Gus Cosio says so

Ideas on the Philippine Stock Market

Boats in the harbor

11:00 pm  Sunday  30 January 2011

I was in Cebu all of Thursday and flew back to Manila Friday morning.  Unfortunately, I left my laptop charger in my office so I  was not able to have full use of my computer and could not write down my thoughts for the blog.  Fortunately though, I was able to catch up with a few readers from Cebu Gordon Gekko, Norman, Orven and Jacqui for a late night coffee at the Ayala terraces.

Our firm held a business and economic outlook briefing for our clients in Cebu.  An affair like this is normally by invitation only from a list provided by the company.  It was relatively well attended and people were appreciative of the information shared.  It really goes to show that in this day and age, one of the most important commodity is information.  But more than simply getting information, it is very important that we know how to process the bits we receive.

Over the weekend, we saw an unexpected decline in the DJIA and people attribute it to the political crisis in Egypt.  Egypt plays a special role in the Middle East.  Recall that it was Egypt under the late Anwar Sadat who signed a peace treaty with Israel in 1979 which would have gained much for the peace process in the entire region.  Tragically, Sadat was assassinated during a televised military parade for all the world to see in 1981.  It had been Mubarak who held power since then.  Egypt continues to be an ally of the U.S. and a radical political change could alter relationships with the U.S. and Israel.

What the event highlights is the uneasiness of investors in the DJIA in spite of the fact that global asset allocation has been favoring U.S. blue chips since the turn of the year and even earlier.  Volatility measures such as the VIX has suddenly bounced after gradually creeping lower over the last three months.  Personally, I think it will take more time before the momentum of the move to global blue chips slows down.  what we are seeing is just a pause before the charge resumes.

Nevertheless, I think that some of the stocks I watch that are looking to have developed good support at current levels.  JGS, FLI, DMC, AP, and EDC look to be meeting buyers where they were last Friday.  Fundamentally, they all look good but their prices were whacked last week.  Perhaps, having an accumulation strategy on these stocks could pay off a few months down the road.

I think RLC could still trade below 14 possibly 13.70 but it is decently priced where it is now.  I heard that most of its earnings are recurring rentals from malls and commercial buildings.  VLL is also very cheap around 2.75.  If your nerves can hack the volatility, a VLL position could pay off handsomely in a few months.

People might think that I am beating a dead horse with ORE.  Honestly speaking, I believe that speculating on a stock that has been closely followed by both fund managers and speculators should have limited downside.  One only has to be honest with oneself and realize that there will always be that possibility of losing money on the stock.  My take on it is that my chances on ORE are far greater than that in a black jack table where I can lose everything.  NIKL should also continue its surge as nickel prices are again above U.S.$ 25,000 per metric ton.

The broad market should continue to be downward biased, so investors have to be careful.  It is time such as these where we can really learn the art of stock market investing.  Over the past 20 months, it was a situation where the tide rises and all the boats in the harbor rise with the tide.  This time, we sail the uncharted seas.  This time around, we need to sharpen our skills in navigating the market.  That is how we will get our pay-off.

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January 30, 2011 - Posted by | Financial markets in Asia

34 Comments »

  1. the guru is back. miss your posts sir Gus!

    I’m still loaded with FLI and VLL.

    my mistake as a newbie, my portfolio is heavily invested in property stocks.

    I also have SMPH and ALI at the moment… still learning

    Comment by RmR | January 30, 2011 | Reply

    • RmR,
      It is good that you evaluate and self-criticize your moves. You can slowly diversify to get in some power, consumer and mining.

      Comment by Gus Cosio | January 31, 2011 | Reply

      • bought some MBT and a little GEO for playing.
        next would be EDC pag makahabol pa ako.

        Comment by RmR | February 4, 2011

    • RmR, just like you, I’m property heavy. I’m slowly accumulating MPI, AP, EDC and some MER. FLI went far down today… I’m tempted to average down!

      Comment by weena | January 31, 2011 | Reply

  2. Glad to have finally met you sir! It was a pleasure talking to you and hearing your insights on individual stocks first hand.

    -Norman

    Comment by twisted_pretzel | January 30, 2011 | Reply

    • Glad to meet your acquaintance as well, Norman.

