Gus Cosio says so

Ideas on the Philippine Stock Market

Young and foolish

9:15 am   Tuesday  28 December 2010

Today is traditionally the day of the “innocents” in the Philippines.  It is the counterpart of the West’s April Fool’s Day.  Well, it is no day to be a fool in the market.  An old English saying goes “A fool and his money are soon parted.”  A fool doesn’t invest his or her money wisely, that is why he loses it quickly.  Making impulse decisions and buying stocks on pure instinct is a fool-proof way of getting into portfolio trouble.  If one is to make a move today, make sure that your objective is clearly defined.  Do not buy a stock simply because you are afraid the market will leave you behind.  Nor should one panic because a share price is down.

I was doing a bit of reading over the long weekend.  One idea that struck me from  a book entitled Rule Makers and Rule Breakers is that if a stock goes down 40%, you should  start to question your investment.  Of course, the author was writing about long-term investing.  In our market, I think the threshold ought to be much shallower.  I would consider a 20% deterioration from an average price in a prescribed period should be a cause for serious re-evaluation if not a loss cutting exercise.  There are various norms for capital preservation by traders and investors.  For traders, a shallower cut-loss level is more useful.  I know a few whose level is 15% from entry which is a good way of swallowing your mistake as a trader.  A trader normally buys on momentum, so a 15% move to the opposite direction is a definite sign that momentum has waned.

For the investor who buys on value, I think 15% from entry is too soon to cut.  For the value investor, I usually recommend not to put all the cash into a stock at one single ticket or price.  I would put in an initial 30% of the allocation  and watch how the investment goes.  That way if the stock goes down, there is cash left to average down.  If the price moves up, buying again would put your average cost still below the market.  It is at the second entry point that I would evaluate my 20% or 30% cut loss possibility.

Anyway, today’s trading will likely be overshadowed by the interest rate story from China who raised rates during the holidays.  This was no Christmas present to the Shanghai Stock Exchange, but it did not seem to be too negative for the major developed markets.  Nevertheless. if the market dips today, it should be a good opportunity to accumulate.  Among the stocks that I would buy on dips would be the major banks – MBT and BPI – because I think consumer spending in the Philippines will further gather momentum in 2011.  Having said that, I would push the money envelope into SM and SMPH as well, not to mention URC and possibly the long shot – RFM.

Those are just a few ideas today.  I must mention also that mining remains to be a good theme since in the major markets, materials have picked up steam.  My shortlist for mining are NIKL, ORE, PX and AT.  While I see a bit of activity in LC/LCB, I am not brave enough to move in that direction.

Happy hunting.

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December 28, 2010 - Posted by | Financial markets in Asia

130 Comments »

  1. Hi gus, happy holidays..

    Perhaps we should be better off not making any moves for the moment and wait for things to settle down. Its just a few more days anyways.

    Comment by jasper | December 28, 2010 | Reply

  2. hi sir gus!

    i hope i can still contribute to your community 🙂

    i stumbled upon this article about why warren buffett is against investing gold..i think its a good read for those who are heavily invested in the mining sector 🙂

    http://articles.moneycentral.msn.com/Investing/MutualFunds/what-has-buffett-got-against-gold.aspx

    Comment by cliffhanger | December 28, 2010 | Reply

    • This is largely relative to Buffet’s bias and perception which is in line to his current holdings. What makes sense to him does not necessarily mean to be the same to others. Anyway, intelligent speculation should be the main principle when investing on commodities and mining stocks. Just my opinion.

      Comment by Seth | December 28, 2010 | Reply

    • he does make some sense though when he said that gold isnt as productive compared to other commodities where you can make real use of it, like food and other commonly used metals..gold just sits there..

      Comment by cliffhanger | December 28, 2010 | Reply

      • Nobody can ever predict the future, and even warren buffet. The words given by Buffet was 1n 1998, but look at the price of gold now. Is this what Buffet is telling? The current price doesn’t validate Buffet claim.

        Mining is not only about gold, there are nickel, ore etc.

        Comment by claire | December 29, 2010

      • hi claire,

        i dont think buffett was trying to predict the future..he was just pointing out how investing in gold is unproductive business wise 🙂

        Comment by cliffhanger | December 29, 2010

      • I have to disagree. Gold has been used in every conceivable way in every spacecraft NASA has launched due to it’s excellent and unique material properties. Every electronic device today contains small amounts of gold. Although the industrial applications for gold only accounts to around 15% of consumption, that demand is very likely to grow as our society requires more sophisticated and reliable devices.

        Comment by Seth | December 29, 2010

    • Buffett has a point, though it has its uses, the price of gold is not exactly in proportion to its utility (but diamonds are worse in this respect). Because of this, high returns or not, he doesn’t want to have anything to do with it. That’s his choice. Much the same way as some people don’t want to invest in “evil” companies, e.g. armaments or cigarette companies.

      Comment by Jay | December 29, 2010 | Reply

    • Buffett’s exact statement on gold is this . . . “(Gold) gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.”

      I disagree with you all. I think what Buffett is saying is that he believes in aliens and that we should too hehehe 🙂

      Comment by D' Intelligent investor | December 30, 2010 | Reply

      • LOL! that was funny bro D’ Intelligent investor!

        Comment by RmR | December 30, 2010

  3. AP has gone down significantly, any significant factor behind the drop?

    Comment by Mal | December 28, 2010 | Reply

    • Significant profit taking from foreign funds.

