Gus Cosio says so

Ideas on the Philippine Stock Market

Ask Manny

6:40pm 16 December 2010

There is good reason for people to get nervous because so many people are dumping their positions.  If I were not looking at the aggregate fundamentals, I would be biting my nails too.  As I had shared with a reader who asked me if I had ever been wiped out in my lifetime, the good thing about having lost everything in the market, which happened to me in the year 2000, is that you learn how to money manage to control your losses.  Some have asked if I have cut-loss levels, and I can only say that I cut my losses when I need cash to buy a better position or I want to be defensive and I choose a stock which I think will not help my position.  Unlike momentum traders, I do not have a formula.  I simply choose a stock that ranks the lowest in my earlier choices and I sell it.   With me, if I like the market very much, then I go fully invested.  If I like it moderately, then I reduce my positions accordingly; and if I start disliking the market, then I reduce positions drastically.

I look at the total return on my portfolio rather than gains or losses in the individual stock.  Today, I am up around 45% on my portfolio for the year and I do not mind giving up some by taking losses on some stocks because my total return includes existing losing positions in my portfolio.  I mark to market everyday so in essence, I take my losses daily.  In this way, the individual stock matters less than the entire portfolio.  If I end the year giving some returns back such that I end 2010 at 40% or 35%, it still would not be that bad that I would bang my head on some wall.  Remember that if your marginal return on this asset class has been significantly higher than your other asset classes, you should not lose sleep over a few losses on some stocks here and there.

Do I think the market will hold at this level?  I will be candid and say I do not know.  If you ask me if I am prepared to see the market go lower, I would probably say I am.  What is important for me is to know what to do if it goes one way or the other.  Right now, I am looking into 2011 already, so I will be doing some adjustments as well as adding cash for new selections.  You just have to roll with the punches.

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

69 Comments »

  1. Hi Gus,

    What you said makes a lot of practical sense because we win some and we lose some. What’s important is to have a good positive return on the total portfolio.

    I am wondering if you can recommend a good portfolio info system or software that can allow me track all my positions individually as well as the whole portfolio. For now, I am using the portfolio facility in bloomberg.com.

    Nestor

    Comment by Nestor | December 16, 2010 | Reply

    • Hi Nestor,

      May I ask where can i get the bloomberg portfolio tracker? also, if its free?

      Thanks!

      Comment by Forth | December 16, 2010 | Reply

      • Ooops! kindly disregard my question. I already saw the bloomberg portfolio in bloomberg site. Thanks anyways! 🙂

        Comment by Forth | December 16, 2010

      • Hi Forth,

        Tell me what you think about it and how it compares with other trackers you may have used. Thanks.

        Nestor

        Comment by Nestor | December 16, 2010

  2. at times i guess its better to be foolish than bullish

    Comment by mike | December 16, 2010 | Reply

  3. thanks again for those wonderful insights sir Gus! avid FAN here!

    Comment by RmR | December 16, 2010 | Reply

  4. Nestor, free ba yung bloomberg? I also want to track my portfolio. How can i access it? Right now, i am using excel file…

    Sir Gus, I am also confident of the slow recovery in overseas and that would make commodity price higher. But i am paranoid that foreign investors are taking profits in pse and investing back in other countries like the US making pse stagnant or lower in 2011. What’s your take sir Gus?

    Comment by bush | December 16, 2010 | Reply

    • Hi bush, yes the Bloomberg portfolio tracker is free. You just create an account and add create your own stock portfolio(s).

      Comment by Nestor | December 17, 2010 | Reply

    • By the way, the Bloomberg portfolio tracker can also track from PHL mutual funds but not FAMI funds.

      Gus, can FAMI consider sending its funds info to Bloomberg? Right now, FAMI sends an email about its current NAVps or posts it on the website. It would be nice to have graphical visualization and integration in the Bloomberg tracker.

      Comment by Nestor | December 17, 2010 | Reply

      • I know that FAMI funds are all in Bloomberg.

        Comment by Gus Cosio | December 18, 2010

      • Wow they do email? FAMI people already know me, coz I always call them at 5pm(mon-fri) asking for latest navps for equity and balance hahahaha..

        Comment by Scared Investor | December 18, 2010

      • @Scare Investor: The latest navps are posted in the FAMI website (http://fami.com.ph). Better yet, you can subscribe to the newsletter so you’ll get the postings in your inbox.

