Gus Cosio says so

Ideas on the Philippine Stock Market

I will survive

9:30 am 3 December 2010

When the market goes up close to 200 points in two days after a horrifying period of decline, there is only one thing that can be said – the previous up trend is still intact.  Of course there will be selective buying and selling because of the nervousness that came with the consolidation.  The down move gave people time to think about their risk thresholds.  That is the usual way it happens, investors whose perspectives are short and narrow get very relieved that their losses have been recovered, and they sell as soon as they break even or at small losses or gains.  It runs smack of Darwinian Theory of survival of the fittest – those with the strength of conviction are left to make gains on the back of the weak of heart and mind.

For an investor to maximize gains now that the correction seems to have run its course, one has to cherry pick among those headline stocks whose prices have not fully recovered.  I am referring to stocks like DMC, AP, AEV, CHIB,MPI, MER, MBT, JGS, RLC, SM, SMPH, SMDC,URC, UBP and even TEL.  Right now, there is so much to choose from.

For the conservative investor, I think entering the market with TEL as a core holding will be very good at this point.  I think we’ve seen the downside of this stock and it is not much deeper from where it is now.  For those who got squeezed out of SMPH, it may be a good time as well to re-establish the position.  You can even make a selection of SM, SMPH and SMDC because these are conservative stocks.  The same thing can be said for MER, DMC and possibly EDC.  Yield players, ironically, can look again at SCC, which may be a natural resource stock and a commodity play, but because its coal is used directly by the Calaca Power, it has a steady and captive user at stable prices.  One can look forward to steady dividend yields.

What I am trying to convey is that in the next few months, this market will continue to move forward in spite of the headwinds.  Things like the Ireland dilemma, the Korean nuclear stand-off, even the bank credit controls in China, these are mere distractions.  We must not fail to appreciate the domestic economy’s fundamental conditions and put more weight on this because at the end of the day, we steer our own destiny.  All else are simply hurdles and road-blocks.  The way to progress remains, and we have no choice but to stay in the path.

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December 3, 2010 - Posted by | Financial markets in Asia

60 Comments »

  1. Sir, how about AGI?

    Comment by Shan | December 3, 2010 | Reply

    • Shan,
      You can buy AGI anytime and sleep for 6 months. When you wake up, you’ll be happy.

      Comment by Gus Cosio | December 3, 2010 | Reply

      • Hi Sir! this is my all time favorite stock. I have some extra cash left though, But wont it seem like im chasing the price now at 12.96? You think its still a reasonable buy? (Im gna average up a bit though coz I own this stock from way way back)

        Comment by Cholo | December 3, 2010

      • Oh, thanks Sir Gus. Love what I just read! Just like DMC and Mer, I can sleep well….

        Comment by Shan | December 3, 2010

  2. > Right now, there is so much to choose from.

    My dilemma. I have so much I want to buy and so little resources to do it..

    I want to enter TEL for dividends. MER because its at my fantasy price. VLL because it entered and came out of the downward trend still at 3(Very strong support levels), MPI because its a monopoly.. CHIB, ORE..etc.. etc.. blah blah..

    arrrrgghhh…

    Comment by jasper | December 3, 2010 | Reply

    • i share the same sentiment, each day that passed that i have not received my proceeds on my MF redemption, it feels like opportunities lost

      Comment by rdthedeveloper | December 3, 2010 | Reply

    • Jasper,
      this is what economics and portfolio management is all about – the allocation of scarce resources over unlimited wants. You have to choose your bets based on the information available and your best instincts borne out of your observation of recent price movements. I think it is not yet time to buy TEL because it is not going anywhwere. My bets are on VLL, DMC, JGS and a reinstated position of ORE and SLI.

      Comment by Gus Cosio | December 3, 2010 | Reply

    • yeah, I had to make some hard choices. Basically, what happened was that I ended up buying a lot more VLL as opposed to TEL or doubling my MER.

      Its just that, I see nothing wrong with the company. Its earning is good. Everything is ok. The only thing that holds it back imho right now is bias.

      But the thing is – It entered the correction above 3p, and now its still 3p. It didn’t lose much. So it passes the critical question – “How much can you lose in this?”.. Since I don’t think it will go down 3p now.. now that the worse seems to be over – then practically I lose nothing but gain everything..

