Gus Cosio says so

Ideas on the Philippine Stock Market

Times are tough!

7:30 pm  Tuesday  15 February 2011

Ours is a market that is still weak.  Sellers continue to appear on market strength indicating further jitters among the large investors.  Even the smaller value turnover today suggests that the market continues to languish in the bearish sentiment that has been hugging the market since the beginning of the year.  Actually, the equities market globally is still looking for a solid trend.  Even if money has already moved back to the U.S. and Europe from emerging markets, there have not been strong signs of conviction in those markets.  I caution everybody, therefore, not to expect any strong rises in prices over the coming days.  If at all, price action in that direction should be met with some selling.

For whatever its worth, I would like to share some views on stocks based on my observation of their price action over the past few days.  This is the way I call it.  The strong stocks which appear to continue to hold its own against all that is negative in the market are AP, DMC, JGS, NIKL, and PX. These stocks look to have very little selling is going on.  Actually, you can detect that buyers appear on dip.  A stock like AEV looks vulnerable to a sell off on further profit taking because of its recent price spike.  Among the banks, BDO and MBT look to be stocks on the rebound, but whether the bounce can be sustained is another matter.

In my view, stocks that appear to be bottoming out are EDC, MER, BPI, RLC,URC, SLI, SECB and CEB.  You can see from their price action that a base is forming where buyers emerge.  I think people are slowly accumulating these stocks.  FLI is one stock that is looking to be bouncing from a double bottom and may be worth a trading buy.

Among the stocks that look very weak are TEL, ORE and PNB.  while these stocks are already oversold, the dumping may continue.  TEL, however, is extremely cheap at this level except that the disclosure from Globe cutting cash dividend payment has cast a pall over TEL’s dividend yield.

I do not know when market negatives will eventually be shaken out.  There are two strategies people can do – choose stocks which they wish to accumulate and nibble slowly or find stocks that look like they are ready for a technical rebound and pick it up for a short-term trade.  It is tough times ahead, so we’ve got to toughen up or else we lose.

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February 15, 2011 - Posted by | Financial markets in Asia

71 Comments »

  1. thanks po sir gus for the sharing your thoughts…

    sir, any thoughts po with PCOR’s surge today?
    it went up by P1 which is equivalent to 7.16%…

    it’s so hard to understand the market right now. PCOR surged 7.16% and I don’t know any news that would have contributed to it….while SECB, who reported a P7.2B earnings had an initial surge of 3.86% (P3.10) but eventually closed at -P0.10 lower than yesterday’s closing price.

    Comment by ricky | February 15, 2011 | Reply

    • I think the other discipline in trading that would probably have an explanation would be the technical one (TA, on their parlance).

      I hope the TAs would have a more thorough explanation on PCOR’s movement.

      Comment by vicoy | February 15, 2011 | Reply

      • Guys to make it simple, PCOR was being accumulated by some brokerages namely Deutsche Regis, Asia Sec, DW Capital, The First Man Resources and UBS arranged by accumulation. @ 14- 14.5 levels from Jan 26- Feb 14. This was actually bound to happen it was a perfect setup actually with the low volume. Hope my explanation helps

        Best Regards,
        Rav

        Comment by Foreign Investor | February 17, 2011

  2. why do people still dump ORE, when shipment is coming this march? ( i know this is long overdue)

    Comment by buhawi | February 15, 2011 | Reply

    • let the shipment pursue so that people will buy..

      Comment by Blogspot | February 15, 2011 | Reply

    • Sir Gus, any insights?

      Comment by Bu$h | February 15, 2011 | Reply

    • ORE is still a speculative play. It is something that is not backed with solid fundamentals and this will continue until the rumored shipments will push thru. Who knows, the sell-off is intentional to flush-out weak hands and so others can buy cheap until the shipment will push thru.

      Comment by Claire | February 16, 2011 | Reply

      • Technically speaking ORE chart is not looking good, currently at descending channel. I am monitoring this stock and planning to buy when selling subside.