        @Gus: Would you know the Bloomberg ticker symbols of the FAMI funds? I could not find them.

        Comment by Nestor | December 18, 2010

  5. sir Gus,

    I believe in the gus cosio effect but i have only ample cash, can you give us your estimate %upside on each stock so i can choose the top 2 or 3?

    Comment by Bu$h | December 16, 2010 | Reply

  6. Hi Sir,

    I am not worried about DMC and MPI because I really see them performing well in 2011. I am just uneasy holding on to AGi and JGS right now because of some news that new shares will be sold? Is this a cause for concern?

    Comment by James | December 16, 2010 | Reply

    • issuing new shares is always a cause for concern since, not all investors are willing to invest their additional money hence they are force to sell their existing ones and raise some money to pay of the rights di ba?

      Comment by mike | December 16, 2010 | Reply

      • AGI do not have SRO nor will it issue NEW shares by any other means. what it is selling would be they treasury shares.

        and yes, it is a cause of concern depending on how much supply would increase and how much outstanding shares would be diluted.

        Comment by oliver mia | December 16, 2010

      • @Alex,

        Now its clear why foreigners are still net buyers despite the down trend.

        Comment by Raymond | December 17, 2010

    • Seems technicals is the current theme of Phisix…

      Yes, JGS is about to sell existing shares (2B?) owned by the Gokongwei’s but the board will also issue new one equivalent to the number of shares to be released. I dont know if this will result to dilution and perhaphs sir Gus will post his opinion in the future.

      What makes me think twice to consider JGS as weak stock is the foreign accumulation (net buying). From Sept 2010 till yesterday, foreigners have accumulated close to Php 1B at an average of 19.50 (today’s closing price is 19.98)…classic move of accumulation? (I hope it is…)

      If I extend the data all the way to Mar 2010, the number of shares & amount are quite significant 🙂

      Comment by Raymond | December 16, 2010 | Reply

      • Hi,

        I think the value turn over of JGS going down is very low.People seems to be shorting it, selling and trying to buy back at lower
        price.

        Selling more shares while causing dilution is good because it means management is confident of making profit out of it.Remember that this shares will be paid in cash and the same no. of shares to be reissued to the Gokongwei’s will be priced at the same amount.

        I think people seems to be confused here.

        Thanks

        Comment by alex | December 17, 2010

  7. Gold @ 1375 from 1421…If China raises rates next month i think Gold will go down to 1250…Im expecting a Panic selling or a Profit taking in Gold if China raises rates next month…

    Comment by Tony | December 16, 2010 | Reply

  8. Regarding Ben Graham

    – I think if you take anything from his writings, the only thing you really need to follow is the concept of “margin of safety”.. this is usually indicated by a low pe(but not always). The industry average pe, and the nature/prospect of the business needs to be considered too.

    Its practical application for me is to always asks the question “how much can I lose in this”? before buying a stock. Most would ask how much they will earn first,I think.

    Kelangan sadsad or as close to sadsad.. otherwise, just wait. Its better to lose opportunity than to lose real money.

    Minsan lang nadadala ako ng emotion so I buy when I shouldn’t 😦


    Anyway – My guess is MBT might be nearing a compelling price point. It might already be here now. If the 20 high-priority PPP pushes through, MBT would have no problem participating on all of them in a meaningful way.

    Comment by jasper | December 16, 2010 | Reply

  9. Hi Sir Gus.

    Ron Nathan writes..

    “The Philippines has been Asia’s top performer this year and I believe that fund managers are realizing their book profits in order to earn enormous bonuses. If so, they might buy back the same stocks in the New Year. ”

    Any comment on the bonus part?

    Thanks

    Comment by oliver mia | December 16, 2010 | Reply

  10. Hi Sir Gus,

    Will you please elaborate more on what you said that your portfolio has been wiped out? What happen back then? I’m still a newbie and I don’t want to pay that kind of tuition fee in the market as much as possible. Will you be kind enough to share what went wrong during those times? Salamat po sir Gus!

