Gus Cosio says so

Ideas on the Philippine Stock Market

Picnic time?

9:45 Tuesday   1/11/11

A 90 point drop is truly a cause for worry.  Net foreign selling was Php 661 million which is an amount to ponder.  The biggest foreign selling was seen in AGI and AP.  These are stocks that had more than doubled through most of 2010, so opportunistic investors will likely opt out while it is still early.

People seem to be reacting to a variety and even perhaps opposing stimuli.  Some selling were said to have been in reaction to the higher than previous consensus full year 2011 Philippine inflation forecast by a UBS economist.  Others were being attributed to the disappointing unemployment numbers released in the U.S. last Friday.  I find these reasons opposing because the dollar was recently strengthening against Asian currencies as signs were afoot that the U.S. economy was gaining traction given the recent series of economic indicators released by various government agencies.  The labor statistics are released weekly and in my view, the trend is more important than a single week’s figure.

There were similar concerns about the sovereign debt situation in Europe where the European Central Bank was said to have been urging Portugal to go for a bail-out package.  The euro is down against the dollar.  I actually expect that down the road, the weak countries would be kicked out of the common currency.  I also remember that this time last year, Greece first came out with its fiscal and financial crisis, yet look at where it brought our market one year later.  Philippine export to Europe account for only 12% of total exports compared to close to 60% with our trading partners in ASEAN and East Asia, so I do not see the big deal about Portugal.

What is pretty obvious is that all the reasons for the sell-off were not of any domestic fundamental reason.  Of course, questions about earnings growth come to the fore; but with a good number of stocks we watch, the skepticism clouding the broad market does not seem to be warranted.  If you look at DMC and NIKL, they are down only slightly and people are picking them up at lower prices.  There is support even for something as edgy as ORE.

If earnings growth are causing anxiety, the telecom industry has slowed significantly; but we can still expect a 5% growth.  The power sectors will have steady growth in line with GDP growth which was already expected to be lower in 2011.  There really is very little reason for panic.

The biggest loser was the financial sector where the big banks – BDO, BPI and MBT – had over 1 % declines.  The holding companies also saw significant declines as well which may be an opportunity to buy.

The big question is whether it will be sentiment or valuations that will determine where the market will go.  As a closet fundamentalist, I will go with companies which continue to promise solid growth.  This means that I will still go with the likes of MPI, EDC, JGS, VLL, ORE, NIKL and the like.  Be careful though because I think the threat of the index going down to below 4000 is very real.  It is time to test your nerves.

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January 11, 2011 - Posted by | Uncategorized

64 Comments »

  1. Hello sir gus,

    Would you rank DMC in the list of companies with solid growth? I’ve always looked to your blog as a source of great information and valuable advice, I remember when you mentioned something in the line of testing nerves when the greek crisis hit last year and everyone was selling like crazy LOL. Thanks.

    Norman

    Comment by Norman Go | January 11, 2011 | Reply

    • Norman,
      I observed good demand for DMC yesterday in spite of the market being weak. Yes, I think DMC has more growth to come. This will be in power, housing, infrastructure and mining their coal in semirara.

      Comment by Gus Cosio | January 11, 2011 | Reply

      • Thanks sir gus,

        It was for that reason that i purchased DMC. I was also hoping for DMC’s housing unit to IPO this year, is there any news on that?

        Norman

        Comment by Norman Go | January 11, 2011

  2. Still holding on to of of my cores-DMC.

    Comment by Shan | January 11, 2011 | Reply

  3. Sir Gus,

    Thanks for sharing your thoughts.
    They are very helpful especially for newbies like me.
    What are your thoughts about MER? I am planning to sell it now to secure my gain.

    Comment by check | January 11, 2011 | Reply

    • Check,
      Go ahead and sell to take profits. Nobody loses money by taking a profit.

      Comment by Gus Cosio | January 11, 2011 | Reply

      • Thank you very much sir Gus.

        How about CEB and RLC sir?
        I have both on almost -7%. I’m not nervous though, just wanna know if i’ll dilute my position or buy others like AP, AEV, and DMC.

