Noise

The best stock market advice I had the opportunity to read was not a book by Graham, Buffett, or any other big-time stock market guru. It was from this book that I have now forgotten the title of(I will update this entry as to the title via the comments section).

It says "shut yourself off from the noise".

I'm a believer in value investing and to me having media blurt out the next hottest company or trend just does not help in decision making. This of course includes online forums, commentaries, etc; which is to a certain extent helpful, but not always.

That being said, I'd like to mention one particular stock that has been on the receiving end of some very strong selling pressure, AP. Aboitiz Power has been one of the PSE's darlings of the year. YTD it has increased in price by around 250 percent. It has traded from a low of 8.6 to a 52 week high of 36.9. Yesterday, it was traded down to 30.10 and that to me is some cause for concern for some traders. I would be worried in the short-term, but not so much in the long run.

Short term - selling pressure does not seem to be getting any lighter and although as I type down this entry it is trading at green, this can probably be a simple bargain hunting reaction. Another reason is that its phenomenal performance this year has some fund managers and individual stock owner pocketing gains.

Long term - it belongs to one of the most bullish sectors in the PSE, energy. The Philippines has, is, and will be in the foreseeable future; lacking in power generating capacity. Another reason is that the fundamentals speak of a still-cheap stock. Put these two reasons together and as a friend of mine said last night "You can't keep a good stock down".

So what would I do? I would sell part of my AP and hold it in cash, just so if it trades lower, I would be in a better position to buy. But then, that's just me.

Comments are greatly appreciated guys! Put them down!

Telecoms and Investing Long-Term

I have so much time on my hands(it is the holiday season after all), its given me more than enough time to think about what else I'd like to talk about.

I'd like to share a little about three of the more popular telecom-based companies that are being traded in the PSE

TEL - Philippine Long Distance Telephone Company, the largest company being traded in the Philippine Stock Exchange. It accounts for, more or less, 15 percent of the weight of the local index. It also has internet and wireless communication services, more popularly known as SMART.

PLDT is one of the favorite picks for new investors and you can't blame them. It has a consistent uninterrupted dividend policy and it has to a lesser degree emulated the index in its up and downs. PE ratio based on 2009 is around 12-ish and 2010 with flat growth is expected to be the same. Dividend yield has consistently been around the 6-9 percent range. This is a true blue defensive stock that Benjamin Graham has consistently advocated to be purchased by people who don't have enough time to monitor stock market action, more commonly known as defensive investors. Although I would not discourage people from purchasing shares of this company, I wouldn't buy it myself. My reason is simple; I don't feel like I'm in a position to be a defensive investor and that there are a lot of other companies out there that may have better potential. I won't discourage anyone from buying the share simply for the dividends, if you don't have the time I can't blame you. But if you do, I believe it would be prudent to re-examine your strategy.

GLO - Globe Telecom, the Philippine's leading postpaid wireless provider. It has arguably the largest post-paid subscription base (being contested by Sun Cellular). This Ayala-led company is one of the Philippines' more successful cellular service provider that has recently branched out to internet services. Globe has been expecting a slower 2010 with growth being negative for 2010. Some foreign brokers have even put Globe as either a HOLD or SELL. Another one of Benjamin Graham's true blue defensive stocks; globe has a strong dividend policy that can sometimes exceed ten percent dividend yield. This stock, however, does not seem like it has much of an upside in the near future.

Can I also just say that service in their "convenient outlets" in Cebu is horrible. I was inquiring about internet services and much to my dismay the attending clerk gave me attitude. He actually made me feel like I've been living in the stone age forever. But then that's besides the point, an intangible factor in considering a stock pick

DGTL - Digitel Telecommunications Philippines, Inc.; the fastest growing cellular service provider in the Philippines. This Gokongwei-led company is known as Sun Cellular and has grabbed a huge chunk of the market previously owned by Globe and to a lesser extent Smart. The company's strategy is based on "unlimited" text and calls and has garnered a huge following with mid to low income households, and some high income as well. This company does not belong to the 30-company PSE index and has been widely viewed by some traders and fund managers as a speculative stock worth speculating on.

It has been trading between the 1.4-1.8 range for some time and has unnerved plenty of investors who have purchased at its peak. Without a dividend policy and with a 2009 PE ratio base of 36-ish this company is long believed to be a speculative play. It has recently encroached on Globe's post-paid subscription base and has claimed to be the leader as well. However, earnings for 2010 and expected earnings for 2011 have made DGTL a stock that is considerably cheap simply basing it on its PE ratio. I wouldn't mind owning shares of this company, my only hesitation would be its current price @ 1.47 being a bit too high for my taste and that its a player in an already very mature industry.

FYI, I have a Globe and a Sun post-paid subscription service.

2011 and beyond!

Hey guys!

Let me start by giving of what I think will be a good stock to own this coming 2011.

I'm a firm believer in DMC, simply because the holding company has invested all in the right places. Its 2011 forecast-ed earnings continues to be higher than 2010's unlike AEV and I think it's PE ratio based on 2011 is hovering around 10-11. It also owns Semirara(SCC) which is not a mere resource play anymore; it has successfully integrated power generation which will drive its 2011 income(2/3rds will come from power gen). I have always said that @ 40 pesos a share DMC is still a buy-able stock.

I have also recently moved away from AEV and have shifted my attention to AP; the reason is that both their PEs are similar and yet AEV rakes more than 3/4ths of its earnings from AP. Earnings are expected to stay flat in 2011, but even so AP is much cheaper than some of its regional peers. If any of you guys are interested in a play in the aboitiz story, I believe AP would be a better company to own. First metro has rated AP's fair price to be around 36 more or less; I personally believe its worth a little more than that.

Lastly, I'd like to share something about UnionBank. The Bank has already beat analysts estimates for this year(which says that earnings will be flat or lower); they intend to have achieve a full-year target of 5 billion pesos, which is around 20-25 percent higher than last year's. It's ROE is the second highest among the banks that are rated by ATR. The company's PE ratio is also lower than what you would see in other financial plays. With a solid dividend policy(similar to other aboitiz owned companies). This bank is a very strong play in the financial sector. I have repeatedly rated UBP to be worth almost double of what its trading at today.

Hope this was a good read guys! Just my two cents! Hope you guys can share your thoughts too :)