        Comment by jaayem | February 16, 2011

    • Buhawi,
      until the first shipment is made, people will not take ORE that seriously.

      Comment by Gus | February 16, 2011 | Reply

  3. I hope tough times end soon. We felt the bear’s presence for quite sometime now. Hope the bull comes for a visit really soon. :))

    Comment by Shan | February 15, 2011 | Reply

    • Shan,
      this is not yet a bear market. wait if it slides to below 3600 and does not recover in 3 months. That will be a bear market. What we have now is merely a squeezing out of the weak players. This is where real tuition is being paid. Here is where real trading is being learned.

      Comment by Gus | February 16, 2011 | Reply

      • Agree sir on the tuition fee thing. I’ve paid a lot in 2006. I wouldnt want to pay except for miscellanous fees when I need to re-balance or re-shuffle portfolios 🙂 I would say this is like a marathon, you pay for time lost if you wanna do a pit stop.

        Comment by Mark Anthony | February 17, 2011

  4. Manila water and maynilad(Mpi/dmc) raising rates this week..is it good to buy them sir Gus?

    Comment by rene | February 16, 2011 | Reply

  5. Sir Gus,

    Would you be a buyer of MBT at current prices? Thank you 🙂

    Comment by KennyV | February 16, 2011 | Reply

    • Mbt is good @ 55/sh…if i were you wait for PNB to fall below 39/sh i think Pnb could go down to 35 within 3 to 4 months….

      Comment by rene | February 16, 2011 | Reply

    • Nope. I consider buying @ 28 and below. As of latest quarterly disclosure, MBT is among the banks (along with PNB and BDO) that have the lowest return on equity, although it has the highest profit margin in the industry. But I still believe that if I should then I would buy it for a steeper discount from its net asset value

      Comment by chris munti | February 16, 2011 | Reply

      • 28 and below!!?? haha that is preposterous, hindi mangyayari yan. ill bet my life on it thats not going to happen.

        Comment by AK-47 | February 16, 2011

      • @ chris i dont think it will go down below 28..watch out for 2011 Q1 GDP it can make PSE higher or it can accelerate the Sell-off..think Positive

        Comment by mike | February 16, 2011

      • mike,

        I always think positive. A sell-off, or buying stocks at cheap valuations, is a big positive for me. Is it not to you? I look at the current sell-off in our market as a positive thing because I can add into my positions at lower risk-reward ratio. 😀

        Comment by chris munti | February 16, 2011

      • Hi Chris Munti. You remind me of a seller who priced his lot way above the market value. This give us the notion that the seller was not intending to sell after all. 😉 Well, if you are waiiting for MBT to fall to 28 before buying, and if that happens, you will realize a 32% discount vs the bv of 2009, it’s P:E down from the peak of 17x to 7.12x. This will be a great bargain, HOWEVER, the chance is minimal because looking at past bottom line, MBT is doing good net income year on year, netted 2.44/shr in 2008, 3.07/shr in 2009, estimated 3.93/shr in 2010.

        Comment by Benson Lim AXA Life | February 16, 2011

      • MBT: if I could buy it @ 28, I would; yes, you’re right. chances appear minimal, but not impossible. I would only be interested in buying this stock @ 28 below (that’s my fair price).. right now, other banks have more attractive valuations 🙂

        Comment by chris munti | February 16, 2011

      • hi chris,

        actually its CHIB who has the highest profit margin in the industry at 50%..MBT is only at 20%, BPI at 29%, SECB at 41%, UBP at 33%, RCB at 24%

        Comment by cliffhanger | February 16, 2011

      • WOW! MBT @ 28? i will allocate big part of my funds if that happens.
        when would that be, this year? next year? or after how many years? excited!!!

        Comment by RmR | February 16, 2011

      • 28 pesos for MBT is not even a realistic buy price in the near future, as this price only appeared because of the global crisis years ago.