      Comment by Seth | December 28, 2010 | Reply

      • Thanks, Seth.

        Comment by Mal | December 28, 2010

      • Net foreign selling for the past 14 trading days but it’s RSI suggest that it’s now oversold. I think it will reverse shortly.

        Comment by Ralph | December 28, 2010

    • Mal,
      I hear that a foreign broker has downgraded AP from buy to hold. Also, I think the stock has to go through a major consolidation sometime. I see the stock retreating to 26 or so. I reckon anything below 26 should be a good buy.

      Comment by Gus Cosio | December 29, 2010 | Reply

      • Thanks, Gus.

        Comment by Mal | December 29, 2010

      • Sir Gus,

        I am fully loaded with AP (30%) of my meduim size portfolio at 31+ and if it goes down further I’m thinking of loading more. Do you think this is a prudent strategy or better take some cut-loss?

        Comment by Ralph | December 29, 2010

      • Ralph,
        I am of the opinion that AP will remain strong in 2011. Remember, analysts are all looking at 2012 when the excess capacity would have been reached meaning that there will be little reserve in the system. When that happens, spot electricity prices will have to go up causing increases in marginal profits for low cost producers like AP. The same can be said of EDC.

        Comment by Gus Cosio | December 30, 2010

    • Ah rumors. Don’t mind the rumors or try to find reasons on why a stock has dropped or why it has gone up etc.

      Each investor should make his or her own independent judgment of each stock that they buy base on the fundamentals. This I believe is the best way to determine your buy and sell decisions.

      Merry Christmas and a Happy New year to all !

      Comment by D' Intelligent investor | December 30, 2010 | Reply

      • But couldn’t it be possible that fundamentals of the company changed causing the price drop/rise? Shouldn’t you try to figure it out?

        Comment by Forte | December 30, 2010

  4. Another year is about to start and I am seriously considering my portfolio for the coming year. I want to invest for the long term this time and would like to ask for advice on which stocks would be the best bets for long term investment, say 3 to 5 years down the road?

    Comment by Weena | December 28, 2010 | Reply

    • maybe you could consider my picks too, free for download at my site

      Comment by cliffhanger | December 28, 2010 | Reply

      • cliff, I saw your portfolio – FLI, MEG, and UBP and is baffled by it. I know you’re reading ‘the intelligent investor’ and I can’t seem to understand whether you’re a defensive investor or an enterprising one.

        What I mean to say is that a purely defensive investor wouldn’t really pick FLI or MEG since one of the requirement is an uninterrupted decades-long record of dividend payments. I would have expected something like CEU or COAT really if you were aiming for that type of investment strategy.

        And yet, if you are an enterprising investor, you seem to be surprised why gus would like DGTL or even ORE.

        I suggest you read some more about value investing. Google Walter schloss and his interviews. He was Grahams student too and one who worked alongside Warren. Perhaps the Additional knowledge would help.

        Comment by jasper | December 28, 2010

      • napansin ko lang, bakit post ni bro cliffhanger may thumbs down? may kaaway ka ba bro rito?

        Comment by RmR | December 28, 2010

      • hi jasper!

        here are the numbers for the following 🙂

        FLI

        debt/eq = 0.5 (very very good)
        price/bv = 0.80 (very very good)
        price/earnings = 14 (just ok)
        net profit margins around 50% for the past 3 years (best in the industry)

        MEG

        debt/eq = 0.69 (good)
        price/bv = 1.09 (just ok)
        price/earnings = 14 (just ok)
        Net profit Margins around 25% (good enough)

        UBP

        debt/eq = 6.34 (best in the industry)
        price/bv = 1.13 (just ok)
        price/earnings = 12 (just ok)
        net profit margins around 25% (good enough)

        these 3 stocks are liquid enough too, FLI and MEG are part of the index..

        COAT and CEU are ok but i dont think they are liquid enough for my standards..

        i would say that im more of a defensive investor jas because to me, one can only afford to be an enterprising investor if you pass at least one of these 3 conditions:

        1. if you have the capital to buy out majority shares of the corporation you are after

        2. if you have time for the stock market everyday and every minute of every day

        3. if you have some insider information

        i dont pretend to have any of the 3 hehe

        to me jas, if you look at the numbers, DGTL and ORE are very speculative. its ok to speculate, but i dont think one should put more than 10% of your portfolio on speculation, unless you have some insider information.

        but i will look up walter schloss jas, thanks for the suggestion 🙂

        good luck on your investments 🙂

        Comment by cliffhanger | December 29, 2010

      • and by the way jas, i hope you are open to downloading my stock picks too on my site..id appreciate your comments on my research, thanks! 🙂

        Comment by cliffhanger | December 29, 2010

      • Cliff, one of the rule for defensive investing is that the company should have a history of dividend payments spanning 20 years. FLI and MEG will not pass that.

        Also, at the volume were dealing with, liquidity would be the least of our problems. If we are doing multi-million transactions that could be a problem but if its below 50k, we won’t have no problem buying and selling. I know that I managed to buy and sell COAT and CEU whenever I wanted.

        And thats another point.. why are you concerned about liquidity? Its not really a concern as I understand it from a value investor pov.

        But well, goodluck. Lets just hope you’re strategy will give you a good return.

