Gus Cosio says so

Ideas on the Philippine Stock Market

2011 – A happy New Year

2 January 2011

First of all I would like to greet everyone a happy and blessed new year.  We have so much to be thankful for and I hope each one of us realize this.  We not only have a stock market that was good to us in the year that past, we have something to look forward to and a fresh start for the new year 2011.

The PSEi closed the year at 4201.14 or a whopping 37.7% gain for the year.  People who did not invest any of their money in some form of equities exposure should be banging their head on the wall.  I remember from late 2009 to the beginning of 2010, I had been encouraging my own family members – sons and daughter, sisters and brothers – and friends to have at least a portion of their savings in equities.  If they did not have the inclination to follow the equities market, I said that they should at least be in an equities laced mutual fund.  Fortunately, my sons, siblings and a few friends took my advice and invested in the mutual funds that my company (FAMI) runs and are now thanking me for it.  It gives me a great feeling of satisfaction that people close to my heart were able to reap the benefits of being in the capital markets.  Even those who simply went for our fixed income funds did a lot better than those who merely chose to keep their money in money market, time deposits or SDAs because our fixed income fund returned 11.56% for the year.  Of course our equity fund closed the year returning 63.37% while our balanced fund came in at 61.97%.

My personal portfolio only returned around 50%, but that does not make me sad at all because I was not able to watch my positions as closely due to other demands on my time.  Fortunately, I had kept some money in our equities mutual fund so I was also able to reap the higher return thanks to our people who monitor the market much more closely than I.

Reflecting on this blog, I am quite pleased that it has developed into a site where people ae able to express their views and contribute their ideas about the markets.  I am equally pleased that there are those who offer information on stocks that they follow and even inquire as to what I think of a certain equity issue.  While I cannot claim to be an authority on everything, each comment or query opens up an opportunity for me to devote some thought to the idea propounded.  Comments by Jasper, Seth, Cliffhanger, Chris, Mark Anthony, Foreign Investor and many others are truly welcome.

I had always mentioned that I believed in the collective wisdom of the market place and your comments, questions and replies are those that contribute to that collective wisdom.  we may not agree with each other all the time but that is what a free market is all about – people with opinions that are as diverse as the many readers who have enjoyed following this blog.

I will never force my ideas on our readers although I will always provide arguments for my point.  What I will continue to do though is to give insight to what is going on in the marketplace and also find the same from what people are saying to me.  That is not to imply that my convictions will always fall sway to the winds of public opinion.  Far from it, I would say because I would always stick to what makes sense to me given the facts and information I have on hand.

For one, I am of the opinion that in the beginning of the year, it will likely be that the largest blue chip stocks will be leading the way.  The top 10 constituents of MSCI Philippines are: TEL, SM, ALI, BPI, AC, BDO, SMPH, EDC, MBT and MER.  I think many core portfolios will be made up of at least 3 of these 10.  My best bet among these would be EDC which I noticed to be sitting just above its support level at 5.80.  I believe that many have rebalanced TEL in their portfolios at the close of 2010 which is the reason for its big jump to above 2500.  I think 2500 will be the support for TEL in Q1 2010 as MER will probably have a range of 200 to 240.

For individual portfolios, we do not have to follow institutional strategies.  I think moves in stocks, such as MPI, DMC, FLI, JGS, just to name a few, can be more pronounced.  Then there will always be the mining plays in stocks like NIKL, ORE, AT, MA/MAB, PX and LC/LCB which given the strong metals prices will probably shine in this quarter.  Of course gaming might be in wide fashion for the year such that AGI will remain strong while WEB, EG, BEL and LR should be given some attention.

If I may suggest, I think the most appropriate thing to do is to mark all positions to market be they gains or losses.  Then, start the year as if you bought it on the last trading day of 2010.  Finally, ask yourself whether you want to own the stock at these levels and rebalance your portfolio accordingly.  That way, you do not get attached to your past decisions and you  give yourself a clean slate for the start of 2011.