      Comment by Gus Cosio | January 31, 2011 | Reply

  3. I’ve loaded up on RLC. In combination with VLL, it now comprises about 33% of my holdings (The other 33% being MPI)

    If you believe what the other sources are saying, RLC’s mall component alone is worth 20p. And VLL’s 17k hectares of land is alone is worth 5+ pesos per share. Basically, you can buy this two excellent companies at a steep discount.

    Although whether or not the market corrects itself is another matter. But I’m quite happy I bought this two for the moment.

    Comment by jasper | January 31, 2011 | Reply

    • Jasper,
      It will just be a matter of time when both RLC and VLL move closer to fair value.

      Comment by Gus Cosio | January 31, 2011 | Reply

    • I sure hope so.. But in the meantime, I’m suffering some loses. :ouch3x:
      DGTL -4.19%
      JGS -9.21%
      ORE -15.99%
      VLL -1.98%

      Oddly enough, RLC is still above water. Although I never expected VLL to fall so low. It was at 3.5 just a few months ago.

      What’s wrong. There’s so much blood on the streets. Are the foreigners still selling like crazy? Are the locals panicking? :worried:

      Comment by jasper | January 31, 2011 | Reply

      • The psei went down by a lot of points today. Quite evidently, the situation in Egypt has affected the stock market, and the fact that the locals are panicking is just making it worse. I am on the brink of panicking myself, given that I now have 10% paper loss on VLL, 18% on JFC, and more paper losses on some other stocks like AP, SMC. But I am trying to keep my faith. The index may go down some more. I do not have the courage to cut losses, maybe because I am still hopeful that when the bloodbath is all over, the sun will begin to shine. In the meantime, I can only wait and hope for a miracle to come.

        Comment by beanstalker | January 31, 2011

      • Beanstalker, investing is not about hoping for miracles and earning spectacular results over a short span of time. The challenge is to try to beat the broader market consistently over a number of years and even decades. It’s about spotting and owning companies that have promising futures without over paying for it. These are Companies with capable and trustworthy management that have the ability to generate future positive earning surprises. There will always be noise such as oversold, overbought, political tensions, etc etc. To beat the market you should be ahead of it and not merely reacting and following daily.

        Comment by Cj ch | January 31, 2011

  4. is MER cheap now?

    Comment by loco | January 31, 2011 | Reply

    • MER is cheap right now, remember what sir gus said, 250php is a good price already to buy

      Comment by sam | January 31, 2011 | Reply

      • Really? Did sir gus specifically said that?

        Comment by Inquisitor | January 31, 2011

  5. Bloody Monday 😦

    Comment by Shan | January 31, 2011 | Reply

  6. When DMC went down to 32 levels last week I hesitated to buy. It then bounced back to 35 and then now its again at the 32 level. Is this my 2nd chance to finally get it? I really find DMC a good buy @ 32 but with the market being unstable, is it still a good opportunity?

    Comment by Chriss | January 31, 2011 | Reply

    • Chriss,
      I think DMC at 32 is good.

      Comment by Gus Cosio | January 31, 2011 | Reply

  7. Remember what those who made a killing at the stock market had said…the best time to buy is when “there’s blood on the streets”. The question is.. Is this bloody enough?

    Comment by weena | January 31, 2011 | Reply

    • Weena Egypt Uprising is the Culprit…Let’s Pray that this Problem will not spread to other countries like Kuwait,Yemen,Jordan and Saudi and Egypt not fell to Islamic Fundamentalist….

      Comment by Rene | January 31, 2011 | Reply

    • Pls also remember the traders who committed suicide on Black Tuesday. They had the same motto

      Comment by Cris | January 31, 2011 | Reply

  8. i’m now bargain hunting of my stocks,i’m including MER now, i don’t care of foreign selling, y? bcoz they don’t care about me. i’m not panicking also, i’m panicking to get more funds to buy more of my stocks, actually i’m happy that we have too many scared and feared investors this time. IT’S BUY TIME FOR ME!!!

    Comment by sam | January 31, 2011 | Reply

    • right discipline applied at the right time makes a lot of business sense. it is an investing time fellow..be greedy.

