Gus Cosio says so

Ideas on the Philippine Stock Market

Holding a pattern

6:24 pm  8 February 2011

While the value turnover was very unimpressive at 3.28 billion, what I like is the fact that net foreign selling was 330 million or 10% of the total volume yet the market was hardly changed.  The PSEi was down a mere 1.55points and only two stocks – SM and AC – moved the index 11 points down.  Perhaps, foreign funds are not as intent on selling at the current level of the index as they were at higher levels.  I think that if we rise above the 4000 level next week, we will likely invite a large wave of selling because many of these foreign funds are still looking at 3Q2010 figures.  Full year 2010 earnings reports have still to be seen.  I think the better move for the market is for prices to stay in a holding pattern until full year earnings reports are disclosed.  Good trailing earnings per share numbers provide fair guidance for stronger analyst forecasts for 2011.  So far, it is only BPI among the index heavies who has given full-year disclosure.  While there was initial selling on BPI after the report, strong demand emerged as 2011 valuations appeared reasonable.

Nevertheless, I think some short-term trading ideas are emerging.  In the mining sector, NIKL is looking very strong making the nearby target of 24 – eyed by analysts –  very feasible.  Spot nickel prices at the London Metals Exchange is hovering at $28,350 per metric ton already from just $27,000 the other week.  NIKL has a very large stockpile of low-grade nickel which still commands good prices.

For those speculating that ORE will eventually fly, you should be holding your breath a little more, but it may be worth the wait.  I hear that another group of analysts and fund managers will be flying to Palawan over this weekend which would return lost credibility on the stock.  Again, ORE is a very volatile stock which is not for the faint of heart especially if you can’t stomach paper or real losses.

Copper prices have also soared above $10,100 and it is probably why good interest is being seen in PX after slipping from a 16.20 high 3 weeks ago to current levels around 14.70.  I believe that as some portfolios hedge against inflation, base metal prices should remain buoyant making a mining stock with high production such as PX to be a good trading buy.  I suppose AT should be coming up as well, and SCC ought not be ignored.  It will take a while for coal prices to stabilize and SCC trading round 10.5X 2011 earnings is still reasonably attractive.

The non-mining shares that I think are worth looking at today are AGI and TEL – AGI because its earnings for the next 3 years will continue to be strong and TEL because its core earnings will grow slightly above GDP making it a good yield stock.  Otherwise, I recommend being counter-intuitive in your thinking because we will be range bound in most stocks.  Sell when it soars and buy when it tanks.

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February 8, 2011 - Posted by | Financial markets in Asia

34 Comments »

  1. Stock punters are slowing getting impatient…….i think a weel or two wks more of consolidation will be healthy…..but watch out for the Dow……

    Comment by Mike | February 8, 2011 | Reply

  2. Hi sir Gus,

    What do you think would be a good entry-point for PX and what would be the estimated target price. I am not a momentum trader. I prefer to buy and hold.

    Thank you.

    Comment by Mark | February 8, 2011 | Reply

    • Mark,
      The way I trade mining stocks is I correlate it to metals prices because they normally follow trends in metals prices. Having said that, I think it should be alright to get into PX at these levels ( below 15).

      Comment by Gus Cosio | February 9, 2011 | Reply

  3. Dear Sir Gus,

    Thanks for your daily guidance. currently have a -5% paper loss. Still holding 100% on my stocks mainly because of fundamentals. However, DGTL still quite questionable for me, given this consolidation, do you find that 20-30% upside of this stock this 2011? or do I need to cut my losses, bought at 1.48, lesson learned, should have sold at 1.65 last upside.

    TIA

    Comment by alssy | February 8, 2011 | Reply

    • alssy,
      I mentioned to a reader earlier that I am prepared to hold DGTL for around a year. It is not rally a stock that you can easily trade. I bought it because of it is a recovery story and I growth in earnings.

      Comment by Gus Cosio | February 9, 2011 | Reply

  4. sir gus,
    what can you say about ORE being a jockeyed stock?. Thanks. More power

    Comment by pikachu | February 8, 2011 | Reply

    • pikachu,
      In any market all over the world, people promote stocks all the time. Furthermore, they hire market makers to keep the interest in the stock alive. The Philippines is a small market and there is no formal market making rules. A stock must be actively traded for people to gain confidence in buying it. “Jockeying” gives the stock some liquidity. The problem arises when the stock being jockeyed does not have any intrinsic value. It is a speculative stock, no doubt; that is why I made sure that there was a mine and that ore was really being stockpiled. If people cannot handle trading ORE, they should avoid it like the plague.

      Comment by Gus Cosio | February 8, 2011 | Reply

      • makes sense. thank you

        Comment by pikachu | February 9, 2011

  5. What about DGTL – have you unloaded your DGTL? It looks like this stock is reaching it’s bottom very soon. What would be the target for this stock?

    Comment by Gokonwei | February 8, 2011 | Reply

    • Gokonwei (nice name),
      yes, I am holding my DGTL. I am actually adding at these levels. I am a willing long-term buyer of this stock. I am gambling that I can double my money in a year’s time. I like its recovery and growth prospects.

      Comment by Gus Cosio | February 9, 2011 | Reply

      • Sir Gus,

        Thanks for your thought on DGTL. It is also in my radar to add more on my position at current level.