    Comment by Jen | December 16, 2010 | Reply

    • Jen,
      This was the period leading to the Erap impeachment of 2000. There was massive capital flight which I do not see in the near or intermediate future. At that time, that country had very low dollar reserves in relation to its dollar requirements – its import bill. Today, our reserves stand at $60billion and the country’s foreign currency cash flow is running a monthly surplus.
      I have always found it useful to follow the money whether it is a company or the country because it is when the cash runs dry that we get into trouble. Same thing with personal portfolios. There should always be some cash or near cash positions. When you stretch it, i.e. go fully invested or leverage up, that is when you could really get wiped out.

      Comment by Gus Cosio | December 18, 2010 | Reply

  11. if i want to position myself for the long term, maybe 5-10 years down the line, what stocks should i pick that will give the best return for my retirement? it’s not easy to pay to tuition often. what if i just want to sleep for a loong time (assuming that i’d still wake up), which ones would make me wake up happy?

    Comment by weena | December 17, 2010 | Reply

  12. Some rough numbers.

    JGS
    Current
    – Net 3Q 2010 – 12.77B, (+113%)
    – BVPS – 14.08
    – EPS 9mon = 1.88
    – EPS Annualized = 2.5
    – PEx = 20/2.5 = 8x
    – P/B = 1.4x
    – PE x PB = 11.2x >>> Ohhhhh… <<>> I think its still cheap <<>> think <<<

    So:
    Well, I think anyone of the two would be nice depending on personal preference. But perhaps JGS would be slightly cheaper.

    Comment by jasper | December 17, 2010 | Reply

    • err.. what happened to my post. Looks like something chewed on it. But well, here is whats missing

      JGS (After +2B additional shares)
      – EPS = 1.9
      – PEx = 20/1.9 = 10.5 :Still cheap:

      MBT
      – EPS 9mon = 2.95
      – EPS Annualized = 3.9
      – PEx = 62/3.9 = 15.8 :think:

      Comment by jasper | December 17, 2010 | Reply

      • Jasper,

        Its good the Gokongwei’s are not trading in and out of JGS, sometimes the turn over going down is just few months salary of its CEO.Otherwise they can buy at P19 and sell it later on at say 25 to a foreign offering???

        My fellow small investors, try to see the bigger picture, dont be skewed by mechanical things in the stock.

        thanks

        Comment by alex | December 17, 2010

    • kaya lang, i think jgs wasnt able to earn last 2008 right?

      Comment by cliffhanger | December 18, 2010 | Reply

  13. someone just sold CEB at 82. ano yun, nagkamali?

    Comment by sdrobob | December 17, 2010 | Reply

    • CEB 110 to 82??

      Comment by Ria | December 17, 2010 | Reply

      • swerte nakabili.. haha

        Comment by Ria | December 17, 2010

      • He may have a market order and the next bidder in line was 82.

        Anyways, I entered at a comfortable level of 101.5 for the long-term.

        CEB went downs due to the news of competition.

        Comment by alexis | December 17, 2010

    • loko yun ah. dami ko pa namang CEB

      Comment by Nik | December 18, 2010 | Reply

    • it was a great error by the broker. Substantial loss for them.

      Comment by Gus Cosio | December 18, 2010 | Reply

  14. Hi Gus and Everyone,

    What are your thoughts about CEB? Right now i’m having palpitations with its price. I really don’t know if i should let it go now or later or maybe next year. It is a huge discomfort for me to be honest. 😦

    Comment by Pedro | December 17, 2010 | Reply

  15. Ria
    I think si 252 nagmadali magbenta posted a lower price not considering the bid volume side kaya na hit nya price from 109 to 82.

    Comment by jaayem | December 17, 2010 | Reply

    • baka nga or baka same na nangyari sa akin dati. posting a lower price and thinking that it was a sort of the stop loss. yun pala, mapipick-up pala kaagad, hehehe

      Comment by sdrobob | December 17, 2010 | Reply

    • but this doesn’t make sense really.. so someone sold this clearly at a loss.. BIG TIME LOSS!that’s around 35% down from IPO price presuming that person took it at IPO price!

      Comment by mon | December 17, 2010 | Reply

  16. JGS really hurts 😦

    Comment by Migo | December 17, 2010 | Reply

  17. Grabe JGS is eating up all my profits for the year.

    Comment by Cholo | December 17, 2010 | Reply

    • actually sa akin, Gokongwei stocks are making me bleed. Need to find more cash for possible averaging down.

