Stock Update as of December 20, 2012

Stock Update:

The PSEi experienced a correction and is a great opportunity to buy. This is what we call "dips". Imagine a mountain climber sprinting towards the top of the mountain. Every now and then, the climber needs to rest and catch his breath, before resuming his climb. Just like the PSEi, it needs to rest for a moment before moving upwards again.


MEG - cp 2.71, tp 3.34, bbp 2.9


MPI - cp 4.48, tp 6.35, bbp 5.65 *buy! (tp was decreased to 6.35 as per COL evaluations)


Ayala Corp (AC) - cp 528, tp - 520, bbp - 452 *sell.


Banco De Oro (BDO) - cp 75.3, tp - 86, bbp - 75 *stop buying.


Aboitiz Power (AP) - cp 36.7, tp - 38, bbp - 33 *nearing TP. be ready to sell.


EEI Corporation (EEI) - cp 9.9, tp - 10, bbp - 8.7 *TP was hit. sell!


First Philippine Holdings (FPH) - cp 88.85, tp - 110, bbp - 96 *buy!


JG Summit (JGS) - cp 38.4 tp - 40, bbp - 34.8 *tp was hit. be ready to sell.


Metrobank (MBT) - cp 99.1, tp - 120, bbp - 104 *buy!


SM Prime Holdings (SMPH) - cp 15.96, tp - 17, bbp - 14.79 *stop buying. be ready to sell.

Another choice would be to hold off buying for this month, and see the Future Valuations of COL next year in January 2013.

Merry Christmas to all, and a Prosperous New Year!

Listed Companies requiring additional float

The Philippine Stock Exchange reported that as of December 7, 25 companies have yet to comply with the minimum public ownership of 10%. The exchange is giving them until the end of the year to raise their public float or face an immediate trading suspension for 6 months. If the companies continue to remain non-compliant, the listed company would then be delisted by July 1, 2013. Out of the 25, FMIC, TOL, and ETON have already expressed that they will delist from the exchange. On the other hand, Globalport 900 (PORT) has just reported that it will soon be compliant as its majority stockholder sold its shares. PORT added that they are just waiting for the proper documentation to report who bought the shares.

Stock Update as of December 11, 2011

Stock Update:

AC tp was hit. Selling my AC now at 528. gonna add more to my MPI positions.

Also, MEG's tp was raised by COL. It is now 3.34.

so,

MEG -  cp 2.71, tp 3.34, bbp 2.9

MPI  - cp 4.51, tp 6.5, bbp 5.65 *new addition

Ayala Corp (AC) - cp 528, tp - 520, bbp - 452 *sell.

Banco De Oro (BDO) - cp 75.3, tp - 86, bbp - 75 *stop buying.

Aboitiz Power (AP) - cp 337.2, tp - 38, bbp - 33 *nearing TP. be ready to sell.

EEI Corporation (EEI) - cp 9.86, tp - 10, bbp - 8.7 *be ready to sell.

Bank of Philippine Islands (BPI) - cp 95.35, tp - 91, bbp - 79 *sell. will be removed on next stock updates.

First Philippine Holdings (FPH) - cp 89, tp - 110, bbp - 96

JG Summit (JGS) - cp 37.75, tp - 40, bbp - 34.8 *stop buying.

Metrobank (MBT) - cp 104, tp - 120, bbp - 104 *currently at BBP.

SM Prime Holdings (SMPH) - cp 15.9, tp - 17, bbp - 14.79 *stop buying.

Tis the Season to be Jolly by Gus Cosio

by Gus Cosio

Philippine stocks have done so well over 2012. I remember that after the first quarter this year people were already saying that the PSEi was expensive. Of course, we saw some consolidation on some days in 2Q and over a few weeks in Q3. At the beginning of Q4, it seems that momentum just kept stock prices going. 

I guess investors do not want to be left out of this really. Fortunately for us who are already in the market, a large number of investors out there are only entering the game now. The strength of the market last week was completely flow driven. Those that have discovered Philippine stocks simply want to gain exposure. 

It is not surprising that new players have entered our market. Macroeconomics seem to be in our favor with last week's GDP figure coming in at 7.1 percent. This is the strongest 3Q that I've seen for as long as I can remember. In the backdrop of growth rates of other countries in different regions of the world, the Philippine GDP growth rate provides stellar attraction. What gives me further encouragement is the expectation that the strong 3Q GDP growth should propel stronger growth momentum into 4Q which is seasonally our strongest quarter.

The first quarter of 2013 should also see growth well above the norm given that elections will be coming. This country has seen exceptional growth in 4 of the last 5 elections. I am expectant that the 2013 elections will even bring stronger growth than the 8 percent seen the quarter preceding the 2010 elections. What is encouraging about the latest GDP numbers is the strong gains seen in construction. This likely reflects infrastructure spending which government has started to embark on. Of course, private construction remains in full swing judging from the cranes that tower not just the NCR but other regions of the country as well.

Another reason for bright anticipation is the strengthening of the manufacturing sector reflected in the latest GDP. Signs of manufacturing revival have been seen in the Volume of Production Index. While there are many skeptics about manufacturing, I remain hopeful because with domestic consumption comprising over 70 percent of our economy, it makes sense for manufacturing activity to grow in tandem with demand. Anyway, banking and real estate transactions with the manufacturing sector point out that resources are being accumulated in manufacturing.

Where does this leave stock prices? Well, I think there will be a fair amount of profit taking. But rather than view it with anxiety, one should use it as an opportunity for beefing up old positions. It is time to go for growth stocks, and there are quite a few in the market.

Stocks Nearing TP

Sell notice:

AC current price: 510, TP 520
AP current price: 37.5, TP 38
MEG current price: 2.81, TP 2.87

addition to stock list

MPI - cp 4.5, tp 6.5, bbp - 5.65

PSE hits new high of 5,700!

I was able to sell all my positions of SMPH yesterday and am happy to say that I made some money. If you weren't able to sell, don't worry. The price will go back up. The reason SMPH is down now is that alot of people sold their shares. This happens when a TP is hit and the selling off is called "profit-taking". Rest assured, the price will go back up again, so don't sell at any other price than 17!

For our newer investors, suppose you were able to receive a stock dividend of 25% (like me for SMPH) and let's say you had 100 SMPH shares, your number of shares has increased to 125.

To sell all these shares, you first sell all boardlots, i.e. the 100 shares.

You then sell the 25 shares via the odd-lot option in the sell stock options. Please refer to the picture below.

Now, the best thing to do is to reinvest this new-earned money into other stocks that are still below our buy-below-price, but do not buy in 1 go. Divide the cash into 6, and invest it over a period of 6 months. I posted earlier that Philippine stocks might go down because prices are now quite expensive, and the dip in the U.S. market has made U.S. stocks cheaper, thus attracting more foreign investors to transfer their money there.

For more experienced investors, buy when the price hits support levels. For our newer investors, just buy as long as the price is below our buy-below-price, spread out over a time period.

Why do we need to do this? Please refer to the picture below:

Let the X-axis dictate time and the y-axis as price. Over time, prices fluctuate and no one can predict with certainty where prices will go. Thats why we minimize cost by buying over a period of time rather than a 1-time-big-time method.

For example(based from the picture):

Month 1 - stock price P6
Month 2 - P4.5
Month 3 - P3
Month 4 - P4.5
Month 5 - P6
Average: P4.8

You get an average of P4.8, whereas if you buy only 1-time, your purchase might be at expensive levels/resistance levels.

On my next post, we will talk about support and resistance levels and how to draw their lines.

Circle of Competence

When it comes to the stock market, there are just so many stocks to choose from that sometimes, we get overwhelmed in choosing what to buy. Add to this the funny reality of money burning a hole into our pockets...

I must buy something! But what?!?

I don't know if the above holds true for you when my money clears into my brokerage account, but it is true for me.

Based of these, lets try to categorize the type of stocks in the Philippine Stock Market.

First we have the companies known as blue chips. These are the companies listed on the PSE composite index. They are somewhat the leader companies of their sector. There are 30 in all in the PSEi. These stocks are chosen to be in the index due to their stability.

To name a few: Ayala Corp (AC), PLDT (TEL), Aboitiiz Power (AP)

Next are called the 2nd liner stocks. These are stocks that are popular or well-to-do companies that are not part of the Index but are still popular due to the size or profitability of the company.

To name a few: Cebu Pacific (CEB) used to be in the index but was downgraded to 2nd liner, EEI, NICKL

The last grouping of stocks are known as the third-liners. These stocks are what U.S. Brokers would call penny stocks. They're called penny stocks because most of the share prices of these stocks are in centavos.

To name a few: OV, APM

Even after we've grouped them, there are still a lot of stocks to pick from even if we base our choices from the Index alone. The index holds 30 stocks. If you want, you can buy 1 boardlot of each company in the index. But then this would counter what we call as Focus Investing.

Focus investing concentrates our capital on 3 stocks for our portfolio, with 6 being the maximum allowable number.

So how do we pick 3 out of 30? Quite simple. We just follow our circle of competence.

Imagine yourself as the center of a circle. As you go about your day-to-day tasks, you interact with people, commodities, services, etc.

For example, your house uses Veco for electrcity. You buy your groceries from SM, or your house sits at an Ayala developed land.

This is your circle of competence. Investing in what you know.

Peter Lynch of Magellan Fund (the most successful Mutual Fund in U.S. history) discovered Taco Bell because while on a trip in California, he was hungry and saw a Taco Bell stand. So he parked his car and had a snack there.
Warren Buffett bought Fruit of the Loom (company that makes underwear) because he liked the brand and had used it.

From this, observe your circle of competence and buy stocks accordingly.

Do you go on trips using Cebu Pacific?

Do you put your savings into Banco De Oro?

Do you drink San Mig Light or San Mig Coffee 3-in-1?

Is your cellphone network Globe?

Do you like eating in Jollibee?