        Everybody wants to buy the cheapest price possible, but I hope we can post realistic buy prices and strategies here.

        Comment by tina | February 16, 2011

    • My recommended strategy for MBT in the near term is a buy region of 58 and a sell region of 65. You can tighten the range if you wish, but I think you can maximize returns over the next few weeks by trading this range.

      Comment by Gus | February 16, 2011 | Reply

  6. “…money has already moved back to the U.S. and Europe from emerging markets, there have not been strong signs of conviction in those markets.” I beg to disagree. Infact the Dow is on multimonth highs now & any pullback brings more US retail & fundie investors in as they have liquidated their bonds for equities. My 2 cent worth.

    Comment by MaxM | February 16, 2011 | Reply

    • noted, thanks.

      Comment by Gus Cosio | February 17, 2011 | Reply

  7. Capital preservation is the best strategy for now. Wait…till the downtrend ends.

    Comment by Jen | February 16, 2011 | Reply

    • Slowly accumulating stocks should also be good for some as a strategy if your not yet good at market timing 🙂

      Comment by jhesqi | February 16, 2011 | Reply

      • Well for those who have huge money, enough to make a trend, slowly accumulating would be great! But for those who follow trends and have meager resources, staying out of the market would be an advantage in the meantime.

        Time to refresh Technical Analysis for the next bull market.

        Comment by Frank | February 16, 2011

  8. Thank you very much for your post Sir Gus. I really need this one. I am in the position now were my profits lost 50% from the Oct 30, 2010 level. However, my investment were intact due to accumulation of stocks during 2008 and 2009. What I will do is be tough when everybody are panic like the situation were are now and looking forward to the time were fundamentals will be given importance.

    Comment by Benson Lim AXA Life | February 16, 2011 | Reply

    • imo, sometimes the right approach is to take profits and buy back those shares at your comfortable price. as gus said, nobody lose money by taking profits 🙂

      this is what i did with MER and SCC.

      Comment by rdthedeveloper | February 16, 2011 | Reply

      • Thanks rdthedeveloper. I learn my lesson on this experience. While I pursue for the long term, I need to keep in mind locking in profits.

        Comment by Benson Lim AXA Life | February 16, 2011

  9. To anybody fooled by “chris munti” and his so called website. The websites owner had this to say “This morning, I was perplexed by a spike in web traffic coming from a certain blog called Guscosio WordPress. After checking the source of traffic, it appears that a guy posting on that forum was attempting to link the URL of this Colorofmoney website with his name and attempting to misrepresent that either i am the one posting on that blog site, or that he is associated with me. There was no attempt being made on that blog to clarify that the weblink this guy is using, is not his.

    If you are one of those readers coming from that blog site, please be informed that i am not associated with anything being posted on that Guscosio wordpress site. I have nothing to do with it, and my URL is simply being misrepresented.

    I was not posting anything on the internet for the past 2 weeks as i was out on vacation trying to enjoy some warm climate somewhere, after spending several weeks in hypothermic winter. Trading data being posted on this website came directly from the trading office while i was away.”

    Please dont claim ownership of something that is not yours

    Comment by Rex | February 16, 2011 | Reply

  10. what i did was to average down, sold some positions on ORE and used the proceeds to acquire additional MPI and bought some more PCOR to average down. As soon as i reach my target prices i will take profit and move some cash to mutual fund.

    Comment by jofoler | February 16, 2011 | Reply

  11. I thought, I already got ORE @2.70 and 2.81. Still, it went down further.

    Comment by Ogie | February 16, 2011 | Reply

    • I mean, I thought I already got it cheap… 😦

      Comment by Ogie | February 16, 2011 | Reply

  12. sir gus, it is possible FPH would bounce back to 65 lvl? Is this the right time to accumulate ORE at a current price?
    thank

    Comment by ron | February 16, 2011 | Reply

    • I’d rather keep my opinion for ORE close to my chest. I like the stock though it remains to be speculative. The risk/return prospects looks fine to me except a lot of people were thinking to make money quick on this stock. Fortunately, I can afford to follow the risk which really decreases as the price goes lower. You’ll have to decide for yourself depending on you risk threshold.