      But I’m no oracle.. I could still be wrong. But hopefully not VLL@3p–>1p wrong 🙂

      Comment by jasper | December 3, 2010 | Reply

  3. Hi sir,

    Are you still recommending to wait to buy MPI? Im still seeing lots of selling although coming from a person who watches MPI, 3.76 is already a bargain. What do you think?

    Thanks

    Comment by Ria | December 3, 2010 | Reply

    • I bought a second trache of MPI a few weeks ago. But I bought too soon as I entered at 3.88.

      but I regret not buying some more when it went down to 3.55.

      Comment by jasper | December 4, 2010 | Reply

  4. rdthedeveloper,

    Yeah it will take 4 days to process your stuff. I almost switch to fami’s fixed income to protect my earnings from balance/equity(from 32k down to 11k)*lol* but upon the suggestion of friends and fami person I’ve talked to, I stayed on and now I’m slowly reaping the rewards. Its better to “oursource” anxiety to somebody you know hehehehe.

    Regards,
    Scared Investor

    Comment by Scared Investor | December 3, 2010 | Reply

    • yes. plus the clearing time for the check when you deposit it. that’s almost 7days TAT.

      I was thinking before of borrowing some from my brother to take advantage of the recent consolidation and just pay him with the fami proceeds BUT i decided not to, i think hindi ako pwede masanay ng ganun. It will be like betting a money i don’t have.

      I have my full 13th month pay on MER at 178.00/sh 🙂

      Comment by rdthedeveloper | December 3, 2010 | Reply

      • wow! congrats on your MER! ganda ng AEP mo sa kanya… taas pa AEP ko sa MER, nasa 195.

        Comment by RmR | December 3, 2010

      • maybe i should buy some more MER. Its still relatively cheap. At below 185 its still a relative bargain.

        Comment by jasper | December 5, 2010

      • its really annoying that fami have their bank account at Binondo and their office is in Makati CBD. hays…

        Comment by rdthedeveloper | December 6, 2010

  5. during the market correction I was just on the sideline watching how my stocks were faring. all went down with ALI and VLL as my biggest losers (paper loss) but I believe my portfolio will rebound as I have fundamentally sound stocks. my only regret was that I only have limited funds for shopping during the correction. small time newbie here

    Comment by RmR | December 3, 2010 | Reply

    • No need to worry if your company is fundamentally sound. If you have extra cash, buy additional stocks

      Comment by jopard | December 4, 2010 | Reply

  6. As I said before the end of November won’t be pretty but December will begin with a bullish run. Expect a small correction on Monday before the rally resumes on late Monday or Tuesday. Also don’t forget to expect a correction at the end of the month (end of year) before it resumes on January.

    Comment by Mars | December 3, 2010 | Reply

  7. Hi sir Gus,

    Any idea why SMPH has been consolidating for quiet some time? Fundamentally, the company is earning. It has strong balance sheet and has been dominating the mall industry in the country. It has strong management with lots of talents and integrity. Any insights on this sir Gus? Thanks!

    Comment by Jennifer | December 3, 2010 | Reply

  8. Hi sir. What is your take on NIKL, LOTO, MIC, APC & AT? Many thanks.

    Comment by Pipo S. Onrubia | December 3, 2010 | Reply

  9. Sir gus any comment on DGTL? I still have some. Thanks in advance.

    Comment by gabbysev | December 3, 2010 | Reply

    • Gabbysev,
      I am still positive on DGTL. From this point, I think the odds and fundamentals are for prices heading toward 1.70 rather than 1.40. I just bought both a sun and a globe pre-paid sim yesterday for my dual sim myPhone and my experience over these two days shows me that SUN actually gives me better service for my money. I think it is the Sun product acceptability that will boost DGTL’s earnings. By the way, I now use all three services – Smart (my main), Sun and Globe – so I can compare.

      Comment by Gus Cosio | December 6, 2010 | Reply

  10. Sir Gus,

    Is there any available online ForEx trading here in Pi? How is ForEx compared to the Stocks trading in terms of return/loss?

    I think it’s also a good vehicle to diversify my investments.

    Thanks

    Comment by PoGGs | December 3, 2010 | Reply

  11. Good day Sir Gus! I’m just wondering sir if you are going to be one of the lecturers of PSE’s Certified Securities Specialist Course? Thanks and more power!