      Comment by richard | January 31, 2011 | Reply

      • Haha Richard, Sam! Amen to that. I went All in today! 🙂

        Comment by Chris M. | January 31, 2011

  9. Hi Sir Gus,
    What are your thoughts on MA? There has been some movement lately. I’d appreciate any input from you on this stock. Thanks!

    Comment by finch | January 31, 2011 | Reply

    • It’s a speculative stock. You may win a lot of money there and you can also lose more… I suggest not to buy if you’re a fundamentalist.

      Have a good day!

      Comment by PoGGs | January 31, 2011 | Reply

    • Finch,
      If it is a matter of mineral resource,MA has very good reserves. The stock’s problem is that the controlling owners of the company have not been very straightforward with their shareholders.

      Comment by Gus Cosio | January 31, 2011 | Reply

  10. NIKL vs ORE analyst research :” While it is true that nickel mining is a simple business that more or less is a pick, shovel and dump activity, it is not as easy as it appears. As we pointed out, nickel grades of 1.2% or lower – which comprise the bulk of most deposits nationwide – are paid at very large discounts, therefore any slight drop in quoted nickel prices will make the whole operation – which involves considerable labor, fuel and transport costs – unprofitable. Even with a higher grade, there is the question of supply. One shipment is 50,000 wet metric tons of ore. NIKL is only one of 2 companies in the Philippines – the other one unlisted – capable of filling those ships within feasible economics and schedule frames. This consistency of supply is what attracts established long-term buyers like Sumitomo, PacificMetals of Japan and Baosteel of China to lift ore from NIKL vs. other small operators. “

    Comment by Cj ch | January 31, 2011 | Reply

  11. Hi Gus,

    Meeting you in Cebu was the highlight of my week. Thanks for meeting us in spite of your busy schedule.

    My portfolio took hits these past days but is still conservative with quite a huge chunk in cash. I plan to start accumulating when the index closes in on 3,800. I’m following dips in DMC, AP, and EDC and biding my time. My blackhorse bets are PNX and SMC because of their very low PEs and aggressive expansion plans for 2011. I wonder what you think of them?

    Thanks for sharing your expertise and for helping promote investing in the PSE. I always thought the whole Philippines could benefit from larger public participation and from a broader investor base, not just the rich.

    Comment by Orven | January 31, 2011 | Reply

    • Orven,
      I was happy to meet you guys, too. I’ll keep you posted of our next program in Cebu.

      Comment by Gus Cosio | January 31, 2011 | Reply

  12. Good day Gus,

    We feel honored you mentioned us in your blog. Though our Coffee get-together was kind of bitin since we wanted to discuss so much with you! And we can’t wait till you get back to Cebu again!

    I was amazed with what you shared with DMC, being 0.40 cents last 2003 to around 32 pesos today. And when you traded TEL at 211 last 2004 which is now around 2400. Those are crazy growth rates in less than a decade!

    Any guess what are the next TELs and DMCs in like 5 years? Thanks!

    Comment by Gordon Gekko | January 31, 2011 | Reply

    • Hard to say Gordon,
      I think a guiding factor is the companies growing importance to the economy. You may not agree with me but among my candidates are DGTL and EDC. DGTL because if they are really serious about the telco business can really carve out a bigger niche for themselves. I found out that they have not yet penetrated other regions yet, so they have growth potential. EDC is the only geothermal player in the region today. I understand that they will be going into joint venture in Indonesia. If that is successful, that poses tremendous growth. I own both and I just buy a little at a time, and I’m willing to forget it for maybe a year or so.

      Comment by Gus Cosio | January 31, 2011 | Reply

    • Gordon,
      another one I’m following but have not yet bought is COAT. It is into bio-diesel. One of these years, oil will become too expensive and we will have to turn to bio-fuels.

      Comment by Gus Cosio | January 31, 2011 | Reply

  13. Sir Gus,

    I was in your office yesterday to open an MF. Unfortunately, I wasn’t able to meet you in person. Regarding MEG, do you see any growth for this company this year?

    Thanks sir.

    Comment by mylene | February 1, 2011 | Reply

  14. Sir Gus what’s your TP for ORE for Q1?

    Comment by AbysmalSpecter | February 1, 2011 | Reply


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