Gus Cosio says so

Ideas on the Philippine Stock Market

A rational pessimist

11:45 pm   Sunday  27 February 2011

Unless there is a dramatic shift in the global political tensions, I do not think that our market will be going anywhere in the coming days.  It is really quite a pity considering the constructiveness that we saw in the last quarter of 2010.  This only goes to show that we cannot underestimate the fickleness of markets.  It seems that movement of crowds will always be the norm in stock markets which makes it an imperative that we have an insight on crowd psychology.

When the inflation fear gathered momentum, there was no stopping it.  I believe the fear will be among us for sometime more.  Even the tension in the Middle East is a manifestation of inflation fears given that what embeds the anxiety of investors is the fear of oil prices sky rocketing as OPEC supplies get threatened by lower production.

The developed markets while enjoying a bull run over the last two months is showing some signs of weakness.  Of course the downward revision in US GDP estimates from 3.2% to 2.8% does not help the cause for equities world wide.  Surely, strong domestic fundamentals in the Philippines will not affect global mindsets very quickly.  Everybody is looking at the big picture, and, unfortunately with big pictures, small markets can hardly be seen.  The key is for local investors to gain strong conviction on the fundamental values that domestic stocks present.

A case in point is TEL.  I must admit that while TEL has been cheap from 2400 and below, I have yet to be compelled to pick it up in spite of the impending cash dividend which is usually paid out in March.  I guess I value cash more greatly today than I value even high yield stocks.  It gets to be that way when you sense that the crowd will be against you.  Timing is absolutely key to situations like TEL and my instinct tells me that it is not yet time.  I think that sometime soon, conditions can become very attractive to a handful of TEL followers.

In the meantime, investors must come to their levels of comfort before thy increase exposure to the market.  Whether you are a technical trader or one who puts more weight on fundamental value, you cannot escape the prevailing mood of the market.  If you are optimistic on the markets short-term performance, you are in a very small minority.  Fortunately, it is times like these when I remember a quotation from the oracle of Omaha, Warren Buffet: “The most common cause of low prices is pessimism – some times pervasive, some times specific to a company or industry.  We want to do business in such an environment, not because we like pessimism but because we like the prices it produces.  It’s optimism that is the enemy of the rational buyer.”

Nevertheless, patience and careful analysis of the situation cannot be yet ignored.

Advertisements

February 27, 2011 - Posted by | Uncategorized

46 Comments »

  1. Sir Gus, What is your insight on how will the peso will perform in the current situation? Will it be weaker or stronger for the succeeding months? My father and sister are both OFW’s. Thanks!

    Comment by Jerome Peralta | February 28, 2011 | Reply

    • Jeroeme,
      I think the Peso should be stable in the 43 to 44 range for the time being. It is actually better for the economy if the peso is slightly weaker at 45 but it is the financial or capital flows not the current account flows (trade and remittances included) that strongly influence FX rates.

      Comment by Gus Cosio | March 1, 2011 | Reply

  2. hello sir Gus! do you still have the same view as what was written in Business Banter by Maiki Oreta? to quote “One of Business Nightly’s “go to” people for market insights and the President of First Metro Asset Management, Gus Cosio, has some words of assurance. He says, ”What we’re seeing is just a major major correction of a bull run that is still very much in tact.””
    God bless!

    Comment by RmR | February 28, 2011 | Reply

    • I agree to “major major correction of a bull run” because 2010 was supposed to end up at 3,650 index but was over valued at 4,200. Anyting that is over 3,650 psei is the return of stock investment for the two months period.

      Comment by Benson Lim AXA Life | February 28, 2011 | Reply

      • Who predicted the index will end up at 3650? Who can say that the market overvalued at 4200 in dec? The markets future movement and valuation is anyones guess. The PSE index only returned about 5 percent compounded annually over the past 12 years despite TEL growth which continues to the largest index component.

        In other words most companies underperformed the index. It’s tough to outperform the market and choose companies whose profits will outperform the economy. But if you choose wisely, the rewards are overwhelming.