      Comment by Gus | February 16, 2011 | Reply

  13. Sir Gus, I just read in the paper that global inflation on food prices rises by 29% from a year ago, where the 15% rise was accounted from Oct 2010 to Jan 2011. This news surprised me considering we have only 3.5-4.5% inflation for 2010. How will this affect global equity in the months/years to come? How much is the degree of chances that this cannot be well controlled by the governments around the world? How will this affect PH equity market?

    Comment by Benson Lim AXA Life | February 16, 2011 | Reply

    • Benson,
      Inflationary expectations force valuations to adjust to higher interest rates which result from monetary authorities tightening credit. Remember, when you invest, you let go cash in favor of stocks. When cash gets tight as interest rates go higher, there is less cash chasing stocks. When eventually people need more cash and credit is tight, they sell assets or stocks. In the PH, credit has never been loose over the last 5 years. Right now, our market is adjusting to global sentiment on inflation in emerging markets. That takes away a lot of investing liquidity for our market. The jury is still out whether local investors will plow their cash into the local stock markets because they think future returns are attractive here. Personally, I think it is safer to invest here. Ask those who lost a lot during the sub-prime crisis.

      Comment by Gus | February 16, 2011 | Reply

  14. If you have 6000 php tomorrow, what stock would you buy? I know this is just a small amount of money. Any suggestions will be appreciated… 🙂

    Comment by Cathy | February 16, 2011 | Reply

    • at the prices now, id have to say FLI..

      passed most of my conditions in debt/equity, price/book value, price/earnings, growing earnings and revenues, high profit margin..

      but in reality, its really hard to find that one best stock thats going to make money for you. even with good fundamental numbers, theres a chance that the stock will still go down within your time frame. id prioritize thinking more on diversifying 🙂

      Comment by cliffhanger | February 16, 2011 | Reply

    • 200 shares of NIKL

      Comment by buhawi | February 17, 2011 | Reply

      • My bet is JGS. buy it now.

        Comment by Adnan | February 17, 2011

    • 150 shares of AEV….or, a darkhorse is, 300 shares of PCOR

      Comment by ricky | February 17, 2011 | Reply

      • wow. dami thumbs down. i wonder what’s wrong with my post?!

        Comment by ricky | February 20, 2011

    • AEV or DMC

      Comment by jopard | February 17, 2011 | Reply

      • I’ll buy Nikl, DMC or EDC

        Comment by Shan | February 17, 2011

      • aev

        Comment by Adnan | February 17, 2011

    • buy VLL shares, lower mv vs bv at 4/shr. lower P:E ration compare to other major developers.

      Comment by Benson Lim AXA Life | February 17, 2011 | Reply

    • I’m a fan of AGI. wait till tomorrow when it goes down to 11.30ish. If not, with current prices I’ll go with FPH and then wait.

      Comment by weena | February 17, 2011 | Reply

    • As you can see, hard to get anything useful with such a question as 10 people would give 10 (or more) good suggestions LOL

      I suggest you look at the available info, choose what you yourself want, and go for it. Better to not let someone else choose where you spend your money… unless they’re professional fund managers.