        Comment by jasper | December 29, 2010

      • hi again jas!

        while i agree that graham emphasized dividend payments as part of his acid test, i dont think that its a necessary one. companies today have other alternatives to the taxable dividend. they can buy back shares, issue warrants etc… so dividend really isnt the only test out there.

        just like liquidity isnt the only test out there too. but i’m more comfortable with investing with high capitalized companies rather than the lower ones. thats just me being a defensive investor.

        i believe that the bigger picture with ben graham’s teaching isnt really to teach someone what is right or wrong, but to teach someone what to look for in a company. because sometimes even an undervalued company can stay undervalued for as long as the market doesnt realize it.

        i think the bigger picture with ben graham’s is for us to know the numbers, and see for yourself what your comfort zone is based on those numbers. it doesnt mean that one is wrong when he/she invested in a company with a p/e ratio of 40, because even with that, it’s stock price still has a chance to go up. but it gets dangerous for that person if he invested in that company without knowing that its p/e ratio is already at 40.

        a good example is the article above where buffett mentioned he’s not comfortable investing in gold. he didnt say that its wrong to invest in gold, he just said he’s not comfortable based on his respective reasons.

        like i am comfortable too with investing MEG and FLI even though they havent passed the dividend test. because all the other numbers look good for both 🙂

        but you may be right on our cases of liquidity jas when considering that the capital is below 30k. i think you are more experienced than i am. i will try to look up your suggestion 🙂

        Comment by cliffhanger | December 30, 2010

    • I invested in JFC last 2007 at P52.50. At it’s price today it already gave me almost 60% without even adding the 3% to 4% annual dividend that it gives out. That’s a 20% gain annually.

      Comment by Lyndon | December 28, 2010 | Reply

      • 20% per annum is not really good, especially with the bull market we’re having

        Comment by Forte | December 28, 2010

      • That’s already great if you’re a busy career man. Congrats!

        Comment by Aldrien | December 29, 2010

      • If 20% is not great, then i’m downright miserable. I only have about 10% profit all in all factoring my losses with GLO.

        Although, I only just started last Jan. This year was supposed to be my “tuition fee”-year so, I guess its still a little bit good. At least I didn’t have loses right.

        Comment by jasper | December 29, 2010

      • 60% in 3 years isn’t 20% annually. It’s actually 16.96% compounded annually.

        Comment by Jun | December 29, 2010

      • I just answered someone’s query about what stock to buy for long term. And JFC made me a 20% per annum if you are to divide it by 3 (since 2007). But in reality all the 60% was gained this year (because of the bull run). So I guess 60% is good for you Forte?

        Comment by Lyndon | December 29, 2010

      • Yes 60% per annum is good, if the entry was this year it would have been an excellent move. But since it was done way back in 2007, its really not

        Comment by Forte | December 29, 2010

      • Considering that you bought in 2007, you actually outperformed the index since PSEi grew only 40% from 3000 to 4200. Not a lot of people can do that.

        Comment by Jun | December 29, 2010

      • Hey Forte, what your average gain annually for it to be a good year? I’m thinking 25%-50%.

        Comment by Don | December 29, 2010

      • Considering the size of JFC, I’d say 60% is pretty good. Peter lynch said if an old stalwart gives you 30%, you should be happy.

        And I suggest not to compare your holdings to another. The time, information, etc. available is different for each one of us. This ain’t no pissing contest.

        Basta ako masaya di ako nagloss this year. Kahit konti lang kinita. Basta ang mahalaga mayroon kahit paano.

        Comment by jasper | December 29, 2010

      • @Don
        On average, 35% return is what I go for but in a year like this, for me personally 50% should be the bare minimum. Anything below that would be underperforming.

        @Jun
        You should always outperform the index. If you cant, it would be better to invest in utifs or funds that track the index instead

        Comment by Forte | December 29, 2010

      • Forte: Wow,it sounds like your been trading for a long time. I just started to it to trade only last May of this year. Would like to hear more from you if you do have a blog or forum that could learn from your trading techniques.

        Comment by Don | December 30, 2010

    • Weena,
      For long term core holdings, I would recommend you choose from among the following: EDC,MPI,DMC,NIKL,URC,VLL, AEV,MBT,BPI,SM,SMDC. I think these are all fundamentally sound. You should not, however, ignore your portfolio because there will be downgrades from time to time as some fundamentals could alter the course of the market and the particular stock.

      Comment by Gus Cosio | December 29, 2010 | Reply

      • Hi sir gus

        Thank you very much for the advice. It is much appreciated.

        Comment by Weena | December 29, 2010

    • Most blue chips are good long term holdings.
      (Take note I said most not all)

      Look for a durable competitive advantage, strong balance sheet and earnings and above all good management.

      You do this and the company you are investing will do wonders for your portfolio 🙂 Happy investing !

      Comment by D' Intelligent investor | December 30, 2010 | Reply

  5. hi sir gus, would it be good if i hold my URC for about 3 to 6 months? thank you and God bless…

    Comment by al | December 28, 2010 | Reply

    • Al,
      I think URC is just consolidating. It is a good hold for 6 months, I think.

      Comment by Gus Cosio | December 29, 2010 | Reply

  6. My suggestion are infrastucture stocks like MPI, AEV, & DMC.

    Comment by jopard | December 28, 2010 | Reply

    • For a long-term hold, try to imagine what the company would look like in 10 years. Like for MPI, I think if everything goes well.. in 10 years, we’ll all be paying for one of its services one way or another.