        Comment by Cj ch | February 28, 2011

      • Hello CJ: 3,650 psei was supposed to be the dec 2010 number if the corporate earnings of the year are to be basis of the index. This was shared to us by Sir Gus on his previous post. the line between 3,650 and 4,200 was the over value of the index due to hot money.

        Comment by Benson Lim AXA Life | March 1, 2011

      • Sorry you are attributing the difference due to hot money? The market level is a complex mechanism due to a million different factors. Corporate earnings and hot money do not make the market as these are only 2 factors. If you trust the market, you would think that the public will eventually validate on your valuations for your holdings since it is supposed to be an efficient market.

        I just want to let readers know that predicting the market movement on a daily basis makes one seem to think he or she is a fortune teller. Even with the use technical analysis which is not fool proof. Over time, there are very few professional traders who make it big trading in and out with a short term perspective. It almost isn’t wise to spend too much time in the market if you have a promising career or a business. The market is a good tool to invest in and gain good returns in the long term. Let the traders have all the excitement.

        Comment by Cj ch | March 1, 2011

      • I agree to you CJ. We are both investors rather than a trader. We use time to grow our investments. on the investment return of 2010, I only comment that the it is too high if we use the corporate earnings as basis. Aside from this, we are in agreement. All the best CJ….

        Comment by Benson Lim AXA Life | March 2, 2011

  3. I believe that the correction will last for the next 2 weeks. The bull is here to stay. It’s just so happened that it’s now surrounded by fear and global. But I don’t think these will last long. The bull will just hit the ground in no time. It’s actually a very very good time to bottom fish but be ready to have some more cash when the market slips some more.

    Happy trading everyone!

    Comment by Shan | February 28, 2011 | Reply

  4. Thank you Sir Gus for your latest thoughts. At this point, psei is still on the downward direction and shows no sign yet that the direction be reversed. Im hoping that PH good economic fundamentals, confidence of the businessess for 2011, healthy fiscal and monetary environment which BSP governor is being given credit of, will build pressure for market to go up. All the best to everybody and to FAMI

    Comment by Benson Lim AXA Life | February 28, 2011 | Reply

  5. gudday sir, do u provide some seminars for colleges or universities about stock market or mutual fund?, or the FMIC/FAMI itself?, i’m a working student and i return to school for the purpose of having a better job. i’m new on this thing but i see the potential, i’m convincing my classmate to go with stock market but there are many questions about it that i cannot answer all. i see that schools like PUP, TUP, RTU and etc have less exposure on stock market compare to DLSU, ATENEO and etc. I have this ambition that class D and lower class C filipinos will be involve in stock market. And i think people like u sir have this capacity to introduce or to reach mind of this middle class filipino to try the stock market. I don’t wanna be an employee for my entire life that’s why i give a try on this.

    Comment by Gorvanni | February 28, 2011 | Reply

    • great idea gorvanni!

      my dream of stock investment started when i was in college and i do a lot of research about this venture. while working i was able to compound a capital that is more than enough to pursue it as a full time enterprise.

      i tell you this as your inspiration, it is really feasible. you and your clasmmate may register to our forum this coming march 2, see the related post of sir gus. i like your inner drive for financial independence. goodluck!

      Comment by richard | February 28, 2011 | Reply

    • Gorvanni,

      I am really happy that a person as young as you are is mature in terms of investments and already thinks and prepares for your future.

      how I wish I was like you when I was your age.

      There are a few brokerage and mutual fund firms (Firstmetrosec, COL, FAMI)that provide seminars/talks about investing in stocks. Even the Philippine Stocks Exchange sponsors some of these.

      I suggest that you search the net (you may check the following: http://www.pse.com.ph, http://www.fami.com.ph, http://www.firstmetrosec.com.ph, http://www.citiseconline.com) to learn about schedules of seminars/talks on stock market.

      Keep it up and good luck in your ventures.

      p.s.
      if you have questions, feel free to ask any one of us (bloggers and/or readers). I’ll be more than willing to help in whatever way I can.

      Comment by ricky | February 28, 2011 | Reply

    • I am open to being a resource speaker in a seminar which you can organize in those schools. Just book a schedule with me.

