Gus Cosio says so

Ideas on the Philippine Stock Market

My pet cats

12:26 am  Wednesday  26 January 2011

We had a good bounce today, but more than a few may be seeing this as a dead cat bounce.  From a technical point of view, I would say that the threat of a further downturn is still around.  The most optimistic scenario is that we have a trading range developing between 3, 900 and 4200.  It could be wishful thinking, but a range bound market is very possible.  People in general may not have the bullishness they had through most of 2010 and would be inclined to sell anywhere above 4,000.

My take of the current market sentiment is that the tendency to reduce holdings in emerging markets by global portfolios will continue well into the first quarter.  Investors will look towards the range to sell at the highs since the bullish indicators are presently overshadowed by bearish ones.  Essentially, sentiment as it has been developing will not be able to turn around overnight.  What will change sentiment will have to be very strong earnings disclosures supported by equally encouraging economic figures.  Even if that happens, I believe raising cash should still be the order of the day.

As I write, the European markets closed softer due to weak economic news in Britain while the U.S. markets appear to be headed much lower for the day.  If the general outlook is turning cautious, the inclination to be defensive could get more pronounced in Manila.

8:25 am Wednesday 26 January 2011

It looks to me that the DJIA recovered close to the close of trading.  When I saw it before I went to bed past midnight, it had been down 61 points.  The market color that funds are re-balancing towards large cap beta stocks seems to be the main plot of the current story.

Also, with yesterday’s bombing dominating news all night and even this morning on the radio, I think the case for some foreign selling becomes more compelling.   Fortunately, some of the well performing stocks like DMC, AP and AEV are much cheaper, and our sights are set for longer horizons, I think it would not be unreasonable to start accumulating.  The same would go for MPI, FLI and even ALI.  TEL should make a good dividend play as it consistently pays over a hundred pesos dividend in March.  MBT should be a good buy at 60 or lower.

On the way to the office, I gave a thought to ORE and I think the stock is very cheap at 3.25 is not bad at all.  Still speculative but downside should be limited at this point.  Anyway, I don’t know if this cat is really dead, but we should be aware that it could be.

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January 26, 2011 - Posted by | Financial markets in Asia

69 Comments »

  1. Bracing myself for some more downward trend.:(

    Comment by Shan | January 26, 2011 | Reply

  2. its ok, we are ready for the downtrend. its part of the cycle, also a chance for others to accummulate.

    Comment by chiefy | January 26, 2011 | Reply

  3. This bus business is going to take us down. Last Aug 25, 2010 the bus incident in Luneta took us down. Accumulated some during that time and it bore fruits. It’s time to buy!

    Comment by Nik | January 26, 2011 | Reply

    • less bus?

      if that is so, why not push for more LRT/MRT line constructions? Yes, less bus but more mass railways instead which mean less traffic, less pollution and more manageable travel time.

      i’m just looking for an opportunity in a disaster here.

      why not?

      Comment by haribon2007 | January 26, 2011 | Reply

    • I’ve been thinking the same thing. The station on the major hubs – cubao, ortigas, makati is really lacking. Here in makati, you only get one MRT station. The should add additional lines.

      i.e. Japan has the golden-loop – a train route similar to here where mrt goes from pasay to monumento and the lrt will go from monumento to pasay. The japan loop will is a circle that goes the entire tokyo metropolis. But they also have crisscrossing lines that goes from one busy terminal to another. Tokyo-shinjuku express, tokyo-stationB express, etc.. So maybe add something like makati-pasig, makati-pasay, makati-rizal, makati-cubao express, etc..

      Comment by jasper | January 26, 2011 | Reply

    • I agree, there should be lesses busses and even lesser jeepneys. If you observe closely these PUVs are not being filled to capacity unlike before when PUVs are like sardines. This is the cause of traffice kasi pinipilit nilang mapuno.
      Unfortunately we are very behind in transport infra. Other countries have very efficient transpo system. Tayo hanggang ngayon gumagawa pa rin yung iba tapos na. And how come other countries have no jeepneys or tricycles and yet they are more prosperous than us.