      Comment by jasper | December 28, 2010 | Reply

      • Thanks guys for the suggestions. I’ll be thinking it over very carefully over the next remaining days of the year. May it be a fruitful 2011 for all of us!!!

        Comment by Weena | December 28, 2010

      • thank you for your inputs sir jopard and sir jasper. I will also consider MPI, AEV and DMC in my little portfolio 😀 God bless…

        Comment by al | December 28, 2010

  7. Sir Gus,
    What do you think about FGEN and ANI??

    Comment by Allen | December 28, 2010 | Reply

    • Allen,
      FGEN should be okay, but if you’re open to my suggestion, I’s go for EDC which is what drives FGEN’s earnings. As to ANI, I am allergic to listing by way of introduction which is how ANI got listed. There were very few shares brought to market making it very easy to squeeze.

      Comment by Gus Cosio | December 28, 2010 | Reply

  8. i have a personal blog that is looking for more hits. please visit my blog.

    thanks sir Gus, i’m considering buying SM or JFC for my wife. I suggested to her to invest it in stocks than keep in the bank… konti lang naman

    Comment by RmR | December 28, 2010 | Reply

    • dineretso ko na lang na paki-visit blog ko guys. anyways, we help GK projects… kaya more viewers ng blog, hopefully more earnings ng blog para more to share. advance Happy New Year!

      Comment by RmR | December 28, 2010 | Reply

      • ngek! ako naman nilagyan ng thumbs down. i wonder kung sino un… peace po…
        i always see to it na nababasa ko mga insights and advices ni sir Gus.
        idinagdag ko lang na mas marami hits sa blog ko, mas maganda sa blogger.

        Comment by RmR | December 28, 2010

      • Siguro ng makita nila yung site mo na puro pula ang portfolio mo eh di sila bumilib. You already have a twenty percent (-20%) loss. Are you a trader or investor? If you are a trader then dapat nag stop loss ka na.

        Comment by Don | December 29, 2010

      • i’m not a trader bro Don. and i don’t suggest to buy this or that in my blog. my aim is to let others know that anyone can invest in stocks. 20% loss na ba un? my stocks are fundamentally sound stocks and no need for me to cut loss, dahil sabi mo nga IF trader ako which i am not eh dapat nag-cut loss na ako. maliit lang paper loss ko for each stock na namumula di ba? kaya ko mapababa yun once there is a correction. newbie lang po…

        Comment by RmR | December 29, 2010

      • i’m not a trader bro Don. and i don’t suggest to buy this or that in my blog. my aim is to let others know that anyone can invest in stocks. 20% loss na ba un? my stocks are fundamentally sound stocks and no need for me to cut loss, dahil sabi mo nga IF trader ako which i am not eh dapat nag-cut loss na ako. maliit lang paper loss ko for each stock na namumula di ba? kaya ko mapababa yun once there is a correction. newbie lang po… your comment/suggestion is highly appreciated po. thanks bro

        Comment by RmR | December 29, 2010

      • Ok bro RmR, I do both technical and fundamental trading. Sa technical medyo bago pa lang. 7 months ko pa lang try at medyo ok din at may 25% gain na agad ako. Hopefully for the next 5 months eh maging 50%. Good luck!

        FYI: I also do GK work…keep it up!

        Comment by Don | December 30, 2010

      • RmR: For me promoting your blog is ok. But a lot of people don’t like that kind of approach kaya siguro you got a lot of thumbs down sign. Minus factor ito sa karamihan and if you keep on doing this especially in forums, you get lots of enemies. So para hindi ka guguluhin, don’t do it. 🙂 Just a friendly advice. Work on your content and SEO instead.

        Anyway, visited your blog. Happy holidays!

        Comment by D' Intelligent investor | December 30, 2010

      • i was just kidding when I did that bro D’ Intelligent investor. Nevertheless, i don’t expect that some will appreciate my aim of promoting investing their free cash in the stock market here in Sir Gus’ blog because all of us here are into stocks already.
        i did not force anyone to visit my blog and neither did i promise anything for those who will view it, right bro? and did i added the word “PLEASE” also?
        And to those who visited my blog, thank you. The earnings will go to the needy, promise! Happy New Year!

        Comment by RmR | December 30, 2010

  9. How about ALI? It’s out of the spotlight from quite sometime now.

    Comment by Jonathan | December 28, 2010 | Reply

    • got some ALI. naku, super taas pa AEP ko nun. sayang nung bumaba sya sa 16 below eh wala ako cash… long term ko ‘tong ALI.

      Comment by RmR | December 28, 2010 | Reply

      • Too bad I wasn’t able to average down when it was still trading 15.80-16.xx. My AEP’s not too far from yours and like you, I’m hoping for something big to happen in ALI. Any news on the REIT listing?

        Comment by Jonathan | December 28, 2010

      • Thats the risk with buying companies with high PE ratio. Particularly with mature companies like ALI.

        What I mean to say is – Some investors are attracted to growth, but what are the chances of something like ALI doubling in value? It could grow slowly, sure. But if you bought it at 30x pe.. then that future growth is already factored in at its current price. Upside might be limited in that situation.

        Comment by jasper | December 28, 2010

      • noted bro jasper. thanks for sharing…

        Comment by RmR | December 28, 2010

      • Na postpone ang REIT. Di pumayag grupo ni PNOY at wala daw kikitain ang gobyerno. They did not even thought that it would create additional jobs for Juan dela Cruz.

