio is already bloated..

      Comment by cliffhanger | November 24, 2010 | Reply

      • the p/e isn’t so bad, on the high side but not completely out there. at around 26 it’s not a bad call but requires patience (my reference is the earnings of ytd to get the p/e).

        Comment by ed | November 29, 2010

      • refers to sph.

        Comment by ed | November 29, 2010

    • If you are looking for short term appreciation, I suggest you pass up on FOOD for now.. I’ve been holding it since June and I haven’t got anything out of it. 😉

      Comment by Perocho | November 26, 2010 | Reply

    • Cashed in my gains and wait for the next movements…

      I am short term bullish on all world wide markets

      Comment by Master | November 23, 2010 | Reply

    • In world war.. not all the market went down. The industrial and metals went up for the production of equipments and weapons. So, I can’t see a reason for the market to overreact on the decline. We’re still on track. And hopefully, the war ends very soon and let the negotiators take care of conflicts.

      Comment by marketbeginner | November 23, 2010 | Reply

  13. So, Sir in your opinion what would be the best stock to buy now?

    Comment by Allen | November 23, 2010 | Reply

    • Allen,
      For my money, I would go for MPI.

      Comment by Gus Cosio | November 24, 2010 | Reply

      • Agree! With all those tollgates, utilities, medicare, mining, and probably mrt.. we should never go wrong with this… (hopefully)… buy in dips!

        Comment by Perocho | November 26, 2010

  14. Are you still convinced that the bull is raging Sir? Even with Korea? Ireland and the rest of the world going crazy?

    Comment by War | November 23, 2010 | Reply

  15. Sir Gus,
    Hope you could give us your thought on the possible ramification of the Korean incident, being a newbie, its difficult not to speculate.

    Comment by jofoler | November 24, 2010 | Reply

    • just want to share, the Korean incident will have an impact in the market. Admittedly, our market is not that strong in the last few days or weeks because there is fear in the market right now aggravated mainly by external news, to name a few are US DJIA, EURO concerns and lately the impending Korean war. I hope, peacefull reconciliation will happen.

      Comment by Claire | November 24, 2010 | Reply

    • Just be positive that any dip is an opportunity to buy and that this issue will somehow end….surging the market up again. Be an investor rather than a speculator.

      Comment by jopard | November 24, 2010 | Reply

      • who knows, we’ll see NIKL going back to IPO price today or better 🙂

        Comment by sdrobob | November 24, 2010

  16. from what i saw in cnbc this morning, most of the markets were slightly affected

    Comment by sdrobob | November 24, 2010 | Reply

    • oopss, this should be a reply to claire above. sorry.

      Comment by sdrobob | November 24, 2010 | Reply

  17. Beautiful recovery by PSE. As I said it will blow past 4100 and head straight for 4050. But as soon as most prime stocks hit their support levels it bounced back. It seems that a good number of people anticipated the drop and bought stocks as soon as they hit their support levels. The rally seems to be fizzling out but the PSE should end comfortably above 4100. It also helped that the dollar is finally trending down.

    This is how you play bearish markets. Understanding support levels and knowing when to release some cash, wait and buy low. It’s good training for those just starting in the stock market.

    Comment by Mars | November 24, 2010 | Reply

  18. newbie here. what is your take on FGEN?

    Comment by mei chua | November 24, 2010 | Reply

  19. Sir,what happened w/smb today?from a high of 31.90 to 25.00.what will be the scenario tomorrow?thanks.

    Comment by reichs | November 24, 2010 | Reply

    • Profit taking. Anything that rose 40% is bound to receive profit taking especially in a relatively negative day. SMB should rise significantly again tomorrow since it is in a midst of an “investing” phase for its upcoming IPO.

      PSE should rise in the next 3 days. Volume will be light because most of the foreign heavyweights will be on Thanksgiving vacation. So how high it will rise will entire depend on local investors. Then expect profit taking again on Monday when all the players return.

      Comment by Mars | November 25, 2010 | Reply

      • Oops, I meant next 2 days.

        Comment by Mars | November 25, 2010

      • thanks mars.how about pcor, will it still continue to rally?

        Comment by reichs | November 25, 2010

      • PCOR will continue to rise until the supreme court opens up the pipeline. With their competition crippled they pretty much have a monopoly on sales in that area which is reflected on their stock price.

        Comment by Mars | November 26, 2010

      • BTW disappointing last 2 days in PSE. Most similar asian markets rose during Thanksgiving. We may be looking at bargain hunters instead of profit takers on Monday. If PSE doesn’t hold at 4050 it will definitely hold at 4000 as November winds down. As I said December will be a totally different month.

        Comment by Mars | November 26, 2010

  20. Sell on Rally Buy on Dips…

    Comment by Art | November 25, 2010 | Reply

  21. Hello Gus,

    I was wondering what your thoughts were on UBP… the stock is very cheap based on the PE ratio… its 3rd quarter earnings came out with a huge increase from last year’s… 70% if i’m not mistaken… and from what i hear this is a stock some analysts have been looking into.. I was wondering if you have ever considered this stock.. Thanks!

    Norman

    PS
    If anyone else can share your thoughts on this stock please by all means. It would be greatly appreciated!

    Comment by Norman Go | November 25, 2010 | Reply

    • UBP’s debt/equity ratio is one of the lowest in the industry, price/book value still at 1.2, PE ratio around 11, net profit margin consistent at 30% which is pretty good for the industry, pays good dividends, i’ve been holding this and im still going to buy some more for the long term..

      Comment by chino | November 25, 2010 | Reply

  22. Good day Sir Gus,

    LPZ dropped around 6% today, do you think this stock will recover eventually? Thanks sir

    Comment by Snake Ice | November 25, 2010 | Reply

  23. Sir Gus, what are your thoughts on ALI?

    Comment by bernie | November 30, 2010 | Reply


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