Macros

When the market drops close to 200 points in a matter of two days, it gives you time to pause and consider your options. A lot of people are in the opinion that a bigger consolidation, one that will drive the market to below 3800 is looming; others are saying that the market cannot go further south and its a great time to buy; while others are right in between. At this time, I see no reason to put all my eggs in one basket and I would rather set aside some cash.

I am in the opinion that the bull run has not run its course and that what we are currently going through is a mere speed bump. The macroeconomic numbers point to a great deal of optimism in our current environment. Net money inflow in 2010 has grown 1000 percent compared to 2009, remittances continue to come in in greater volume, and our economy may have grown an estimated 7 percent this year (one of the best numbers in the fastest growing region in the world, Asia). So what does this mean for us, those who have invested in equities. Strong economic fundamentals will eventually translate to better corporate earnings as companies try to keep up with consumer demand for goods and services; whether it be food, electricity, prepaid cards, or banking services for their hard earned money.

Just recently, I managed to cash out on SCC and MBT when it hit new highs at 195 and 75.05, respectively. And now my strategy seems to be paying dividends. I managed to re-enter both at an even cheaper price and am currently in a stronger position compared to say a week or two ago. I am still in the opinion that both these companies have some way to go with SCC looking into developing its 600 MW brownfield project (with work expected to start in late 2011), increasing power generating capacity by 200 percent from its current 300 MW. MBT's 52 week high was 81 that's a good 20 something percent from today's closing of 64.1 pesos per share. Bear in mind, MBT is a sectoral leader (#2 Philippine bank in assets).

I've also recently began to study EDC and I have acquired a position in the company since it traded at 4.9 pesos per share; the stock has been trading between 4.31-6.55 the past year or so and has a relatively average PE ratio (average locally, low regionally). A lopez led-company, much of its power generating company is based on geothermal sources; so unlike other sources of energy it is unaffected by weather conditions such as El Nino, it is also unaffected by commodity price increase such as coal and oil. Besides the fact that it is is a green power generating company, this company seems to be very well-liked is because of the power supply shortage in the Visayas region. I know JP Morgan has set a TP of 7.85 and other brokers have set either a buy/overweight/or accumulate rating on EDC.