For regular followers, you can now find my market views and comments at http://www.guscosio.com. Hope to see you there.
dear blog readers,
I am now in the process of developing a new site which I hope can block out disruptive activities. I plan to have the first post by Monday. Please check again with this site for the new site address. I am just testing it for administration. i am not that tech savvy so it is taking me sometime to familiarize with the site. Bear with me a little more.
P.S. For Cebu followers, i will be emceeing the Cebu launch of firstmetrosec.com.ph on-line trading in Cebu on the 17th of March. Those who want to be invited, you can send me you names and a few details at firstname.lastname@example.org although I confess that will have to screen you first. Please email me asap so I can work on it.
I am planning to discontinue this blog because somebody has been posting comments in my name. I do not want to be misquoted or misrepresented by others as I have my business and reputation to preserve. There are even people who I think use this space even to subtly insult me. I just do not want to give you satisfaction. It is not worth my effort.
I will, nevertheless, continue my investment literacy advocacy through other means such as seminars conducted by my firm and affiliates or other organizations which invite me to speak in their assemblies. For those who want to continue to follow, you’ll know how to keep in touch.
I will resume my blogging when I find a secure way of managing it and find the time to do it. In the meantime, this blog space will exist only for my personal announcements.
For regular followers, I am sorry. For people who only seek to destroy, you’ve succeeded. My question is, what now? Did it make you a better person?
The disruptive action on this blog is starting to get severe that even my name is being used by a gremlin comment writer. I think he or she has written comments with my name twice. I will choose to ignore this person and the mischief that he or she is trying to foment. I have a fundamental purpose is making this blog flourish and whoever is trying to sabotage the longevity of this blog will not discourage me from doing so.
I would suggest that legitimate followers be discerning in following comments. If the tone or language appears to be condescending, impolite or vulgar, then just ignore it. From this day forward, I will try to be more vigilant in reading comments. I will erase any foul or vulgar language or snide remarks that appear offensive and mark it as spam. In the meantime, to those of you who find this space useful, bear with me and understand that there is a hacker whose intentions are far from decent.
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.
We will be resuming our seminar series on Wednesday 2 march 2011. As usual, there will be snacks and refreshments. More importantly there will be a lot of food for thought.
I am looking forward to lively discussion among those who come. If you have questions, write them down and pass it forward when you come on Wednesday. We will give it a shot.
6:40pm Thursday 24 February 2011
It is extremely difficult to make a call on the broad market due to the multifarious influences such as global commodity inflation, the price of oil and the tension in Libya. Cursorily, broad problems exist such as disruption in oil supplies, displacement of OFWs working in Libya, political re-alignment and saber rattling among allies of the troubled countries and possibly long debates in the United Nations General Assembly and Security Council.
My friend used to say that in his household, he makes the decision on the major issues like who should the Philippines have strong diplomatic relations with, global warming and climate change, and whether the Euro should be abandoned by EU member states. His wife is the one who decides on the minor issues like the monthly household budget, where the kids will go to school, what brand of car they should buy. I guess they have a notion of what matters the most.
There is very little we can do about what is going on in the world, but we can get to have a look at a few minor details. One minor item which I have in mind is ORE since I sense that there are a number of people losing money on this stock. For your benefit these are some highlights of of the notes of one analysts note:
ORE owns 94% of Citinickel which is the sole owner of the mining claims of the Pulot and Toronto mines located in Barangay San Isidro, Bato Bato, Narra, Palawan, 100km south of Puerto Princesa City. Both mines contain 1.83% to 1.85% nickel at a cut-off grade of 1.2%, which is one of the best explored nickel grade in the Philippines today.
- ORE’s stockpile as of Feb. 12, 2011 stood at 142,000 cubic meters or 156,000 Wet Metric Tons of ore with grade of 1.8% nickel or better per ton.
- Several mountains of ore (stockpile) are on two stockyards, at a maximum distance of 2 km from the mine port and 6 km from the vast expanse of the open mine pit, 400 meters above sea level . High grade (saprolite) nickel ore can be extracted on shallow soil. Company officials say that overburden is 2 meters deep and saprolite protrudes at 6 meters deep.
- ORE’s first shipment has been delayed thrice since last year up to early 2011. They hope to ship two boatloads or 110k WMT to 165k WMT, at best within the month of March. Subsequently, they plan monthly shipments until Sept. of at least 110k WMT per shipment.
- Tonnage (mining output) for the year and shipment will be 750,000 WMT on robust selling price of $83/WMT based on a grade of 2.1% which is the indicative weighted grade for the 700 ha. Toronto mine per Mines and Geoscience Bureau (MGB) records shown by ORE officials.
- Operating margin is 80% on the abovementioned selling price as ORE’s all-in mining cost is $15/ton. We estimate ORE net profits assuming selling prices at 1.8% nickel grade and 2.1% grade of $63/ton and $80/ton to be PHP1.1bn and PHP1.6bn for PE of 3.5x-2.5x, respectively.
- Risks that we see are more rains and flooding of the mine site and a port under repair, which ORE claims can accommodate two barges at a time. The port is 200 meters long, 3.5 meters deep and faces the Sulu Sea.
I reiterate that I do not suggest this stock to the faint of heart, and I am not saying that the price will not slide further because I think it can. This is purely for the information of those interested.