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January 2, 2011 - Posted by | Financial markets in Asia

29 Comments »

  1. Hi Sir,

    I have already set my averages to market price to start fresh. I did this in my excel sheet but would my online system allow me to do the same?

    Thanks

    Comment by Mel | January 2, 2011 | Reply

  2. Thank you very much for your insight sir Gus, and happy new year to every one!

    Comment by norman | January 2, 2011 | Reply

  3. Hello Sir Gus!
    I’ve read once that you were not able to follow SMC and other RSA stocks.

    Haven’t you considered SMC lately?
    God bless our 2011!

    Comment by Aldrien | January 2, 2011 | Reply

    • Aldrien,
      I’ll try to gather more sound information then make some comments.

      Comment by Gus Cosio | January 3, 2011 | Reply

  4. Happy new year and happy trading to everyone. 🙂

    Comment by Shan | January 2, 2011 | Reply

  5. Sir Gus,

    First of all, happy new year and we would like to thank you for providing your valuable time.

    Comment by alexis | January 2, 2011 | Reply

  6. I am currently pondering if I will shift my individual investments to FAMI mutual fund as I do not want to follow the market daily as I have done in the past 4 years. As for FAMI, I am seeing their portfolio as concentrated to its “conviction list” where 5 securities had 10% allocation to its net assets in Sept 2010. This is similar to my strategy wherein you can go out and in from the market.

    I entered BEL in December for its future gaming play. It can be worth more in 2 or 3 years time once its casinos/complex are operating.

    My core portfolio is now comprised of RCM (monopoly+dividend play), DGTL (good business model), VLL (undervalued property play with huge landbank), CEB (low cost carrier and future competition oversold this stock + other LCC also declare dividends like GOL, Ryanair, etc.) and BEL.

    ORE, RCB and MER are other stocks that can be in my radar. TEL has always been a good play for me to enter in the last weeks of February before the dividend is declared and sell after dividend has been paid.

    Comment by alexis | January 2, 2011 | Reply

  7. 2010 was a great year for myself sir gus, partly thanks to you!!! Happy new year and let’s hope for a great 2011

    Comment by Norman Go | January 2, 2011 | Reply

  8. hapi new yr sir gus and readers of this site. i would like to hear your opinion on mbt. when the sro date payable comes and the price drops, will it be better to buy some more, sell, or shift to chib and/or ubp? tnx.

    Comment by obi lesil | January 3, 2011 | Reply

  9. hapi nw yr sir gus and readers of this site. i would like to hear you opine on mbt. when the sro date payable comes, and if the price goes down, will it be better to buy some more, sell, or shift to chib or ubp? i have only one bank and prefer to have only one. tnx.

    Comment by obi lesil | January 3, 2011 | Reply

  10. Sir Gus, I have always been an avid reader of your blog. Thank you for your reasonable market insights and information that you share. Happy new year!

    Comment by Seth | January 3, 2011 | Reply

  11. Sir, BDO forecasts that the market will have a big correction during the 1st quarter – back to 3700-3800 before continuing its bull run. Do you share the same sentiments?

    Comment by Kado | January 3, 2011 | Reply

    • Kado,
      In my position, I am always wary of corrections. They come very stealthily, but if it is always a correction that you are waiting for, you’ll never get anything done.

      Comment by Gus Cosio | January 3, 2011 | Reply

    • Kado, correction is part of stocks investing and it is part of the risk. You have to consider that nobody can ever predict what will happen in the coming days. It may happen and may not as it depends in various factors both externally and internally adding thereto the market psychology (fear and hope).

      Comment by claire | January 3, 2011 | Reply

  12. Would anyone know what’s the latest news with JGS? The PSE website is ever so slow to non-responsive during trading hours that I don’t know the latest disclosures about the companies listed in it.