      Comment by Nikmatik | January 27, 2011 | Reply

  4. I’m afraid what will be the effect of the bus bombing yesterday.

    Comment by Topmace | January 26, 2011 | Reply

  5. Sir Gus,

    I’m tempted to accumulate some stocks and eying to buy some of the ff: AP, AEV, ORE, and VLL. Currently, my position is

    AGI(+3.03%),
    CEB(-19.41%),
    DMC(-0.57%),
    JFC(-10.50%),
    MBT(-5.84%), and
    NIKL(+14.66%)

    Should I average down or buy the stocks I’m eying? I am 40% liquid. Your thoughts will be highly appreciated.

    Comment by pinaytrader | January 26, 2011 | Reply

  6. Hi Sir Gus,

    In your opinion, during the next 12-24months, which is more rewarding to invest in dollar fund, balanced USD or purely bond USD? Who do you think is the best local USD bond manager historically? I am an existing MF account of Sunlife, but seriously considering either BPI or Metro. Thanks in advance and more power to you Sir!

    Comment by hinlog | January 26, 2011 | Reply

    • Hinlog,
      I do not think that a dollar fixed income fund will do better than a local equity fund. I see a maximum of 8% one year return on a dollar fund while I think local equities will return upside of 15%. Of course short term volatility could present trading opportunities for the dollar but that is for the arbitrageurs to do.

      Comment by Gus Cosio | January 31, 2011 | Reply

  7. Sir Gus,

    I am torn between averaging down my position and accumulating some of my fave stocks. I’m eying to buy any or a combination of the ff: AP, AEV, ORE, and VLL but also want to accumulate some of what I already have to average down my portfolio. I am 40% liquid with the ff positions:
    AGI (+3.22%)
    CEB (-19.37%)
    DMC (-0.41%)
    JFC (-10.50%)
    MBT (-5.84%) and
    NIKL(+14.66%)
    Your thoughts will be highly appreciated.

    Comment by pinaytrader | January 26, 2011 | Reply

    • Pinaytrader,
      It is difficult for me to tell you what to do but since we are looking at the same stocks, this is what I did. I sold some of my CEB and bought ORE with the proceeds. One thing that I would also be inclined to do if I had JFC would be to sell it form some ORE. This is for a trading position, by the way. A trading position means that I will reverse the position at some point in time when it makes money.

      Comment by Gus Cosio | January 26, 2011 | Reply

      • thank you sir for your helpful insights!

        Comment by pinaytrader | January 26, 2011

      • I think the suggestion to replace an excellently managed and financially established company with a third liner is quite irresponsible. ORE has no track record and does not have the experience in the mining industry vis a vis NIKL. The lousy port excuse if true does not make the business viable as any ship idly docked will cost a lot of money and destroy the financial feasibility of their business model.

        Comment by Cj ch | January 27, 2011

      • cj ch, i dont think its irresponsible at all. the suggestion was for a trading buy not a long term replacement. i would suggest the same thing even for the bluest of the chips.

        Comment by obilesil | January 28, 2011

      • To replace CEB at these bargain prices below 100 having excellent future growth prospects is questionable. When oil prices stabilize or even reverse, this company will continue delivering solid growth income which the market will eventually price in. Danger is of course if oil shoots up to more than 100 in the near future which is unlikely as affordability worldwide becomes an issue.
        ORE should have been bought separately with an amount or percentage that the investor, being liquid, is willing to take a higher risk.

        Comment by Cj ch | January 28, 2011

      • A trading position also means you have to cut loss at a certain point in time which is usually shorter.

        Comment by Cj ch | January 28, 2011

  8. Hi Sir,

    As I recall, the scheduled shipment by ORE is due this end of January?

    Comment by Shane | January 26, 2011 | Reply

    • what i recall was 1Q11.
      probably january is out.
      it’s still raining.