        Lord bless and More power to you Sir Gus!

        Comment by check | January 11, 2011

      • CEB looks like a slow mover. RLC may have some softness to go. AP and AEV are seeing more selling. I think AEV is a good buy at 27 or lower. DMC should be okay around 33.

        Comment by Gus Cosio | January 11, 2011

      • “Check,
        Go ahead and sell to take profits. Nobody loses money by taking a profit.”

        — no one, but the people who forget to remains in the stock. 😀 hehe

        Comment by berz | January 12, 2011

  4. Sir Gus,

    I have about 80% of my portfolio in AGI? Do you still see an uptrend after a few weeks or is it wise to unload a substantial amount before the market dips again? My average is 11.85.

    Comment by weena | January 11, 2011 | Reply

    • weena,
      You are only 10% below your average cost. You can set a cut loss if it trades below 10.90 if you feel very nervous. Personally, I think AGI can go back above 12 in the next 6 months. It’s just that today, thinkgs really look bleak.

      Comment by Gus Cosio | January 11, 2011 | Reply

      • Thanks sir.

        Thst would be enough for me to just hold on to it.

        Comment by weena | January 11, 2011

    • that’s only a 7% loss so it’s manageable. AGI anyway as good fundamentals.

      Comment by ricky | January 11, 2011 | Reply

  5. I like this blog unlike other blogs (e.g. we gotta buy SMB when 31.95 is broken!) It goes below 31… dami talaga “experts”

    Comment by Sam | January 11, 2011 | Reply

  6. Sir, what are your thoughts on CEB?

    Comment by Seth | January 11, 2011 | Reply

  7. Sir Gus,

    My dad purchased LR for me years back. Although a small amount, I would like to maximize my gains here. What is your take on this stock in light of everything that is happening now? Do I lock in or do I wait? Thanks!

    Comment by gabby | January 11, 2011 | Reply

    • If I sell I want to tranfer to a more safe stock like MPI or EDC

      Comment by gabby | January 11, 2011 | Reply

  8. …pic-nic time or yakity-yakity scenario? as of this moment 12:00pm 1/11/11, mkt. dn 100pts, let’keep our boots strings tight… all the best to all!

    Comment by ottrho | January 11, 2011 | Reply

  9. MER…may liwanag ang buhay…:)

    Comment by Shan | January 11, 2011 | Reply

  10. as i have said as early as dec. its better sometimes to be foolish……….rather test the resolute of our nerves now

    Comment by mike | January 11, 2011 | Reply

  11. Oh wow, I wasn’t able to view early today because of a meeting, but when I did it was a sea of red.. my portfolio just went down 15k pesos.. gosh..

    Comment by jasper | January 11, 2011 | Reply

    • i opted not to open my portfolio for the next 3 days. anyway i have no plans of selling any of my positions, nakakastress lang tingnan 🙂

      learning lession. i should have maintain my position to hold my cash until this consolidation happens, kaso naatat ako eh hehe

      Comment by rdthedeveloper | January 11, 2011 | Reply

      • of course, you’ll never lknow when the consolidation would end so it’s hard to decide when to start buying again….

        Comment by ricky | January 11, 2011

      • Sir Gus always says having cash is a strategy. Indeed, consolidation happens and issues are cheap, then you get advantage of buying them at a low price. 🙂

        Comment by Shan | January 11, 2011

  12. I was thinking of selling my DMC and SECB to fund buying some other issues, but at these prices I would be better of holding on to them. I mean, at these prices, I’ll probably be a buyer of SECB and DMC (If I had money that is)

    And oh, MBT is nearing 60 again. Paulit ulit sya. It went down to 60 then rose up to 70.. then down to 60 again.. etc.. Someone who bought and sold on MBT’s cycle would have had a pretty big smile right now.

    Comment by jasper | January 11, 2011 | Reply

    • I was thinking of selling my MBT when it went to 75 but decided against it, thinking that it would go even higher.

      I was wrong.

      Of course, you to live with it because you have to be responsible for your decisions.
      I just consider it part of the learning process.