        Comment by Ralph | February 9, 2011

      • Sir Gus, I also accumulated at 1.33, 1.32 and 1.30. Hope DGTL will make its run soon. )

        Comment by Shan | February 9, 2011

  6. Good Day Sir Gus,

    I saw pictures of ORE progress in Palawan and the forest cover was cleared cut, would you know if is it actually environmental issues causing the delay of its shipment? many thanks in advance

    Comment by ed | February 9, 2011 | Reply

    • From what they tell me, it is simply the weather. Rains have been very heavy.

      Comment by Gus Cosio | February 9, 2011 | Reply

  7. good day sir gus,

    maybe megawide IPO is also a reason as investors keeping cash for it. would you buy this stock?tnx

    Comment by poker | February 9, 2011 | Reply

    • only for a quick trade.

      Comment by Gus Cosio | February 9, 2011 | Reply

  8. What’s is the expected 2011 earning of SCC?

    Thanks.

    Comment by Andrew M. | February 9, 2011 | Reply

    • Andrew,
      My EPS estimate is 21 per share.

      Comment by Gus Cosio | February 9, 2011 | Reply

  9. Megawide is OK….

    Comment by Claire | February 9, 2011 | Reply

  10. Sir Gus,

    What your thought on RFM at current level and in relation to the follow-on offering/capital raising this year. It is already below B/V- 1.76 and would probably sold at least at B/V.

    Comment by Ralph | February 9, 2011 | Reply

    • RFM perhaps is affected by the inflation news. RFM products will be affected by high inflation, as people will be prioritzing basic goods for consumption. If this is the case, then a problem will arise in achieving their sales and profit target for the year.

      Comment by claire | February 9, 2011 | Reply

    • Firstmetro gave RFM a buy rating with a PE ratio of 6X based on projected 2011 ratings. Inflation would actually benefit RFM as demand for flour would likely remain stable amidst rising prices. Also, summer is coming so I expect people to buy more ice cream. Caveat.

      Comment by Seth | February 9, 2011 | Reply

  11. AP, MPI and DMC – all NFB. AP/MPI, NFB for the last 2-3 days. Price action of AP still not impressive despite 90M NFB…patience…patience.

    Comment by Mark Anthony | February 9, 2011 | Reply

    • And AGI has been rising amid continous NFS. Go figure

      Comment by Cris | February 9, 2011 | Reply

  12. Is AC a good buy at 340? or SM at 450?

    Comment by Superman | February 9, 2011 | Reply

    • Superman,
      Both stocks are a good buy but market sentiment is the hurdle.

      Comment by Gus Cosio | February 9, 2011 | Reply

  13. What seems to be happening to MBT? It hasn’t recovered since its SRO. Please enlighten us. TIA

    Comment by blooddeewings | February 9, 2011 | Reply

    • I think 4Q 2010 numbers could have been disappointing. I haven’t seen them yet.

      Comment by Gus Cosio | February 9, 2011 | Reply

  14. Good day Buds,

    Just want to share some data I just got from Citisec. They just recently disclosed F2011 figures on DMC.
    Net Profit @ 10Bil
    EPS @ 3.79

    Which means at today’s close of 33.10
    P/E is at 8.7. Ridiculously Cheap I tell you.

    Even at P40/share, P/E will still be at 10.55! Still way below the average P/E of 15 among Conglomerates. To be at par with industry average, DMC’s price has to be around 55 – 60.

    And with DMC having its business all in the right places. Water, Power, Commodities, Construction and Property. At 33.10, I think this stock has a lot of room to grow. Not to mention, the IPO of DMCI Homes coming up by 3rdQ this year.

    Oh last thing, 2012E Net Profit @ 11.7Bil with an EPS of 4.43.

    DMC might be slow and down now. But I think these are the prices we need to slowly accumulate it.

    Comment by Gordon Gekko | February 9, 2011 | Reply

    • Gordon,
      DMC should really be in one’s core holdings.

      Comment by Gus Cosio | February 9, 2011 | Reply

  15. Gus, I will be accompanying the fund managers you mentioned to Palawan this weekend.. will be uploading new pictures of the mine site in Facebook at the Market Mirror site. I was there in the site last Dec and uploaded pictures of the stock pile. I hope the stock pile has accumulated since then..

    On a separate note, you may want to study Nihao as well.. I believe this stock is pretty much ignored and will be a mining company to be reckoned with soon. 🙂

    Comment by Zandro Zulueta | February 10, 2011 | Reply

    • Thank you, Zandro.

      Comment by Gus Cosio | February 10, 2011 | Reply

  16. Sir any thoughts on my portfolio. I have EDC, MPI, AGI & FLI equally distributed. I am currently down by 12%.. Thank you

    Comment by jaayem | February 11, 2011 | Reply

  17. Hi Gus,

    Among the following stocks: ALI, AP, AT, BDO, CEB, DGTL, FDC, FLI, JFC, JGS, LPZ, MPI, PIP PNB, RFM, SLI, SMPH, SMDC, VLL which should I sell at a loss now? Is there a rule of thumb for selling at a loss? Am currently down by 12%. Thanks.

    Comment by newbie | February 11, 2011 | Reply


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