        Comment by Lyndon | December 28, 2010

  10. H Sir Gus, wat do you think about LND? It has been going up recently since they announced that AGI bought it.Thanks!

    Comment by Cholo | December 28, 2010 | Reply

    • Buying LND could already be too late as the news is already out.

      Comment by Seth | December 28, 2010 | Reply

      • Cholo,
        I wouldn’t chase LND at this time. Why don’t you consider the buyer-AGI-instead. I think AGI will surge in 2011.

        Comment by Gus Cosio | December 29, 2010

  11. Sir at what price is it good to buy AEV?

    Comment by Jude | December 29, 2010 | Reply

  12. Jude,
    AEV has good support at 36.00 and if the level holds, I think it is a good buy. You’ll have to watch AP also because AEV will be soft for as long as AP is in selling pressure.

    Comment by Gus Cosio | December 29, 2010 | Reply

  13. MER is now at my sell-target price range. i.e. anything above 220p. I’ll probably dispose of it next year and buy some other. Maybe ORE. They have a post in the inquirer yesterday. It seems they are going to turn a small profit for the year and that first shipment is at JAN.

    Imagine the upwards pressure when that shipment comes.. hehe.. I bet people will go gaga with it.

    Anyway – MER is the best short-term move I’ve ever made. :apir: – Although, admittedly this is the first short-term move that I am gonna make. 🙂

    Comment by jasper | December 29, 2010 | Reply

    • hi Jasper! pareho tayo sa MER. what is you TP for this? TIA

      Comment by RmR | December 29, 2010 | Reply

    • err.. isn’t my TP this?

      > MER is now at my sell-target price range. i.e. anything above 220p.

      But I’m in no rush to sell. I’ll only sell if I see another good deal out there. Maybe if MBT goes down to 61 again. There’s one I missed.. Thats another 20% climber as of today.

      Comment by jasper | December 29, 2010 | Reply

      • Bought MBT last 2 days and sold it today for a 10% gain in just 2 days. Sold my MER also and got a 15% gain in just 9 days. Ganda patapos ng taon.

        Comment by Don | December 30, 2010

  14. Sir Gus,

    Thank you for your very informative blog. I see to it that I read your blog during my free time, usually at night when I do my readings in preparation for the next day’s trading.

    I am new in the stock market, I only started last July. I try to learn from every transaction, from every event so that I’d become a better trader.

    My question Sir Gus is about the effect of SRO’s like that of EG. They offered a 4:1 SRO @ P1 per share.

    Could you please explain to us beginners what the effects are of an SRO like that to the stock’s price?

    It was quite a puzzle to me because prior to the exdate, the price was at P76 but the day after it went down to P24 something.

    I thought it would go to around 1/5 of the original price, or maybe even 1/4 but then it did not.

    Hope you could enlighten us.
    Thanks po in advance and God bless you and your family!

    ricky

    Comment by ricky | December 29, 2010 | Reply

    • The price should have been 16 on the Ex-date (76+4=80/5)but the price appreciates by 50% and today it went up again by over 20%. If you’re currently holding shares of EG, I think it’s prudent for you to sell before the issuance of the SRO shares while the number of tradable shares are small.

      Comment by Ralph | December 29, 2010 | Reply

      • @ Ralph

        Thanks sir Ralph for giving time to give your input about my inquiry.

        Sir Gus,

        My other question is: In the prospectus of EG’s SRO, it was stated that

        “…to all stockholders of record as of January 3, 2011 at an offer rice of…” where the phrase “stockholder as of record of January 3, 2011” was given emphasis in bold letters.

        I know that the exdate was Dec. 28, 2010, but I just want to clarify if one would still be eligible for the SRO if they buy shares dec 28 to dec 30?

        thanks for your time and God bless!

        Comment by ricky | December 29, 2010

      • Ricky,
        On the date of “stockholders of record,” you must already have bought the shares. As a rule, you must count three (3) trading days before the record date which is referred to as the “ex-date.” In the case in point, 3 trading days before January 3, 2011 is December 28 which is the trade date. The stock will come into your account on January 3 which means that as of January 3, you are already a stockholder on record.

        Comment by Gus Cosio | December 30, 2010

    • Ricky,
      The reason why it has not gone down as much is because there are very little shares around. It is a matter of supply at this point, but after the shares of the SRO are out, the story should be different. There will be new price discovery at that point.

      Comment by Gus Cosio | December 30, 2010 | Reply

      • Thanks Sir Gus!

        Comment by ricky | January 1, 2011

  15. Hi Ricky,
    With regards, to EG’s SRO, any shares bought from Ex-date (12/28/10) and onward are not entitled to the SRO.

    Comment by Ralph | December 30, 2010 | Reply

    • thanks sir ralph!

      Comment by ricky | January 1, 2011 | Reply

  16. Will sell everything today expecting BIG correction starting next week Market is overbought right now…..

    Comment by Tony | December 30, 2010 | Reply

  17. rsi 56 isn’t really overbought. Although I do anticipate a correction as well

    Comment by Forte | December 30, 2010 | Reply

  18. for me near 60rsi is overbought..below 25 is oversold..