      Comment by Gus Cosio | March 1, 2011 | Reply

      • sir Gus, re-post ko lang po itong post ng member sa forum na kinabibilangan ko
        “guyz kung may alam kayo firm na puwede mag information drive dito sa aming camp about investing, para ma educate naman kaming maliliit na ordinary sundalo makapag invest for retirement. kung retirement benefits lang kasi aasahan namin medyo maliit after 10 years from now considering ang inflation. 8 year palang me sa service i need 12 more years to retire hope and pray that in that span umilag ang bala sa katawan ko and makapag invest me kahit konti monhtly for 12 years.

        Last edited by lhorhenz (Today 16:17:22)

        this is the link of Stock Investing thread http://www.kerygmafamily.com/forum/viewtopic.php?id=4833&p=209

        Comment by RmR | March 3, 2011

  6. TEL is still going down. It has been due to the risk aversion of emerging markets and most of the foreign holders have this security. It is just plain foreign market selling. Market sentiment doesn’t care about fundamental of stocks. The lowest price it had was at 1800 level in Oct 2008 after the MER buy-in news.

    Comment by alexis | February 28, 2011 | Reply

  7. AEV

    Comment by jopard | February 28, 2011 | Reply

  8. The thinning volume of posts in this blog is statistically correlated with a downtrending market.

    Comment by Chris M. | February 28, 2011 | Reply

    • pre chris m., puwede ka ba gumawa ng indicator sa sinasabi mo na correlation? thanks

      Comment by Zandro | February 28, 2011 | Reply

    • The thinning of volume of the posts being made in this blog is correlated with the number of times the bogus ‘chris munti’, who also uses different names, visits this site with his worthless comments. too bad that this guy found this site.

      Comment by ramon | February 28, 2011 | Reply

    • Zandro,

      Yes. Pwede sa excel. But if you are interested you can send me a personal message and we can also discuss the pricing if you would like a copy. 🙂

      Comment by Chris M. | February 28, 2011 | Reply

      • Chris:
        salamat pre. Try ko muna using Perl scipt baka magwork. About your offer, text ya na lang pre.

        Comment by Zandro | March 1, 2011

  9. Sold Ceb.. will add tel tomorrow…

    Comment by Jack | February 28, 2011 | Reply

  10. Hi! Should I hold on to my AGI stock which I bought at 11.40 lastweek or should I change to JFC which is 68? Or if not do you suggest that I invest in another stock instead?

    Comment by Allen | February 28, 2011 | Reply

    • i suggest that you read about the fundamentals of some stocks that you are planning to buy and/or sell.

      look at the historical prices, trend if there’s any, range of prices, etc.

      these will help you decide which stocks to have.

      now whether you’d give up AGI and have JFC instead? let us see…

      AGI is in a box pattern with bottom at P11 and resistance at around P12…so if you could buy at around P11 and sell at around P12, you’d make a little money here and risk is minimal.

      JFC is now back to its price last June 22, 2010 and is definitely on a downtrend…if you hope to bottomfish and hope that it recovers at around this time, then you’d make good money in the long run. But of course, risk here is higher than AGI’s.

      Comment by ricky | February 28, 2011 | Reply

      • AGI lately is on a symmetrical triangle formation….if it breaks out, then there’s a high potential for upward momentum.

        Comment by ricky | February 28, 2011

  11. Sir Gus, What are your thoughts on VLL? It slipped 4% today. Thanks

    Comment by Lester | February 28, 2011 | Reply

  12. Any good news with ORE?what happened to it’s delivery schedule?

    Comment by reichs | February 28, 2011 | Reply

    • I’m afraid there is no news yet. I’ll post when I learn of anything new.

      Comment by Gus Cosio | March 1, 2011 | Reply

  13. MWC is now in its pre-bull run levels of P16. It is my most conservative stock position and it still went down. I guess nothing is spared from this bearish phase.

    Comment by Redge | February 28, 2011 | Reply

    • If you like MWC, you should accumulate now that is is down. Hardly any stock avoids a general market downturn, but fundamentally sound stocks always recover.