In spite of a good number of stocks showing very attractive valuations, the markets are likely to slip further. It is no longer a matter of value but rather a cloud of fear that people are looking at. I have no idea when the market will turn except that net foreign selling in our market cannot go much further. That, however, is no guarantee that there will be local buying to lift the market. If you are going to stay in the market, you better be prepared to sit on losses for a while. In my case, I’ve been through cases like this before, so I am used to the shelling and explosions already. In times of war, you just have to keep your head down; but it is also in time of war that the wily get really rich.
Dear blog readers,
I noticed lately some discussions that have been rather unpleasant to read. There have been exchanges that seem to irritate a number of people as well as tirades on other people making comments. There have also been occasions of bogus comments where identities of regular readers were obtrusively used. Then one reader commented that there may be some parties who were playing tricks on the site. These were causing antagonistic sentiments among readers.
I realized that there have been and continue to be a disruptor coming into the blog. I do not know what his or her motives are, but he or she have managed to get the ire of some people. I realized this disruptor when I replied to a comment from a public terminal in an airport where I did not log on as the owner of the blog. after that comment, I saw a comment with my name and email address on it but I did not make the comment. I deleted the comment when I recognized that it was not me who said it.
Anyway, I do not know who our disruptor is and I do now really care. I think whoever you are, you are simply trying to destroy whatever good that we have tried to achieve in this blog.
May I suggest to bona fide readers and followers to always use polite language when making comments either to my posts or to others comments. That way, we will know who are making legitimate comments and who are not. We should also just ignore those comments which come on as irritating. Let us not dignify them with a reply.
I am of the belief that many can be helped by this blog with honest and candid thoughts coming from all of us. I would like to run this blog as long as I can and I will not let any disruptor dissuade me from doing so. I would like to seek everybody’s cooperation to take it upon themselves to be discreet and honorable. After all, what we really want in this site is for everybody to benefit.
Thanks and God bless you all.
11:10 pm Thursday 17 February 2011
Once again I’ve been on the road and have not had enough time to post my thoughts. Davao City was very nice – clean, orderly and very wide roads. I’d like to visit the city again for a longer time. I love Davao pomeloes.
I’ve also notice so much unpleasant posts being made. I will ignore such posts and not dignify them with a comment. I would like to suggest that decent people on the site be a bit more discerning and respond only to comments that are sensible and constructive. This is not a site where everybody has to think the same way, so if people do not agree or like your point, please leave it at that. I never intended this site to convince people to buy, sell or adopt my views on a stock or the market. I want people to develop stock market sense with the comments I make. I also want people to understand that there are nuances to local markets so that they do not become very bookish in their investing or trading activities.
Anyway, I am very pleased that the market has been recovering over the past week although I remain cautious. Today is a very good example of a market going strong, but the foreign funds are net sellers. It is likely that they are selling much of their TEL because it has become less important in the index. It used to be that Foreign funds used TEL as their main exposure to the Philippine market. Now, you have other blue chips like AEV, AP, DMC, MBT, BPI and the like that can give better Philippine exposure than TEL.
In general, I do not think that the broad Philippine market can go much higher because local investors remain wary of foreign funds. Foreign funds, on the other hand, are continuing to reduce exposure to the local market. It will take a few more weeks before sentiment changes, so please think in terms of trading a range. Nevermind if you take short-term losses. You can make it back if you successfully trade the range.
In the meantime, I’ll be off to the beaches of Panglao Island for a few days. I don’t think this market will run away from me anyway, no matter where it goes.
Thursday 10 February 2011
It looks like we cannot escape the negative sentiment of higher interest rates down the road. Stocks in the Asian neighborhood are generally down with most players wary about China’s rate hike yesterday. A Hong-Kong based economist at Credit Agricole says: “Global markets may begin to see the frequent rate hikes as a sign that a growth slowdown in China is inevitable. But in the end, the move will be seen as a sign of strength, with solid growth momentum allowing policy makers to raise rates.” What the guy probably means is that monetary authorities are not at all worried about halting the growth momentum in China. They just have to cool down inflationary forces before it structurally prevents further growth.
Property prices had been a major concern for China since 2007 with the Olympics related boom in asset prices. Actually, property prices have cooled down a bit but commodity prices have moved higher.
In the Philippines, property prices are also creeping up inspiring confidence among developers. I am not sure if the confidence of developers is credible enough, but ALI has been disclosing through mass media that it is looking to beat its record residential property launches of PhP50billion in 2010 with at least a double-digit increase for 2011. Sales take-up by MEG and FLI in 2010 were very encouraging. MEG disclosed sales of PhP39.6bn (+51%) while FLI said sales were PhP9.9bn (+42%). There should be very good prospects for 2011 as players land bank more aggressively with offers for the 103 hectares FTI property from MEG affiliate ELI of PhP14billion above the DoF’s minimum price of PhP13billion. RLC made an offer for the same property last month for an undisclosed amount.
Fundamentals are definitely sound but sentiment is ruling the trend and property stocks are among the worst performers YTD: MEG (-17%), RLC (-14%), and FLI (-11%). The reason I mention this is because in our seminar last week, our analyst Mark put a few stock through Benjamin Graham stock screener and RLC stood out. I also saw a property report of two large houses having RLC as a top pick stock. Considering the interest shown by some readers of this blog, I thought it appropriate to talk about the property sector and RLC which look to be both defensive and cheap valuations-wise.
I was thinking of the January effect that did not materialize this year. In fact, the market had a very negative January taking February even lower. Net foreign selling has not yet ceased, although it has slowed down. Sentiment will eventually give way to fundamentals. It would be wise to stick to stocks with strong fundamentals.