    Comment by Tony | December 30, 2010 | Reply

  19. Sir any insight to RLC? I am planning to accumulate this stock. Thanks sir…

    Comment by jaayem | December 30, 2010 | Reply

    • Jaayem,
      RLC is a stok that we follow. It has the same components of it it competitors, i.e. ALI and SMDC/SMPH, but is cheaper in terms of Price to Earnings and Price to Book value. It is also seeing good growth prospects. You can visit the company website and click on investors relations. All told, I like the stock.

      Comment by Gus Cosio | December 30, 2010 | Reply

  20. Hi Sir Gus,

    I recently got an email that i am entitled to a Stock Rights offer, based on experience, what will happen to the price of the stock after the offer? Will it go down drastically because of the additional stocks offered at very low prices?

    Thanks in advance 🙂

    Comment by jamezu | December 30, 2010 | Reply

    • Jamezu,
      After SRO’s, stock price normally adjust to the dilution since new shares are issued at lower a lower price. It is a pure arithmetic exercise. After the new shares are issued, a price discovery happens depending on how the outlook for the company develops.

      Comment by Gus Cosio | December 30, 2010 | Reply

      • Thanks Sir Gus!

        Comment by jamezu | December 30, 2010

      • Do you think subscribing to MBT’s SRO an excellent move?

        Thanks and happy new year!

        Comment by Neo | December 30, 2010

  21. Hi Sir Gus,

    Any thought on JGS, just bought today…
    thanks.

    Mikayla

    Comment by mikayla | December 30, 2010 | Reply

    • Mikayla,
      JGS is a much maligned stock because many market veterans have attached a Gokongwei discount to it, i.e. it will trade at a discount to its NAV, have a lower PE and PB than its peers. That, however, does not mean that the stock will not go up with the market. If you get the timing right on JGS, you could make a very good return.

      Comment by Gus Cosio | January 2, 2011 | Reply

  22. Good day sir Gus! Sir what do you think about JGS? Do you think sir that it’s safe to enter at its current price? By the way sir I’ve been hearing a lot about “Bel” Bell corp. My friends told me it could reach as high Php7. Any thoughts about this stock? Thanks and more power!! Belated Merry Christmas and Happy New Year to you and your family sir Gus!!

    Comment by Den | December 30, 2010 | Reply

    • ano nga kaya nangyayari sa JGS.. its dropping like a fly. Before its 25p, then it fell to 20p. I thought the bottom has fallen out but today it just lost 8%.. a very steep drop.

      But apart from the planned dilution, I can’t seem to find any bad news. Income seems to be up, etc.. :curious:

      Comment by jasper | December 30, 2010 | Reply

      • Jasper, I bought some JGS at 19.50. I hope it’s the bottom price. I have been following this stock as well but my core are DM, AGI and MER.

        Happy New Year everyone. Hope 2011 will be a better year for all of us. :))

        Comment by Shan | December 30, 2010

      • My three biggest holdings are MPI, VLL and DMC. But as for my core, I’ll probably say its MPI and CHIB.

        Comment by jasper | December 30, 2010

      • One of my core holdings is VLL. My reasoning behind this choice is that, aside from being so undervalued, this company plans to build several malls by next year. I have heard this from Mr.M.V himself during one of his talks.

        Comment by Seth | December 30, 2010

      • really? several malls? thats the first time I heard of that. I know they are going into vertical development but malls? wow..

        Comment by jasper | December 30, 2010

      • Hi Jasper,
        Like you, I have been very curious cause I’ve been monitoring this stock for a long time and looking at a good entry. Forein investors sold it down with net selling of 205 million. Could they have inside information that the new shares will be issued at much lower price that 20? Hope the real reason will unfold in the next few trading days.

        Comment by Ralph | December 31, 2010

      • I think dilution or not, this could be a good opportunity to buy a piece of a good business. That is, if your the type who doesn’t mind the stock not moving as long as the business is ‘fundamentally good’.

        I’m like that with MPI.. I’m still thinking whether I can be like that too with JGS

        Comment by jasper | December 31, 2010

  23. Hi sir,
    Im starting 2011 with dmc (35%), ap (30%), mpi(30%) and ore (5%). I do not have banks and I feel Im too light with mining. Any suggestiong on other issues that you are following? Any opportunities to manage split of portfolio? thanks and happy new year!

    Comment by mark anthony | December 30, 2010 | Reply

  24. I found this series of interviews with the writer of “Snowball” (A book about Mr Buffett). Its a good read.

    http://www.simoleonsense.com/simoleonsense-interviews-warren-buffetts-biographer-alice-schroeder-part-1-the-forging-of-a-skeptic-from-accountant-to-buffetts-voice-on-wall-st/

    Comment by jasper | December 30, 2010 | Reply

  25. Loved the “Snowball” ! Its the “Harry Potter” for value investors. Quite a long read though. 🙂

    Comment by D' Intelligent Investor | December 31, 2010 | Reply

    • This is one of the best passage from the interview

      > For the most part, he as a universe of stocks that he has analyzed and when something hits his bid then he will buy it

      This was my problem when I was starting last January. I did not know enough number of stocks to make good calls. If I learned something this year, its that there is this thing called a trading band and it could simply be a matter of waiting for a stock to go into the low end of this band. Case in point MER. Twice this year it went down below 180 then moved up again. It might be simplistic but I think I’ll just wait again till it drop to 180..

      The target is to have a stable of stocks whose behavior/band I know deeply. And the more number I know, the more chance for turning a profit.

      This blog has helped in that regards. I’ve learned about a lot of diff stocks I might not have had where I to go at it alone.

      Comment by jasper | December 31, 2010 | Reply

  26. Hi Sir Gus,
    Happy New Year! I found your blog 3 days ago and still reading on previous posts. I just got into stocks 2010October and still in the learning stage. My questions is…how many trades, more or less, did you made? Is it a result of small gains or just few big gains?
    Thanks!
    Gil

    Comment by Gil | December 31, 2010 | Reply

    • Hi Gil,
      Welcome to the this site.
      Looking back to 2010, I have an average of 2 or 3 trades a month. My goal when I put something into my portfolio is to make a 30% gain within a year. Sometimes it gets there quickly, about a month, then I re-evaluate and I ask myself whether I still want to buy it at that point or not. If yes, then it stays; if not, then I sell. If the stock goes down, but I still like it, I try to find out if there is something wrong. If there is none, then I choose a point to average down especially if we are in a bullish market. One case in point was PNB which I did not sell until I doubled my money. Another is DMC which I slowly accumulated from 9.90 to 15. There was also ORE which I initially bought around 2.50 and I bought more at 2.80. I lightened up, meaning I sold a portion of my position at 3.77 hoping to buy it back below 3.50 but was not able to. If it dips again, I’ll probably reinstate.

      Comment by Gus Cosio | December 31, 2010 | Reply

      • Hi Sir Gus,
        Happy New Year! Thanks for the answer. I am learning more from your blog. I have not finished reading all your post but I am sure I will since your experience in the local market cannot be found in books of foreign authors. Thanks again.
        Gil

        Comment by Gil | December 31, 2010

  27. good day sir Gus,

    May I know you do your position sizing in a stock? Like when you want to buy a stock and you have an idea of a good price to enter, how much of your portfolio percentage wise do you use for the first buy, and how much are the succeeding buys? Is the first buy the largest or which one is? How much do you wait for the price to go up from your first entry price before you add or buy again for your second buy and succeeding buys?

    Do you have a fixed rule/guide on this or you just do it by gut(Gus 🙂 ) feel?

    I feel somehow this thing is important coz when I buy, I would think to buy small first but then if it moves up, I would profit small. Also with regards to the second/succeeding buys, if I let it go up too much, I would miss much. And if I buy when there is just a small increase, and then it retreats big, I would end up losing to the point of being shaken out.

    Your thoughts would be much appreciated and much helpful.

    Happy New Year Sir Gus. Thanks for your thoughts, time and putting out this blog where lots of ideas are being shared from you and readers. Fellow reader’s thanks too and Happy new year to us all. May we have a good market year ahead of us. 🙂

    Comment by jovy | December 31, 2010 | Reply

  28. Hi Sir Gus,

    Based on your experience, May I know your view on the average potential percentage gain and risks in a bull or bear market for the following types of stocks.

    Type of Stocks %Gain %Risks Timeframe
    a. Growth
    b. Cylical
    c. Defensive
    d. Speculative

    I am looking to benchmark my stocks performance based on the above. I am still a newbie.

    Thanks!

    Comment by Rick | December 31, 2010 | Reply

    • Rick,
      Why don’t you follow the papers for an announcement from First Metro Securities Brokerage Corp. and First Metro Asset Management Inc. (FAMI). They will be starting a series of seminars for people who want to methodically manage their investments. You have to be patient with it though because it is an investment literacy program aimed at raising investments knowledge of participants.

      Comment by Gus Cosio | January 2, 2011 | Reply

  29. Happy New Year to all and may we have a good trading/ investing year this 2011

    Comment by jofoler | December 31, 2010 | Reply

  30. happy new year, everyone! looking forward to another bullish year!

    Comment by finch | December 31, 2010 | Reply

    • Happy New Year Finch and everyone… see you Monday 🙂

      Comment by jopard | January 1, 2011 | Reply

  31. Happy New Year Sir Gus and to all the avid readers and traders of this blog.

    Looking forward to another fruitful 2011!
    Another start of the new beginning!

    God bless everyone!

    Comment by Ogie | December 31, 2010 | Reply

  32. With all this guidance and exchange of ideas, we are more than halfway to wealth. We just have to bravely and intelligently make our choices for 2011! Cheers! Happy new year!

    Comment by Weena | December 31, 2010 | Reply

  33. I’ve been reading snowball and it seems that 1999 (The year just before the US stock market crash) has some parallelism. Rates were historically low so they are diverting funds into the market. Plus people were expecting 20% return from the market when the US economy will just grow just 3%.

    Although I’m not saying our own market will crash. Just having some food for thought. Rates won’t stay down forever. I bet this will have some type of effect on stock prices.

    A very interesting book all in all.

    Comment by jasper | January 1, 2011 | Reply

  34. sir gus,

    i read you reply to gil above that you only make around 2 to 3 trades per month and that your objective when you buy a stock is to earn at least 30% within a year…

    i know that you have years of experience as a trader so i’d like to ask your opinion about day or swing trading?

    Have you ever tried them sir?
    The reason i asked is because I tend to make a lot of transactions in a month.

    Although there are some stocks that I hold, i tend to buy and then sell stocks when i already have a profit of at least around P300 to P500.

    I am a newbie (I started July 2010) and still learning and trying to set my own trading plan/rules and I have been following your blog ever since i found about it around two months ago to help me.

    Thanks po in advance for your time.
    God bless!