      Comment by sdrobob | December 17, 2010 | Reply

      • with gokongwei stocks you should be ready for the long haul……….if not he will eat you alive………..maybe he has sold at 24 and waiting to buy at 12…..he is that shrewd

        Comment by mike | December 19, 2010

    • if jgs will do as what mpi has done a year ago to raise fresh capital without considering its present small investor like most of us(i mean raising capital not by sro). it is most likely will have the same fate as mpi. mpi prior to increase of float is trading on high of 6 but a year thereafter still trading at 3++. i think i dont want it to happen again on my portfolio. this is my tuition fee last year. i failed to read the words on the wall.

      Comment by richard | December 17, 2010 | Reply

      • can you elaborate on this? fyi: I’m strongly considering buying JGS next week..

        anything I need to worry about? Is dilution that big of a factor?

        Comment by jasper | December 17, 2010

  18. Sir Gus, any info on PWR?
    Is it true AP will buy PWR?
    So what’s the impact on the stock?

    Comment by ray | December 17, 2010 | Reply

    • Ray,
      I think it may be FDC that is buying PWR but I do not know it for a fact.

      Comment by Gus Cosio | December 20, 2010 | Reply

  19. jasper,

    long before you likened mpi i was one among those who see its good potentials simply because of its infrastracture based business. last year i think it is one of the outperformer from 2 it rises to 7 if my memory is stil right. but when it undergoes equity raising campaign tru selling additional shares by its parent company the problem arises for us small holder. our shares devalued to 3 w/o even giving us proportionate option to subscribed for new shares.

    actually there is no dilution but the share price adjusted lower than what mvp values it.
    it goes down to 2.20 early this year from the offer price of 3. so for those who opted to hold this share from offer price they only have gained more than 10% to date but for those holder prior to offer price its a great paper loss.

    my point is if jgs will do the scheme as mpi there is a big tendency that it may follow its fate. look at now mpi is earning good and its liabilities were substancially reduced and it continued its expansion mode but its share never rises to its relative value no matter what mvp say about its success and longterm plan. perhaps there are lot of investor who feel the way i feel it.

    i believe mpi is a good company but it will take some time before it fly simply because old and small investor were not equally treated. i hope jgs will have a different approach in capital raising than mpi.

    Comment by richard | December 17, 2010 | Reply

    • I hope that would be the case for JGS. That’s why I sold my shares @ 23.2 previously. I will be waiting for more developments on JGS before I see a clear pattern before entering again. But I personally am looking at 17 or lower to get in. As Sir Gus mentioned JGS is a great conglomerate with great fundamentals which cant easily be changed. Advance Merry Christmas and a Happy New Year to you all and Sir Gus. More Power!!

      Comment by Foreign Investor | December 17, 2010 | Reply

      • Sorry, I meant I hope that wouldn’t be the case for JGS since it would be heavy for the current shareholders.

        Comment by Foreign Investor | December 17, 2010

      • ram,

        we did the same but i plan to enter it again after the offer period to observe how the market accept it.jgs is one who deliver me this year a good profit and one of my inner core but for the meantime we were cool-off.

        advance merry christmas and a profitable 2011.(long time i havent seen your comment on this blog)

        Comment by richard | December 17, 2010

      • Thanks Richard,
        I also did enter JGS again at 22.5 a few days back but sold it off immediately at 20. Since I felt that the picture wasn’t so rosy for the moment and I don’t want to fight over market sentiment. Yes I wasn’t able to post in the blog after I met Sir Gus 🙂 I was a little bit busy In analyzing my transactions and the market itself. But I still regularly read the blog

        Regards,
        Rav

        Comment by Foreign Investor | December 17, 2010

      • I bought a very few number(I mean really few) of shares since I just wanted to test the waves before I added up eventually I didn’t have to add rather sold it.

        Comment by Foreign Investor | December 17, 2010

    • err.. i still don’t get what actually happened. Is it something like this?
      1. MPI was priced at 7.
      2. It introduced new shares? Additional shares?
      3. Then since total share count was diluted, the stock price tanked to 2?

      Is this also the pattern that JGS is pursuing? what do you think?