    Comment by Den | December 3, 2010 | Reply

    • Yes, Den.
      They’ve asked me to give the introduction to derivatives module.

      Comment by Gus Cosio | December 6, 2010 | Reply

      • Wow that’s great!! Can’t wait to attend your class sir! Thanks and more power!

        Comment by Den | December 6, 2010

  12. i have in my portfolio:
    30% SCC
    20% DMC
    10% MPI
    10% MEG
    10% PX
    20% MBT
    just sitting back..relaxing(well working for the most part hehe).. patiently waiting to reap the profits in due time=)
    going to add either AP or MER though if any goes down soon.

    Comment by mon | December 3, 2010 | Reply

  13. sir gus, do you think the stocks like dmc and ap will go down slightly as year end is coming?
    i really dont have an idea what exactly happen on stock prices during the January effect and the upcoming christmas season.

    please enlighten me sir ..

    Comment by Francis | December 4, 2010 | Reply

    • Francis,
      I have no doubt that DMC will climB higher. AP has been very strong and It may have come to a point where everybody owns it already. Nevertheless, both stocks will be strong going into 2011.

      Comment by Gus Cosio | December 6, 2010 | Reply

      • u mean dmc sir gus?

        Comment by cliffhanger | December 6, 2010

  14. Thank you sir for that breath of fresh air!

    My portfolio consists of some of the stocks you mentioned, and I continue to believe in their fundamentals. I have been avoiding watching the daily tradings for fear of panic selling. Too bad i’m short of cash, i’m almost all in with my budget for trading.

    Comment by C | December 5, 2010 | Reply

  15. I Bought some PIP…

    Comment by Sophia | December 5, 2010 | Reply

  16. Hi Gus,

    Your thoughts on HOLCIM, do you reccommend to buy on it’s currrent price at 17? their current PE ratio is at 33?
    Thanks!

    Comment by Taylor | December 5, 2010 | Reply

    • 33 pe is too high. thats an ayala-company level pe.. i.e. ali

      “20x pe is the absolute highest ceiling one should be willing to pay” – Ben Graham

      Comment by jasper | December 5, 2010 | Reply

      • Hi Jasper, sorry I just followed the PSE indicated current P/E ratio. As a beginner how can measure the PE ratio?
        THanks!

        Comment by Taylor | December 6, 2010

      • Well, I dunno about the others but I just download the most recent quarterly report from the pse website. ex. Since we are at the 3rd quarter, I just get the eps and multiple by 1.25x..

        Well anyway, since you say you are a newbie, I would recommend narrowing your purchases to the frontline stocks for now (while you learn the ropes). At least, whatever happens – you wont lose too much money if things go bad.

        I mean, you sure you don’t want to pick one from among gus’s recommendations?

        > I am referring to stocks like DMC, AP, AEV, CHIB,MPI, MER, MBT, JGS, RLC, SM, SMPH, SMDC,URC, UBP and even TEL.

        For example TEL. It won’t give 10x returns like AP did.. but even if everything goes to pieces, you at least have the 9% dividends.

        Comment by jasper | December 6, 2010

  17. 21x is the pe of HLCM if its eps for the 3 quarters of 0.567 annualized. There is a continued net foreign buying though for the past 3 months while the net foreign buying since March’10 is now valued at 360MM.

    Comment by Ralph | December 5, 2010 | Reply

  18. hello, gud day sir. i have quite a number on my holdings which are all currently trading below my costs: mer @ 230, mpi @ 5.60, edc @ 6.20, sli @ 2.10; whats your advice? i cant sell them because a big loss of P1m+. should i just hold these and wait till the next run up? should i buy additional on these positions for cost averaging down? i badly need ur wisdom.

    Comment by gerald | December 6, 2010 | Reply

    • Gerald,
      There is no need to cut loss because MER will likely move to 230 in the next few months: EDC will likely move to 7 in the next few months; SLI, contrary to what people have commented in this blog, will go on with their follow on offering and from what I gather, it will be at a price higher than today’s. My advice is to average down on MPI and EDC. Just hang on to your MER and SLI.

      Comment by Gus Cosio | December 6, 2010 | Reply

      • MER just closed at 194 today from 186. It seems that the price will continue to rise soon because of the increase in volume of trading.