      Comment by obilesil | January 26, 2011 | Reply

  9. I bought some ORE at 3.6 a month ago, then bought some more today. Its just a small part of my portfolio that I think I can live with a few thousand pesos of loses.

    I’m also trying to buy some RLC at 13.70. Hope someone sells me. After this, I’ll be done buying for this month.

    Comment by jasper | January 26, 2011 | Reply

    • ORE needs to keep it’s head above 3 or its chart would look bad. Nevertheless, I am still loyal to its potential.

      Comment by Seth | January 26, 2011 | Reply

      • that’s the spirit. buy some more ore.

        Comment by obilesil | January 26, 2011

  10. pero.. patay na pusa nga :/

    Comment by jasper | January 26, 2011 | Reply

    • If it is indeed dead, should we now then switch to short term trading? I wanted to hold long term but if the outlook is bleak, then maybe I should switch to fixed instruments for the meantime?

      Comment by Shane | January 26, 2011 | Reply

      • Negative. Instead of fix term securities, it might be better to buy TEL instead. As Gus said, it will give a 100++ (141 last year) pesos dividends on march. A 5.6% yield for a couple of months waiting?

        TEL is quite safe too since if you’ll notice its strongly supported at the 2,500 level. I think RLC will give me a better deal down to road so I bought that instead pero sooner or later I’ll be a TEL holder too. Its coming up next in my list.

        Comment by jasper | January 26, 2011

      • Ok. Ill add TEL to my portfolio. I am planning now to just hold on to AGI DMC and MBT for the meantime..

        Comment by Shane | January 26, 2011

  11. I’m quite happy with the bounce… AGI jumped to 11.66! I have some extra cash now to buy. I think the cat is just asleep…not dead for sure!

    Comment by weena | January 26, 2011 | Reply

    • meouw…just the cat dreaming.

      Comment by obilesil | January 26, 2011 | Reply

  12. i thought PCOR will make my day.. =)
    still good though.. bought back at 13P yesterday

    Comment by irving | January 26, 2011 | Reply

  13. Guys,
    Not to be the devil’s advocate in this thread but is there a chance that the pse market is being held hostage by powerful businessmen. Maybe these businessmen are lobbying for perks or benefits from the current administration. Presuming Pnoy said no to their proposal, these businessmen retaliated by initiating a massive sell-off. They are aware that the pse is a good indicator of confidence in our country’s economic health. I think it is quite possible for a few individuals to control our market in such a way. Factor in the recent spate of bad news. The country may be in a deeper danger than as presently presented by the media. Something to think about while we continue to trade in our local exchange.

    Comment by Davidoff | January 26, 2011 | Reply

    • i dont think u can blackmail the president by holding the PSE hostage..

      Comment by cliffhanger | January 26, 2011 | Reply

  14. I think that this is yes, a possibility but not a likely one to happen to pse. A sell-off has happened before, i suspect, but not a massive one that can topple down economies like that one portrayed in the movies. I think that this is a fictionalized view rather than a realistic one. Well, that’s just me.

    Comment by weena | January 26, 2011 | Reply

  15. Hi Sir Gus

    I want to have positions in URC, ORE and CEB. Which do you think is the most undervalued issue? thanks

    Comment by Shan | January 26, 2011 | Reply

    • URC has a better track record, undervalued too, plus the company has been buying back shares which is a good sign..

      Comment by cliffhanger | January 26, 2011 | Reply

  16. Hi Sir, what are your thoughts on MPI? I read in some blog that the price might go down in the short term since MVP is interested in buying MER. I know its a good hold for the long term though but for the mean time Im thinking of selling half of my position in favor of some ORE (which I sold at 3.6 way back). Appreciate your thoughts as always.

    Comment by Cholo | January 26, 2011 | Reply

  17. Good day, Sir Gus!

    What’s your take po on MER?
    It has been a couple of days where its range for the trading day has been at least 10 pesos..

    like in yesterday’s session (jan 26), it traded between P247 and P276… It opened at P276, went to as low as P247 at around 11am, then gradually climbed back up to P272 at the closing…

    I though of buying to average down when it went down to around P250 but passed on the chance out of a) wanting to have free cash and b) fear of the price not going back up and end up having MER to be around 33% of my portfolio.