      Comment by jasper | December 17, 2010 | Reply

      • jasper,

        mpi is the local holding company of hongkong based conglomerate first pacific. during the height of global crisis mvp is in a buying spree of tol, meralco, maynilad, hospitals and many others. to finance this ambition he turn into selling i think more than 20% of mpi share being held by the parent company.

        this secondary offering has no dilution effect for it came from the outstanding shares held by the parent company. dilution usually happen when the shares being offered came from the treasury share or from the authorized capital stock that is not subscribed and paid yet.

        the secondary offering price is 3/share. but prior to this mpi is trading between 6 and 7. so the price difference is what i call devaluation. we the old holder were not given a protection by a way of sro tantamount to say our concern were neglected.

        from that time on mpi price never reverted back to its high of 6 or 7. its more than a year now and mpi is still below its fair value. that is the reason why mpi is one of the cheapest holding company in the index. many are scared of..a hard lesson i learned.

        Comment by richard | December 18, 2010

      • Thats… interesting. hmmm..

        Comment by jasper | December 18, 2010

      • thats possible……….after the capital raising, then same old story like cebu……..price good for one week…..then bahala na kayo sa buhay niyo

        Comment by mike | December 18, 2010

  20. hi sir gus,
    do you still have your dgtl?

    Comment by newbie | December 17, 2010 | Reply

    • Yes I do. Actually, it is back in my buying level again.

      Comment by Gus Cosio | December 20, 2010 | Reply

  21. Start Buying when VIX(fear index) goes up near 30…

    Comment by Tony | December 17, 2010 | Reply

  22. Congratulations Sir Gus on your 45% year to date performance. That is very admirable. Would you attribute this more on your fundamental analysis skills or to your technical analysis skills or both?

    Comment by Nel | December 18, 2010 | Reply

  23. Is everybody in? Let the PAIN begin……Fav. Quote of Joseph P.Kennedy Sr….. the Greatest Manipulator of All time….

    Comment by Tony | December 18, 2010 | Reply

  24. I can only buy one stock and I’m considering this three, in no particular order
    1. MBT, 2.JGS, 3.NIKL

    MBT – Unlike something like VLL, who even if they raised 10B would need to buy some land and develop it.. MBT is a bank so, it can just flip that 10B to someone else and immediately earn interest.

    JGS – The pe is very low for a conglomerate of this size. also you get instant diversification. Flush from cash with the CEB ipo. DGTL is earning and should contribute going forward, to the bottom-line.

    NIKL – Just made a disclosure that they earned 1.34B (+464%) for the first 9 months of the year. Thats pretty hard to ignore. Its a very compelling argument particularly since the pe is not really not that high compared with the other mining stocks, i.e. PX is trading at 20x, etc.

    Comment by jasper | December 19, 2010 | Reply

    • If I had more money I would probably buy all three since one really doesn’t know who among them will behave positively. i mean, I think all three are good.. but perhaps the market might not share the same sentiments.. right now, i’m leaning towards nikl.. but I have always wanted MBT so.. yeah, i have a decision to make..

      Comment by jasper | December 19, 2010 | Reply

      • MBT availment for SRO date is nearing. And for the current holders to see the advantage of availing @50, the price should surge back to its rightful place (maybe mid 70s), as the SRO price was bannered to be a 35% discount of the market. MBT is a screaming BUY in my book. Would you agree sir Gus?

        Comment by Jojo | December 19, 2010

  25. Sir Gus,

    B/n MBT & SECB at their current prices, which one is the better to buy. I entered MBT lately at less than 62 while SECB is now at 85. I planned to enter SECB Monday. Their RSIs are at their lowest which suggest that they are both oversold.

    Comment by Ralph | December 19, 2010 | Reply

  26. Another one. CEB at its current price of 106 is trading at 9.5x PE(2010 annualized). It has a net earning of 5B.. The stock is beaten down. :scratch head:

    Reminds me of when I bought EDC at 4.4. EDC was beaten down too without, to me at least, any particularly strong reason..

    Although, I think its a validation of my basic strategy to avoid IPO’s.

    Ok, so now its, in order 1. MBT 2. JGS 3. CEB 4. NIKL

    Lets see tomorrow. Hope I get a good price.

    Comment by jasper | December 19, 2010 | Reply

    • MBT is at a +4.28% rise. And its still 10:15am. meh.. :sadpanda:

      Comment by jasper | December 20, 2010 | Reply

  27. Forget Goks stock i think JGS could go down to 15/sh or even 10/sh by next year…Buy TEL or Petron….

    Comment by Tony | December 19, 2010 | Reply


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