      Comment by ricky | January 11, 2011 | Reply

      • @ricky – same thing happened to me, except the stock was VLL. To make up for the mistake, I averaged down on VLL today.

        Comment by Sonn | January 11, 2011

  13. Here’s one interesting read, in my opinion.

    “Think of stock markets as comprising three types of investor: well-informed insiders, irrational noise traders, and those who are rational but lack inside information. Imagine, then, that a share’s price rises and you are the rational but uninformed investor. What do you do?”

    http://www.investorschronicle.co.uk/Columnists/ChrisDillow/article/20110110/9a3d5d26-1a71-11e0-bef7-00144f2af8e8/The-evolution-of-markets-and-strategies.jsp

    Comment by Aika | January 11, 2011 | Reply

  14. God day, Sir Gus!

    Thanks for the input.

    Sir, with the current price of CEB, would you consider cutting losses if you are at around -13.33% (selling value inclusive of sales tax and other charges)?

    CEB has been eating up my gains last year. I tried to average down when it went down to P105 but went down further…my Average buying price is P114.80.

    Thanks po in advance.

    Comment by ricky | January 11, 2011 | Reply

    • It seems that the investors are fearful of Airasia’s planned entry into the Philippines, that is why they are dumping CEB. But the dog fight hasn’t even started yet and their is no 100% assurance that Airasia can start operating here.

      Comment by Seth | January 11, 2011 | Reply

      • Yes, exactly. The fight has not started yet. I was expecting the price to go down a bit but not this much. Ouch.

        Sir Gus, what’s your take on this po? thanks.

        Comment by ricky | January 11, 2011

    • Ricky,
      I do not know your loss threshold but I am not nervous about CEB at all even if I am close to 20% down because I’m still 35% in cash.

      Comment by Gus Cosio | January 11, 2011 | Reply

  15. Gus,
    Honored to meet your acquaintance last friday! I should have acted swiftly on your tips now I think its better to tank and wait for better days. I am planning to get NIKL as you suggest and after doing a little research. I think this stock has a lot of room to go. Do you see it going lower than 18 or is it a good buy at below 19? Thanks!

    Comment by Gordon Gekko | January 11, 2011 | Reply

    • Gordon,
      I like NIKL and I am still slowly adding to my IPO position.

      Comment by Gus Cosio | January 12, 2011 | Reply

  16. Holding on,
    this panic is nonsense. as long as there’s a supply of money, ill average down. I am for the long term.
    Actually, im “happy” these things happen. It gives me opportunity to lower down my AEP further.

    Comment by frepoy | January 11, 2011 | Reply

  17. Hi Sir Gus,

    You think AP is a good buy now?
    Thanks & more power

    Comment by Taylor | January 11, 2011 | Reply

    • tried to buy at closing but didn’t get a match…i’ll take it as a sign that today was not the time….

      maybe it goes lower tomorrow that’s why my order was not matched today…hehehe.

      Comment by ricky | January 11, 2011 | Reply

    • Bought AP @27.5 pro unti lng bka bumaba pa average down ako.

      Comment by George | January 11, 2011 | Reply

  18. Hello there sir, excellent blog you have here. Thanks for providing your daily inputs for newbie stock traders like us , I bought shares of mpi around the 2.90 to 3.10 levels March 2010, and mpi shares have gone above 4.20 + last year, and early jan 4.20 + too. I was hoping it would reach till 5 before I sell all of them, or am I too greedy?

    Btw I was wondering if I can design a logo for your site, for free =) if you want

    Comment by night phantom | January 11, 2011 | Reply

    • Night Phantom,
      MPI will get there. You should not worry at all because your cost for MPI is so low.

      Comment by Gus Cosio | January 12, 2011 | Reply

  19. The title should be “Panic Time?” instead of “Picnic Time?”. P661 m net foreign selling is big. When foreigners are leaving, I better start packing my bags.