    Your thoughts will be greatly appreciated.

    Thanks and God bless!

    Comment by ricky | January 27, 2011 | Reply

  18. Hello Gus, what is your take on ICT? Is it fundamentally sound? Is it one of your favorites? Why or why not?

    Comment by BornOnChristmas | January 27, 2011 | Reply

  19. I love you RSA!!! 🙂 … Let’s go SMC!!!

    Comment by Shank | January 27, 2011 | Reply

  20. go, go SMC. Come on, Mer…shine today 🙂

    Comment by Shan | January 27, 2011 | Reply

  21. Is the cat finally awake?

    Comment by Chriss | January 27, 2011 | Reply

  22. Sold my Smc and Mpi…Profit is everything…

    Comment by Miko | January 27, 2011 | Reply

  23. I have losses in the following three positions:
    DGTL (-4.19%)
    JGS (-6.57%)
    ORE (-11.62%)

    Profit, but barely – Another losing streak and it will go down to red
    RLC(+2.84%)
    VLL(+2.8%)

    Comment by jasper | January 27, 2011 | Reply

    • It’s just a waiting game for now. Patience is indeed a virtue. So we need to be viiirtuuooous and keep our cool. It’s hard to be burned by selling a day early or buying a day late!

      Comment by weena | January 28, 2011 | Reply

  24. what do you think on LC/LCB?
    by looking at the chart, my opinion is its on uptrend movement. please correct if me if im wrong.
    what do you think will be the appropriate gameplan for this stocks?thanks a lot!

    Comment by irving | January 27, 2011 | Reply

    • I hear LC/LCB is going through another M&A exercise but I’m not one to hold my breath for it just yet.

      Comment by Gus Cosio | January 31, 2011 | Reply

  25. Hi Sir Gus

    Kindly enlighten me on this: What will happen if RSA will pursue SMC’s planned equity offering this quarter in which shares will likely be sold around P150 to P250 per share? How will it affect holders of the issue bythen? Thanks.

    Comment by Shan | January 27, 2011 | Reply

    • The equity offering will DILUTE SMC shares. You have to think and plan when to sell should you buy it by now especially if your intention is in the short-term. Dilution means the value of SMC per share will go down because of the greater number of shares issued.

      Comment by claire | January 27, 2011 | Reply

      • Thanks Claire. I bought SMC at 153 last Jan 24. hmmmm…

        Comment by Shan | January 27, 2011

      • they couldn’t possibly offer the new shares at a price higher than the existing ones but instead offer it at a discounted price that’s why dilution happens…

        now if RSA is planning to offer at a price of P150 to P250 per share, that could possibly drive SMC’s price up, that’s why it surged P17.50 (10.90%) today…

        hope it goes higher tomorrow!

        Comment by ricky | January 27, 2011

      • ricky, the smc surge of 10 percent today was more likely due to the capital gains tax issue development on listed companies not satisfying the minimum float.

        Comment by obilesil | January 28, 2011

      • ps..smc,pcor floats are below the required minimum, which is probably the underlying motivation of the planned sro.

        Comment by obilesil | January 28, 2011

      • @ obilesil

        the capital gains tax issue, in my opinion, is unlikely to be the reason of the surge since that issue has been there for a couple of days already. besides, BIR cannot impose the capital gains tax to transactions on companies with <10% free float because that would require them to amend the law first…

        Comment by ricky | January 30, 2011

      • Claire,

        Re : SMC 2PO, are new shares being offered or existing majority shareholders will sell part of their holdings? In the latter case there is no dilution of minority.

        Melvin

        Comment by Melvin | January 31, 2011

  26. heheh i am expecting a 150% return of my stock picks for 1yr and a quarter, MBT, DMC and AEV.gudluck guys!