      Comment by Gus Cosio | March 1, 2011 | Reply

  14. Woah!

    AEV grew by 17.50% in 1 day! Congratz to the holders and who made money on this stock!

    Is this stock still a good buy at 47? or is it too late? or wait for a pullback?

    I actually felt that 40 – 42 was too late. I guess one the market is right.

    Comment by Gordon Gekko | February 28, 2011 | Reply

    • I think it will pullback but will rise again once they declared dividend which I think is between 0.7-1.0/share or more. This is just my opinion.

      Comment by jopard | February 28, 2011 | Reply

    • A few days ago PAPA securities made a big cross transaction. Back then AEV was still moving along with the market sentiment. I wonder if it is anything related with it’s recent price action. Too bad I did not follow the money.

      Comment by Seth | February 28, 2011 | Reply

  15. what happened to ICT?

    Comment by footballer | February 28, 2011 | Reply

    • It might be one of the stocks that may gap up tomorrow. I’ll be keen on that stock too… 😀

      Comment by Ogie | February 28, 2011 | Reply

  16. Hi Sir Gus,

    Can you share some info on the development of ORE, can you give us some details on the long awaited shipment? Ore is UP by more than 8% today.

    Comment by Blogspot | February 28, 2011 | Reply

  17. Ouch, i sell my AEV at 42php/shr, i rush things up…i bought it at 33.50php/shr

    Comment by Gorvanni | February 28, 2011 | Reply

    • profit is profit. ok na un!

      Comment by RmR | February 28, 2011 | Reply

  18. Thanks richard and rmr! I’m wondering now what will be the next big thing after MER and AEV, correct me if i’m wrong to all expert here, my wild wild guess is DMC or AGI,

    Comment by Gorvanni | February 28, 2011 | Reply

  19. Hi Sir Gus,

    I’m itching to sell my cores DMC and AGI. Should I still hold on to them? Thanks.

    Comment by Shan | March 1, 2011 | Reply

    • My opinion Shan..hold it for a couple of months if there is no need to sell. Add some if it pulls back.

      Comment by jopard | March 1, 2011 | Reply

    • DMC is showing a bearish pennant pattern, meaning it’s playing between P35 and P32 with a possibility of breaking out below P32. If you’re gonna sell it, sell it at least above P34.00 and just buy back when it drops below P32. There’s little chance it breaks above P35 unless market sentiment changes so selling above P34 is a relatively safe bet. It’s still a solid stock so it’s not a bad idea to pare down then buy low.

      AGI is steadier in my opinion and something I would rather hold than play around with. While there’s little chance it will go up significantly while the market is bearish, it’s also not a good stock to time since the support is too solid. It will languish for awhile so a more aggressive investor would probably re-direct some shares to more fluid stocks like energy stocks.

      Comment by Mars | March 1, 2011 | Reply

      • Tanks Mars. How about MER, SCC and SMC? I was able to buy these issues at a low low price months ago. Any potential you see in them? Thanks

        Comment by Shan | March 1, 2011

    • It really depends on whether or not you want to raise cash. I favor cash right now so I wouldn’t mind selling a portion of my holdings.

      Comment by Gus Cosio | March 1, 2011 | Reply

  20. sir Gus, re-post ko lang po itong post ng member sa forum na kinabibilangan ko
    “guyz kung may alam kayo firm na puwede mag information drive dito sa aming camp about investing, para ma educate naman kaming maliliit na ordinary sundalo makapag invest for retirement. kung retirement benefits lang kasi aasahan namin medyo maliit after 10 years from now considering ang inflation. 8 year palang me sa service i need 12 more years to retire hope and pray that in that span umilag ang bala sa katawan ko and makapag invest me kahit konti monhtly for 12 years.

    Last edited by lhorhenz (Today 16:17:22)

    this is the link of Stock Investing thread http://www.kerygmafamily.com/forum/viewtopic.php?id=4833&p=209

    Comment by RmR | March 3, 2011 | Reply


Leave a Reply

Please log in using one of these methods to post your comment:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: