So after yesterday's brutal session, my paper losses have amounted to close to 7 percent and I believe it would have been more if i had not chosen the choice to cut losses or have invested in fundamentally worthwhile/strong picks. Mr. Gus Cosio of first metro mentioned in his blog that the next support might well be at 3620. I, however, am one to hope that it does not go that far. Today, the market closed higher by ten points; a mere ten percent of the 100 point drop of the previous day. I believe that this may be a longer than expected weakness in the market. First off, funds have to stop selling and next we have to get over our fear of buying into the market again. How long this may take is obviously something I cannot say. My long term views of the market remain unchanged though. The numbers; EPS growth, low PE ratios, strong economic numbers, etc are all pointing to good corporate valuations.
Things will probably get worse before they get better. Remember wise men would say "This too shall pass". Before then, enjoy a red Valentine's Day!
Thursday, February 10, 2011
Wednesday, February 9, 2011
Seeing red
I assumed incorrectly that the market has already bottomed and that we would be trading a range for a while. It seems the correction has some way to go. Nevertheless, I would rather stay optimistic and invested in my favorite stocks for the time being. I have already begun to decrease holdings in some companies that I believe are weaker fundamentally.
I am, as of writing this entry, down by almost 7 percent and to be honest, it has started to upset me a bit. I, however, am still in the opinion that the market will bounce back stronger before the year ends. I received a report from citiseconline yesterday, describing the market environment and why we should stay invested. The reasons for the sell-off have nothing to do with speculation and investments gone bad; on the other hand, its got everything to do with hot money movement and that investors are simply taking what they have earned the past year or soo. I would like to believe that is the case. Fundamentals are generally strong in companies i have recently favored and I am in no rush to sell due to speculation, etc.
Some companies that I have recently shored up position-wise include EDC, SCC, DMC, MBT. I am in the opinion that although these stocks are badly battered, they give us a very good and strong upside.
If in any case the losses are too much to bear there are options; cut losses, send it over to a mutual fund, and of course... turning your pc off for a couple of days. I recommend the latter, I have not done so myself yet though.
I am, as of writing this entry, down by almost 7 percent and to be honest, it has started to upset me a bit. I, however, am still in the opinion that the market will bounce back stronger before the year ends. I received a report from citiseconline yesterday, describing the market environment and why we should stay invested. The reasons for the sell-off have nothing to do with speculation and investments gone bad; on the other hand, its got everything to do with hot money movement and that investors are simply taking what they have earned the past year or soo. I would like to believe that is the case. Fundamentals are generally strong in companies i have recently favored and I am in no rush to sell due to speculation, etc.
Some companies that I have recently shored up position-wise include EDC, SCC, DMC, MBT. I am in the opinion that although these stocks are badly battered, they give us a very good and strong upside.
If in any case the losses are too much to bear there are options; cut losses, send it over to a mutual fund, and of course... turning your pc off for a couple of days. I recommend the latter, I have not done so myself yet though.
Tuesday, February 8, 2011
DMC!
DMC or DMCI Holdings, Inc. is a company established by the Consunji family to incorporate all their interests in different businesses; which today includes construction, real estate, mining, power generation, utilities, etc. The company was incorporated in 1995 and it has shown tremendous growth in both share price and value in the past couple of years or so.
There are a number of reasons why I enjoy trading DMC. Aside from its high growth over the past year (close to 300 % in 2010 alone), its companies have also managed to sustain a very good business model with growth being engineered in each company for the next few years.
Take for example Semirara; the only listed subsidiary, DMC owns 50+ percent of. The company is poised to almost double profits this year due to the coming on-line of their Calaca Power Plant and the higher prices of coal (unfortunately, due to cyclones in Australia). The price of this stock has grown exponentially from a 40 range last year to the 200 range this year; of course, with more room to grow.
Maynilad is 45 percent owned by the DMC (55 percent owned by MPI), the company has a relative monopoly of the water distribution in some parts of MM. With planned spending to improve their efficiency, the company is set for higher profits in the next few years or so.
Their construction arm isn't doing so bad as well; with 48 billion pesos worth of backlogs in construction contracts, up from 2 billion two years ago.
Another interesting thing to note about DMC is that another one of their subsidiaries is planning a IPO this year, namely DMCI Homes.
Putting all that I have mentioned above together with the fact that DMCI is still trading below the sectoral average for PE ratios in holding companies and its poised for higher EPS growth than most other companies in its sector. I believe DMC is trading at dirt cheap prices at this point. I mentioned before that even at 40 pesos/sh I would be a buyer of DMC. Today though, the price of the stock has garnered support at the 32 level and its been trading a range between 32 and 35. If patience is not one of your virtues, I do suggest trading that range. But trading the range of this company is by no means a sign of my lack of confidence in this companies growth potential.
There are a number of reasons why I enjoy trading DMC. Aside from its high growth over the past year (close to 300 % in 2010 alone), its companies have also managed to sustain a very good business model with growth being engineered in each company for the next few years.
Take for example Semirara; the only listed subsidiary, DMC owns 50+ percent of. The company is poised to almost double profits this year due to the coming on-line of their Calaca Power Plant and the higher prices of coal (unfortunately, due to cyclones in Australia). The price of this stock has grown exponentially from a 40 range last year to the 200 range this year; of course, with more room to grow.
Maynilad is 45 percent owned by the DMC (55 percent owned by MPI), the company has a relative monopoly of the water distribution in some parts of MM. With planned spending to improve their efficiency, the company is set for higher profits in the next few years or so.
Their construction arm isn't doing so bad as well; with 48 billion pesos worth of backlogs in construction contracts, up from 2 billion two years ago.
Another interesting thing to note about DMC is that another one of their subsidiaries is planning a IPO this year, namely DMCI Homes.
Putting all that I have mentioned above together with the fact that DMCI is still trading below the sectoral average for PE ratios in holding companies and its poised for higher EPS growth than most other companies in its sector. I believe DMC is trading at dirt cheap prices at this point. I mentioned before that even at 40 pesos/sh I would be a buyer of DMC. Today though, the price of the stock has garnered support at the 32 level and its been trading a range between 32 and 35. If patience is not one of your virtues, I do suggest trading that range. But trading the range of this company is by no means a sign of my lack of confidence in this companies growth potential.
Thursday, February 3, 2011
Interpreting Data
This week was quite an eventful week for everyone following the local market. beginning with a nasty bloodbath in the first two days despite our economy growing at its fastest pace in more than 30 years. A nice rebound happened on Wednesday and the index ended flat on Thursday with advancers evening out decliners. We have one more day to go this week and already its been a pretty crazy week.
So how are we expected to react to mixed emotions of foreign traders despite the better than expected results of our economy? With reserved optimism. The numbers have repeatedly stated that our economy is moving at the right direction and corporate results will mirror that soon enough (especially when the 4q earnings are released). I have not changed my sentiments regarding the direction of our market simply because there is no reason to.
On to individual stocks:
SCC- I received a report today from a local trader. The report was made by Abacus and it stated that its 12-month target price for this company is 300/sh. Natural disasters in Australia have repeatedly driven the price of coal up. Despite Australia being the number 4 or 5 producer of coal, it is the world's number two exporter. As of 2009, it handles almost 25 percent of cross-country coal trading. The flooding and cyclones in Australia have driven prices so high that, according to the report, SCC has already been contracted to deliver coal at double the average price of 2010. After the Calaca power plant's recent rehab, SCC's power generating arm is expected to contribute even more to the company's earnings. Potential downside that may affect the price performance include; a prolonged rainy season, sharp decline in electricity prices, and a sudden/unexpected shut down of the Calaca plant.
UBP- With two foreign brokers downgrading the company from a buy to a hold, most investors would probably worry on its potential upside or lack of it. I, on the other hand, would not. UBP has recently announced a 2.5/sh cash dividend in a TBA date. A more than ten percent increase from its previous dividend payout, this is a company that is giving back to its investors 30 percent of income last year. It may not be as widely traded as other financial stocks dues to its lack of liquidity but in terms of a strong base and a low downside risk, this is still one bank I'm willing to bet money on. UBP has continued to outperform most other financial stocks in terms of earnings growth and it is expected to do so again this year.
EDC- It has come to my attention that EDC is a pretty well sought after stock to own by foreign brokers. A trend has emerged lately; responsible investing, namely green energy. EDC is the operator of the Philippine's largest geothermal power plants (a renewable source of energy). With only three countries in the world with the expertise and technology (Iceland, The Philippines, and USA), the fact that we are closest to the pacific rim gives EDC a significant advantage in exporting this technology. EDC has recently concluded a 300 million dollar bond offering, despite the fact that it has no debt to service and it has a healthy cash flow. This most likely indicates an upcoming project or joint venture. I had the great opportunity to meet the president of FAMI, Gus Cosio, and in our talks he mentioned that he shared the same sentiment on EDC; foreign brokers, due to its drive for socially responsible investing, will look into EDC more closely. It also helps that EDC is the least battered among the major power/utility companies trading in PSE, a sure sign there are buyers at a number of strong support levels.
So how are we expected to react to mixed emotions of foreign traders despite the better than expected results of our economy? With reserved optimism. The numbers have repeatedly stated that our economy is moving at the right direction and corporate results will mirror that soon enough (especially when the 4q earnings are released). I have not changed my sentiments regarding the direction of our market simply because there is no reason to.
On to individual stocks:
SCC- I received a report today from a local trader. The report was made by Abacus and it stated that its 12-month target price for this company is 300/sh. Natural disasters in Australia have repeatedly driven the price of coal up. Despite Australia being the number 4 or 5 producer of coal, it is the world's number two exporter. As of 2009, it handles almost 25 percent of cross-country coal trading. The flooding and cyclones in Australia have driven prices so high that, according to the report, SCC has already been contracted to deliver coal at double the average price of 2010. After the Calaca power plant's recent rehab, SCC's power generating arm is expected to contribute even more to the company's earnings. Potential downside that may affect the price performance include; a prolonged rainy season, sharp decline in electricity prices, and a sudden/unexpected shut down of the Calaca plant.
UBP- With two foreign brokers downgrading the company from a buy to a hold, most investors would probably worry on its potential upside or lack of it. I, on the other hand, would not. UBP has recently announced a 2.5/sh cash dividend in a TBA date. A more than ten percent increase from its previous dividend payout, this is a company that is giving back to its investors 30 percent of income last year. It may not be as widely traded as other financial stocks dues to its lack of liquidity but in terms of a strong base and a low downside risk, this is still one bank I'm willing to bet money on. UBP has continued to outperform most other financial stocks in terms of earnings growth and it is expected to do so again this year.
EDC- It has come to my attention that EDC is a pretty well sought after stock to own by foreign brokers. A trend has emerged lately; responsible investing, namely green energy. EDC is the operator of the Philippine's largest geothermal power plants (a renewable source of energy). With only three countries in the world with the expertise and technology (Iceland, The Philippines, and USA), the fact that we are closest to the pacific rim gives EDC a significant advantage in exporting this technology. EDC has recently concluded a 300 million dollar bond offering, despite the fact that it has no debt to service and it has a healthy cash flow. This most likely indicates an upcoming project or joint venture. I had the great opportunity to meet the president of FAMI, Gus Cosio, and in our talks he mentioned that he shared the same sentiment on EDC; foreign brokers, due to its drive for socially responsible investing, will look into EDC more closely. It also helps that EDC is the least battered among the major power/utility companies trading in PSE, a sure sign there are buyers at a number of strong support levels.
Sunday, January 30, 2011
Chaos in Cairo
Protests in Egypt have already amassed quite a following, with an opposition figure, in the form of former IAEA head Mohammed ElBaradei, ready to take charge and unite the fragmented group of critics of the current Mubarak regime. Investors are worried that a scenario which sparked the first crisis in Tunisia, will eventually happen in Egypt and spread throughout the ME region like a domino effect. Already, a smaller copy cat situation is happening in Amman, Jordan and it has not taken an expert geo-political analyst to realize that this may have a destabilizing effect on the region as a whole.
The Philippines, from my understanding, has very little trade with Egypt. With less than 7000 overseas Filipinos in the country, remittances are not exactly affected all that much by troubles there (specifically). So what's bothering the market today? Basically, its the fact that a destabilizing effect in Egypt may cause a domino effect in the region; locally the implication has no immediate effect but considering billions of dollars are pumped in through remittances from the millions of OFWS based in the region, we have quite a bit riding on the well-being of the region (in general).
With troubles abroad, my main concern today and for the past few weeks, is the health of the market and our economy. I see our government is releasing its 4Q GDP data today (I previously stated that it would be last week, I apologize for that mistake), and with the market being battered heavily these past few weeks a good GDP number would be a breathe of fresh air at this point.
As I'm writing this, a number of my favorites are taking a beating. DMC, EDC, MBT in particular. Recently, I received a report from a foreign broker that raised its price target and rating of MBT from buy to hold. This is due to higher expected earnings in 2011 and a lower PE ratio due to the recent beating MBT took. At its current price of 64-66, I would like to post my fearless forecast of this stock reaching the 80s level within a 6-12 month period. Lets just hope this whole fiasco in Egypt boils over soon.
The Philippines, from my understanding, has very little trade with Egypt. With less than 7000 overseas Filipinos in the country, remittances are not exactly affected all that much by troubles there (specifically). So what's bothering the market today? Basically, its the fact that a destabilizing effect in Egypt may cause a domino effect in the region; locally the implication has no immediate effect but considering billions of dollars are pumped in through remittances from the millions of OFWS based in the region, we have quite a bit riding on the well-being of the region (in general).
With troubles abroad, my main concern today and for the past few weeks, is the health of the market and our economy. I see our government is releasing its 4Q GDP data today (I previously stated that it would be last week, I apologize for that mistake), and with the market being battered heavily these past few weeks a good GDP number would be a breathe of fresh air at this point.
As I'm writing this, a number of my favorites are taking a beating. DMC, EDC, MBT in particular. Recently, I received a report from a foreign broker that raised its price target and rating of MBT from buy to hold. This is due to higher expected earnings in 2011 and a lower PE ratio due to the recent beating MBT took. At its current price of 64-66, I would like to post my fearless forecast of this stock reaching the 80s level within a 6-12 month period. Lets just hope this whole fiasco in Egypt boils over soon.
Tuesday, January 25, 2011
Sticking to my guns
So the PSE had a pretty decent rally yesterday, although I think it was more of a case of bargain hunting than a real rally spurred by investor optimism. Value turnover yesterday was not as much as you would have expected from the 3rd-4th quarter of last year.
The market has been mostly red today and I think the trend will be more or less the same for the next couple of weeks or months. The government will be releasing GDP data for the full year 2010 tomorrow, with economists expecting the government target to be breached by at least a full percentage point. If the data indeed touches the 7-7.4 percentage mark or goes higher than that, I expect the market to react with frenzied buying tomorrow. There may be a downside due to the bombing in Makati and the subsequent reactions people usually have after an event like this.
With all this volatility in our market, I see it as a great buying opportunity. I've started to slowly accumulate some of my favorite stocks, with the expectation that our market will bottom out soon enough and trade at a certain range. I have my eyes set on companies with solid fundamentals with a premium put on growth prospects; AP, DMC, EDC, MBT, SCC,and UBP. These companies have taken a beating and have been, in my opinion, oversold for some time now. I'm looking at these stocks and with numbers like the ones they do, I would rather slowly accumulate and stick to my guns. "You can never keep a good stock down"
The market has been mostly red today and I think the trend will be more or less the same for the next couple of weeks or months. The government will be releasing GDP data for the full year 2010 tomorrow, with economists expecting the government target to be breached by at least a full percentage point. If the data indeed touches the 7-7.4 percentage mark or goes higher than that, I expect the market to react with frenzied buying tomorrow. There may be a downside due to the bombing in Makati and the subsequent reactions people usually have after an event like this.
With all this volatility in our market, I see it as a great buying opportunity. I've started to slowly accumulate some of my favorite stocks, with the expectation that our market will bottom out soon enough and trade at a certain range. I have my eyes set on companies with solid fundamentals with a premium put on growth prospects; AP, DMC, EDC, MBT, SCC,and UBP. These companies have taken a beating and have been, in my opinion, oversold for some time now. I'm looking at these stocks and with numbers like the ones they do, I would rather slowly accumulate and stick to my guns. "You can never keep a good stock down"
Sunday, January 23, 2011
Portfolios and the pain in having them
I just got off the phone with a friend of mine asking me how I felt during the last financial crisis; the tone of his voice suggested panic and I can understand how a lot of people may feel that way. I received 5 phone calls today; two asking if they should cut losses, two asking where I see the market going in a couple of days, and one asking if it would be a good idea to invest in bonds instead.
I can't exactly tell where the market is going in the next few days. But what I do know is that our macroeconomic numbers seem solid enough. A lot of investors, look towards gains in a matter of days/weeks. I would suggest a more fundamental/long-term approach towards stock trading if you start sweating everytime you turn on the monitor. One way to digest all this is to look for your personal comfort level. It may be the percentage of loss you are willing to take before cutting losses or even buying into more solid companies and just leaving them unmonitored. Whatever it is, take comfort in your trading strategy, one that you've developed for yourself.
It may seem painful enough to have to go through seeing your portfolio turn from green to red at this point but truth is, if it was that easy then everyone who's in the market should be a millionaire by now.
I can't exactly tell where the market is going in the next few days. But what I do know is that our macroeconomic numbers seem solid enough. A lot of investors, look towards gains in a matter of days/weeks. I would suggest a more fundamental/long-term approach towards stock trading if you start sweating everytime you turn on the monitor. One way to digest all this is to look for your personal comfort level. It may be the percentage of loss you are willing to take before cutting losses or even buying into more solid companies and just leaving them unmonitored. Whatever it is, take comfort in your trading strategy, one that you've developed for yourself.
It may seem painful enough to have to go through seeing your portfolio turn from green to red at this point but truth is, if it was that easy then everyone who's in the market should be a millionaire by now.
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