      Comment by Jay | February 17, 2011 | Reply

    • 1. add Php700-Php800 more and buy 1,000 shares of GMAP.. 🙂 sell when it reaches Php10, or when you can find a high-quality bond that can pay you at least 8.5% net p.a.

      with a 2-year investment horizon, buying GMAP at Php6.80 and selling it at Php9.90 (at least) will give you a net compounded return of at least 20% p.a. NET (on top of the dividends)

      2. if you’ll be lucky to see VLL at Php2.50/share, buy 2,400 shares of VLL.. 🙂 sell when it reaches Php4.50

      with a 2-year investment horizon, buying VLL at Php2.50 and selling it at Php3.64 (at least) will give you a net compounded return of at least 20% p.a. NET

      happy investing! 🙂

      Comment by aaron | February 18, 2011 | Reply

  15. Guys,

    Any comment on Megawide IPO? Thanks

    Comment by ebbay | February 16, 2011 | Reply

    • there’s not much to say about MEGA since it hasn’t been traded yet….

      it had around P300M earnings last year and is said to be expected to earn some P700M+ this year…main client is SM.

      That’s all I know.
      Whether it will be warmly accepted by investors, we’d only know once it gets traded, which i think (am not so sure about the date) is tomorrow, Feb 18.

      Comment by ricky | February 17, 2011 | Reply

  16. I think many Day traders are buying TEL thats why the stocks is still going down…

    Comment by Remo | February 17, 2011 | Reply

  17. Hi Sir,

    At what conditions would you think the foreign funds would return here? And what are their chances of them happening in lets say 2-4 months?

    Thanks

    Comment by Bell | February 17, 2011 | Reply

    • Malabo in the next 2-4 months. PSE would have to rely more on local funds for awhile. As I’ve told Chris before, investing outside your base always have greater overhead not to mention you always have to take in consideration fluctuations in the exchange rate. Earnings reports have been good in general in the US (DELL was awesome for me yesterday) and there’s no signs of slowing down. My non-US stocks are now down to 15% (about 3 Euro stocks I’ve kept that are doing well) and still it’s the most underperforming among my stocks. PSE potential returns has to be that much better for foreign funds to return.

      Remember, funds have left emerging markets in general, not just the PSE and PSE is not exactly at the top of emerging markets list. Foreign funds will poke here and there and test the waters but it will take a while before they commit anything substantial again considering how robust the US stocks are.

      Comment by Mars | February 17, 2011 | Reply

  18. Sir Gus,

    Do you think this uptrend will hold? Is 3,620 points still looming? I’m quite jolted today because most of my shares are up after a month of languishing at the “bottom”. Time to buy, sell or wait?

    Comment by weena | February 17, 2011 | Reply

    • @Wenna We must enjoy the Rally while it Last:)

      Comment by Ponce | February 17, 2011 | Reply

    • as what most technicians would say, with the psei as a whole, you have to wait for a support base to be set before you start buying, or wait for a break of existing resistance…

      but per stock, you have to identify the ones that are trending up or the ones who can be range traded….then identify the support and the resistance and use them as basis for buying and selling

      Comment by ricky | February 17, 2011 | Reply

      • ones who use technical analysis.
        technicians for short.:)

        Comment by ricky | February 17, 2011

    • It’s too early to tell. There is still net foreign selling (meaning most of the buying is local) and volume is low. The possibility of big sell-offs on strength in still out there especially as PSE approaches the 3900 barrier. In any case the best case scenario right now is for foreign funds to stabilize to allow local fundamentals to take over again. When that happens, then an uptrend is possible again but at a more sustainable rate unlike last year. Last year was a bubble anyway and was destined to burst one way or another.

      Comment by Mars | February 17, 2011 | Reply

  19. Friends what can you say about FLI?

    Comment by jofoler | February 17, 2011 | Reply

    • I like FLI but it’s not moving up for quite some time.

      Comment by weena | February 17, 2011 | Reply

  20. I have a lot of paper loss on some stocks. Namely DGTL -13.15%, ORE -18.6%

    But oddly enough, I am entertaining thoughts on buying more ORE. DGTL, I’ve forgotten all about.. lol.

    But I really need to sell JGS since I already have RLC and DGTL. Though JGS is really cheap right now as I think at its price, its just 8x pe

    Comment by jasper | February 17, 2011 | Reply

  21. please be informed that “chris munti” is in no way connected with me

    Comment by Chris M. | February 21, 2011 | Reply


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