        One thing I learned in my one month of trading is to never buy/sell stocks on pure emotion. Try to hold on to stocks with sound fundamentals and buy low / sell high.

        Comment by Anino | December 6, 2010

    • I think mer will go up too. It just went up +6.48% today. viewing the whole year price action, it seems to normally be priced above 200p. Actually, my exit price for MER is 220-230..

      Comment by jasper | December 6, 2010 | Reply

  19. All-in @ Pepsi Today:)

    Comment by Sophia | December 6, 2010 | Reply

    • Hi sofia,

      Whats with pip that you took all in today? Any news on this stock? I hold a couple of shares but has been going down this past few week

      Thanks

      Comment by Ken | December 7, 2010 | Reply

  20. ORE is moving forward.lol

    Comment by marketbeginner | December 6, 2010 | Reply

    • With very little volume though, be careful

      Comment by jhsdll1 | December 6, 2010 | Reply

  21. Sir, right now which stock is the best to buy? I have limited funds though. just around 15k and I’m planning to put it in 1 stock only, what should it be in your perspective?

    Comment by Allen | December 6, 2010 | Reply

    • Allen,
      with 15K, I think you’ll do better in an equity mutual fund. But if you want a stock, I would recommend VLL or MPI for you.

      Comment by Gus Cosio | December 7, 2010 | Reply

  22. i think vll is the best stock to own right now…It reached 7 pesos in 2007…

    Comment by Jolly | December 6, 2010 | Reply

    • I just came from one of VLL’s planned vertical development ‘The currency’. Its supposed to go up on 2014. four years from now, and yet people seems to be buying it.. I even saw someone plunk down a wade of check for the first year dp..

      anyway, the dp scheme seems good. the building seems nice.. and its prices as much as one of the robinson-developed building..

      I can’t imagine plunking 3M for a 32 sqmtr room.. but I wholeheartedly is salivating on the stock even more now..

      Comment by jasper | December 6, 2010 | Reply

      • I’m choosing between VLL and SLI…

        Comment by Mitch | December 7, 2010

  23. Sir Gus,

    Do you think LC would still recover? Should I hold on/let go this stock. I have a whooping -30% loss in my LC stock. Do you think their rights offering would decrease my losses? I am worried about this stock. Please advice.

    Thank you

    Comment by Ogie | December 7, 2010 | Reply

    • I ache with you brother

      Comment by Dr. Mundo | December 7, 2010 | Reply

    • Ogie,
      I do not know where LC will go, but it is a stock that is difficult to trade. I see no logic in the stock’s movement. I would rather avoid it. I once cut a 15% loss on this stock, I did not regret it because I used the money to buy another stock.

      Comment by Gus Cosio | December 7, 2010 | Reply

      • Thank you, Sir Gus. I appreciate your advice.

        Comment by Ogie | December 9, 2010

  24. Do you like AMC? Low PE, dividend yield of 2-3% and good management record.

    Comment by alexis | December 7, 2010 | Reply

    • Alexis,
      AMC is a good company, but the stock may not give you good performance. If you’re simply looking for yield, it should be okay, but TEL gives 9% dividend yield at 2400.

      Comment by Gus Cosio | December 7, 2010 | Reply

  25. Hi sir Gus. I have no time to monitor the market. How do I allocate my investments? I intend to place at First Metro Save & Learn Equity, Balanced & Fixed Income Funds. Thanks & more power.

    Comment by Pipo S. Onrubia | December 7, 2010 | Reply

    • Pipo,

      Don’t put your money in Fixed Income Funds unless your too old and u want to protect your profit. But if you still have time to grow your money, then try equity and balanced fund.

      Scared Investor

      Comment by Scared Investor | December 7, 2010 | Reply

    • Pipo,
      If I put my money on Save-and -Learn Equity Fund, I would have earned more in 2010 .

      Comment by Gus Cosio | December 7, 2010 | Reply

  26. @Alex AMC/alaska is good and very profitable company i think its very cheap @ 13/sh….Freefloat Market Capital is only 5.2 billion…Projected net Profit this year around 1.9 – 2 billion…1st half profit more than 1 billion….net income for the first 9 months jumps to 42% @ around 1.42 bil..China may raise interest rate next week which could lower down the prices of sugar and skim milk by january which for me will be Good for AMC next year…

    Comment by Sophia | December 7, 2010 | Reply


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