    Comment by ricky | January 2, 2011 | Reply

    • Ricky,
      The greatest factor behind any investor is time. I cannot watch the market all the time because I have other equally important things to do. I, therefore, try to gauge how a stock would be performing over a period of a few weeks or even month. You will notice that in this blog, I try to gauge the over-all market sentiment first before I zero in on a stock. That makes me sit back and take a longer perspective on things. For example, I bought DMC early in 2010 at 9.90. A few weeks later I bought it at 15 and later again at 18. I sold a portion at 27 thinking that it was going to correct but it did not; so I was not able to buy back the portion I sold. I sold another portion months later at 34.50 which fortunately I was able to buy back at 32. So now, I still have a position in DMC but not as much as in the middle of the year. The thing is, when I looked at the performance of my personal portfolio at year-end 2010, I made close to 50% trading only around 2 or 3 times in a month.

      Comment by Gus Cosio | January 2, 2011 | Reply

      • Thanks Sir Gus.

        Maybe it’s just the newbie in me that makes me trade a lot of times in a month—i’m so eager to make a profit no matter if it’s just around 300 to 500…my best so far has been making around p500 in day trading EG last dec.

        Sir, if I only have, say, 100k in my portfolio, around how many stocks do you suggest that I have in my portfolio?

        There were times before when i had around 8 to 10 stock positions in my portfolio!

        Thanks again for your time and valuable input, sir Gus.

        Have a nice day!

        Comment by ricky | January 2, 2011

      • Ricky,
        with 100K, best to have 4 stocks only. It will be more cost effective. You do not have to be in every play in the market. Nobody can be there in every play and make money. As in war, choose your battles. Choose the winnable ones.

        Comment by Gus Cosio | January 2, 2011

      • Ricky,

        It doesn’t matter how much fund you’re gonna put into your portfolio. Make sure that you can afford to lose that money as stock trading is so volatile that anytime the value of the stocks in your portfolio might go down.

        It says that “The Bigger the Return, the Higher Risk. And “The Lower the Return, the Lower the Risk”

        It’s the same on the amount of money that you put in to your investment.

        “The Bigger the Amount of Money that you put in to your portfolio, the Bigger the amount you will also get if you make profits and vice versa”. If you don’t make profit, then it will be a big loss as well.

        As a newbie, I would recommend a small amount of money and see how your trading goes. You can also limit position up to 5 stocks only.

        Cheers!

        Comment by Ogie | January 2, 2011

  35. Happy New Year and Good Tidings to Sir Gus and all those who follow his blog. Re: AGI I understand its one of the stocks which you view favorably. However there is one bit of information I would like to share and this concerns my recent conversation with a PAGCOR official just barely 3 days ago wherein he mentioned to me their gripes with Resorts World Manila whose parent company as you may know is AGI. Well it seems technically AGI violated the terms of their agreement with PAGCOR which states that only foreign nationals whether as tourists or residents are allowed to play at RWM (Resorts World Manila). A cursory visit at any given time to RWM will reveal that majority of the players are not which according to the person I was speaking with has been the reason why other PAGCOR casinos are fast losing patrons at substantial rates. He said PAGCOR management might be more forceful in the coming year with regards to AGI keeping its end of the bargain although I myself find it hard to believe how it could possibly be implemented. Assuming what was revealed to me was true, do you foresee an earnings downgrade from the analysts once they get wind of this. Also another thing which begs one’s question is how did AGI ever agree to this proviso regarding casino patrons in the first place. Your opinion and wisdom would be greatly appreciated. TIA our beloved and esteemed mentor.

    Comment by csi | January 2, 2011 | Reply

  36. I don’t think this has any impact on AGI. We’re just looking at an indirect way of privatizing PAGCOR.

    Btw, I don’t hold any AGI. Just my two cents.

    Comment by James T. | January 2, 2011 | Reply

  37. Thanks Sir Gus for the reply.

    At present, I am thinking of whether it is good to avail of my broker’s margin account service.

    Do you think it’s good to have a margin account and just use it in buying stocks that are in good dips?

    They do charge 1.5% interest per month so I know i have to be selective on when to use my margin….

    Thanks po Sir Gus for being patient with my inquiries.

    God bless!

    p.s.

    it’s the start of the year so i’m wondering what usually happens in the market during this time of the year….does it usually go up po or is there usually consolidation during this time?

    thanks again sir gus!

    Comment by ricky | January 2, 2011 | Reply

    • Ricky,
      I am a relatively conservative investor. If you are not a very experienced trader/investor yet, I will advise you against trading on margin because you are leveraging yourself a little over twice your capital. It will require very disciplined cut loss and trailing stop levels. I suggest that you season yourself first and beef up your capital before you even try to leverage it. Be patient. You’ll get there.

      Comment by Gus Cosio | January 4, 2011 | Reply

      • thanks sir gus!

        when you say experiences trader, how long or what kind of experience should i have first sir?

        Thanks for the advice and God bless you po.

        Comment by ricky | January 5, 2011

      • Ricky,
        Experience = confidence. When you can be confident of your portfolio decisions, your day-to-day trades, living with losses and cutting them when necessary or averaging down when the opportunity arises. These are all indications of broadening your market experience. Test yourself from time to time.

        Comment by Gus Cosio | January 5, 2011

  38. thanks po ulit sir Gus

    Comment by ricky | January 9, 2011 | Reply


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