    Comment by hokanu | January 3, 2011 | Reply

  13. thanks for being a good sport sir gus, good luck to you this 2011 🙂

    Comment by cliffhanger | January 3, 2011 | Reply

    • to you too, cliff.

      Comment by Gus Cosio | January 3, 2011 | Reply

      • thanks sir gus and brother cliff.

        I am happy for all of us!

        Comment by richard | January 3, 2011

  14. I note you continue to recommend JGS despite its continued dive. Would appreciate you sharing reasons for optimism. Am now considering buying with RSI below 30. Thanks.

    Comment by glacier | January 3, 2011 | Reply

    • Happy new year Gus,

      Regarding JGS, I would like to know your opinion about the company, and the news and hearsays from different local stock forums that the Gokongwei family is “milking the public”. They are referring to the disclosed equity fund raising proposal, wherein the family will be selling their existing shares then issuing new shares to replace it.

      What’s on your mind regarding this issue?

      Comment by Neo | January 3, 2011 | Reply

      • the fact that they are always trying to raise funds isn’t really a good sign for the company..

        Comment by cliffhanger | January 3, 2011

      • Neo,
        The Gokongweis are very astute business people. You either like them or you don’t here in the Philippines. But for someone who sticks to the fundamentals, the family’s action simply affect the supply condition of the shares. The fundamentals remain strong so I am not worried because value is what investors look for in a stock and surely there is value in JGS. The supply-demand conditions are purely for timing you entries. Personally, one should buy when the stock is cheap.

        Comment by Gus Cosio | January 4, 2011

  15. Hi Sir Gus,

    I was appalled at the takeover price/cash infusion price of AGI into FIl-Estate land at 1 peso. Not only was the almost 3 pesos book value ignored but it seems that the tender offer rule at the company’s fair value was also skirted.

    I’ve worked in the brokerage industry for along time and quite familiar with mergers and acquisition strategies here and in the US but this one is sooo blatantly anti-minority shareholder.

    The parties concerned also failed to disclose the fact that they should have disclosed a possible takeover in the negotiation stage.

    I believe that the SEC will junk the 5 billion increase in capitalization to facilitate the entry of AGI. That increase in capitalization was approved in 2007 when there was no discussion on turning over majority control of Fil-Estate.

    The debt levels of fil-estate are modest to justify an entry of an investor taking majority control at par value and at around 1/3 of book value. Pre-emptive rights was also denied to minority investors who desrve to re-invest at par i\with the entry of an investor at the same price and ahuge discount to book value.

    Comment by John Consomol | January 3, 2011 | Reply

    • John,
      If you analyze the reasons why AGI bought it, it was because they got the discount they wanted. Nobody was willing to buy Fil-Estate at its book value, so the book value is meaningless. The real price of an asset is what people are willing to pay for it.

      Comment by Gus Cosio | January 4, 2011 | Reply

  16. sir gus, positve new year! i am back and suffering from athritis coz of that chilly place that i’ve been to…

    i am back with my seat belt again to address turbulent terms of engagement wt the market. i am thankful to you as our GURU. your ASTUTE really help me a lot, that is why i am now introducing your blog to my 15 year old daughter a 2nd yr. student, she is into
    a lot of ?’s.

    well, lets face this 2011 year an exercise again with your guidance… all the best! sir
    gus

    Comment by ottrho | January 3, 2011 | Reply

  17. SIr Gus,

    Ramon Ang stated that there is a plan to merge Ginebra and SMB with the final intent of selling it to Kirin.

    Would a share swap between GSMI and SMB be better instead of paying the shareholders the enterprise value of GSMI?

    Comment by Rocky | January 3, 2011 | Reply

  18. I admire your writings Sir Gus!
    Thanks for selflessly sharing your knowledge. Hope to learn more thru this website. Thanks and happy new year!

    Comment by RxCrx | January 3, 2011 | Reply

  19. Happy New Year Mr. Cosio and more power..!

    Comment by Oliver | January 4, 2011 | Reply


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