    Comment by sam | January 27, 2011 | Reply

  27. I think PSE will move comfortably above the 4000 level in the next few trading days. US data showing a surged in unemployment (51000 filed new claims for unemployment benefits) last week suggests that hot money might flow back to emerging markets.

    US market is consumption driven and employment is one of the stronger indicators of the US economy. Net foreign buying today is at a convincing 1.1 billion! MBT, DMC, AP, MPI and mostblue chips are being bought heavily by foreign brokers. TEL is one of the few blue chips with a net foreign selling of 38 M.

    Technical indicators show that we had a strong bounce at 3900 and the momentum might carry our PSE back to 4200 again in few weeks time.

    Comment by Chris M. | January 27, 2011 | Reply

    • In fact, if not for the bombing incident, i think we should be above 4000 by now.

      Comment by Chris M. | January 27, 2011 | Reply

  28. as what i have expected, FOOD is up!
    i believe you mentioned this before sir Gus!
    medyo natagalan nga lang. nice to see green in my portfolio.

    Comment by RmR | January 27, 2011 | Reply

  29. Soft Commodities is Rising very Fast Sugar,Wheat,Flour,cotton and Onions….While Gold is going down….Time to Buy Gold Stocks within 2 to 3 months…

    Comment by Fredo | January 28, 2011 | Reply

  30. ORE is down to 2.95. Just a survey. Is this a buy or still a wait?

    Comment by Alvin | January 28, 2011 | Reply

    • It all hinges on the schedule shipment. If the company ships the stock will be worth much. Even the first shipment would bring a positive effect to this much maligned stock. But if they cannot ship, then it will tank.

      If up to you what to believe between the two.

      Although Gus said that ‘downside should be limited at this point’. Makes me wonder.. why is it limited at this point, rather than a month ago? perhaps those ORE will ship after all.

      Well, its hard to speculate. But for me I placed a small bet. I’m taking the position that if indeed they have 80k tons of ORE, then sooner or later that will be shipped.

      Comment by jasper | January 28, 2011 | Reply

    • I suggest you wait for a clear bounce or spread your buying. There are no good news coming out so far.

      Comment by Seth | January 28, 2011 | Reply

    • I just average down on this stock @2.99.

      Whether they ship or not I will be holding this stock for now. After all, they will be shipping sooner or later. Been following this stock and should have made a lot of profit if I bought this before.

      My target here is 3.50 and up… 🙂

      Comment by PoGGs | January 28, 2011 | Reply

    • might be worth a small buy. there is support near 2.9 and since it has gone down quite a lot lately, it could bounce up.

      shipment news should come soon in a week or two

      and remember if you buy just now, your price would be cheaper than jasper’s

      Comment by rodimus | January 28, 2011 | Reply

      • yeah, my average is about 3.5 or so.. 😦 – my loses at ore is now at -3k pesos.

        Comment by jasper | January 29, 2011

  31. Was Mer a good buy at 255? Will it be back to 280?

    Comment by Allen Dy | January 28, 2011 | Reply

    • i’m quite nervous about this stock because the first surge to P299, then the surge to p285 again, was due to the block sale that was offered a couple of days ago…

      from what i know, a block sale can be completed only if the market value of the stock reaches a certain percentage of the block sale price—that’s why the price was pushed up to those levels…

      now that the block sale was completed, the prices will normalize and will not reach the high levels reach a few days ago…

      unless, there’s another block sale up for grabs.

      Comment by ricky | January 30, 2011 | Reply

    • MER was a good buy below 200. Last year there were two times it went down to 180 then went back up again at the 230 level. Basing on that – anything above 230, I would rather not take my chances.

      Comment by jasper | January 30, 2011 | Reply

  32. Where is Gus Cosio? He has not posted in this blog for the past two days…

    Comment by Johnny | January 28, 2011 | Reply

    • i hope he’s ok.

      Comment by chiefy | January 30, 2011 | Reply


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