    Comment by Nivla | January 11, 2011 | Reply

    • sir gus said picnic time because it’s time to buy since stocks are cheap… for some people. it’s panic time…

      Comment by ricky | January 12, 2011 | Reply

      • Ricky,
        I was being ironic; so rather than say “panic” I punned with the word “picnic” just to put forward an idea that panicking does not do anyne any good. If you want to be in the market, be prepared for the unexpected.

        Comment by Gus Cosio | January 12, 2011

    • Nivla,
      Just remember that he (or she) who fights and runs away, lives to fight another day; and a quitter never wins. Long term commitment to the market does not mean that you have to be in positions all the time.

      Comment by Gus Cosio | January 12, 2011 | Reply

  20. The bull run last year made a lot of money for a lot of people. But its after-effect is, at least to me, that it makes you think stocks are so easy when it fact its anything but.

    Comment by jasper | January 11, 2011 | Reply

    • Very good insight, Jasper.

      Comment by Gus Cosio | January 12, 2011 | Reply

  21. Fakeout tomorrow..Buy Bluechips…

    Comment by Candy | January 11, 2011 | Reply

    • whats a fakeout?

      Comment by jasper | January 11, 2011 | Reply

    • Yes, Candy.
      AC, BPI and MBT all look cheap. So does TEL.

      Comment by Gus Cosio | January 12, 2011 | Reply

  22. Hi.. how do I access intraday charts? Thanks.

    Comment by newbie | January 12, 2011 | Reply

    • depends on your broker’s software.
      look for the time/period settings in the software…default is DAILY…you can change it to different periods like monthly, weekly, intraday, 1sec, 3 sec, …etc….

      Comment by ricky | January 12, 2011 | Reply

    • Newbie,
      If you have a First Metro Securities on-line account, they have a wonderful charting service that you can access 24/7. It has intra-day as well as very long period monthly charts available.

      Comment by Gus Cosio | January 12, 2011 | Reply

      • Thank you!

        Comment by newbie | January 12, 2011

  23. Sir Gus, I bought MER at 187 last Dec. Am very happy with how it’s going. Very strong when the market was shedding blood for the past two days. I hope to unload them at 290. Is this too much expectation? thanks.

    Comment by Shan | January 12, 2011 | Reply

  24. Any take on SMP? I’ve been watching that stock since it posted it’s enormous jump on the first day of trading for this year. Too bad my online trading account wasn’t set up until yesterday. 😦

    Comment by ella | January 12, 2011 | Reply

  25. Sir Gus, i was thinking of unloading my MER at 290 today. However, when i saw how it went wild and even went to 294, I held on to it. Do you have any idea on what price i should sell? thanks so much.

    Comment by Shan | January 12, 2011 | Reply

    • Shan,
      From here to 300 should be a good sell. It should retrace sometime in the next 2 weeks in my opinion.

      Comment by Gus Cosio | January 12, 2011 | Reply

      • I’ll post tomorrow at 299. hehhehe greedy me. Thanks Sir Gus!

        Comment by Shan | January 12, 2011

      • Will wait for your 299, then I will let go mine too… he… he…

        Comment by nikmatik | January 13, 2011

      • Hi Sir Gus and Nikmatik,

        I posted a 300 sell this morning when Mer was running from 290. Problem was the high was only 299.60. Hmmm…I was even expecting it to go up and pass 300. Jut now, I checked the quotation report that foreign selling was 132,942,650. We’ll see tomorrow.

        Comment by Shan | January 13, 2011

    • Missed the 299 because of too many phone calls. Hope we can make it tomorrow, Shan!

      Comment by nikmatik | January 13, 2011 | Reply

  26. Hi Sir Gus,

    Hope for your insights in AP do you think this will go up again at 30s or will go down further in Q1?
    Thanks!

    Comment by Taylor | January 12, 2011 | Reply

  27. Hi Sir Gus,

    Hope you can help me, what stocks do you recommend to buy now besides mining? Thank you very much!

    Comment by Taylor | January 12, 2011 | Reply

    • Taylor,
      Go for AP or AEV , DMC , MPI, EDC and perhaps SM.

      Comment by Gus Cosio | January 13, 2011 | Reply


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