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Philippine stocks are expensive

Early warnings from experts Last 26 July 2011, PDI published an article quoting market investment guru Mark Mobius. Mobius said that local stock valuations were now high compared with emerging market peers. That was in July last year. At the start of that month, the Philippine Stock Index (PSEi) was in the low 4,000s. The market didn't look back and zoomed up, convicingly past the 6000 mark in February of this year. I'd be very careful if I were going to buy Philippine stocks any time soon. Nomura, a top Japanese bank has a good explanation of why Philippine stocks are expensive. Click here to read about it.

My pick for the moment: MWC

I don't like over thinking. Utilities are good business, period. Timing, though is important in trading so I like to consult with technical analysts. The resistance for MWC was pegged at 25. Since it broke above it today and closed at 25.3, I would recommend buying it first thing tomorrow if you haven't done that already.

I wouldn't worry about Europe

There's always a few major things that push world stocks up and down. What's in the spotlight now is the Eurozone. The doomsayers forecast the end of the Eurozone with Greece and Spain being the first two who will fall out. There are also grave fears of a default by Greece and Spain as well as by their banks. I wouldn't worry too much, though. I am happy that there are doomsayers even though I don't agree with them. I think they play an important part because the world needs to hear what they are predicting. Their dark words will play a part in preventing it. Europe and all those heavily invested i.e. Germany, will not sit idly by and let things go crazy. Those with interests to protect will move. CNBC analysis argues that only political union can solve the problems. For me its simple, if Eurozone is pulled apart, it makes no financial sense to anyone even Germany who has benefited so much from the Eurozone. Unless there's some unforeseen political problem, the powers that be will think with their pockets and the Eurozone will be preserved.

PSEi at 5000++

The Philippine Stock Index has been pushing to new heights this year and closed today (June 3, 2012) at 5300.14. Who would have known it would happen now. Two years ago I recommended the following: ICT (28.50) ATI (5.3) MWC (15.25) SECB (63.00) The same stocks closed today at the following prices: ICT (75) ATI (9.80) MWC (25.3) SECB (142.2) With perfect hindsight, this would have made anyone a pretty penny over two years. With ICT and SECB, one would have doubled his or her money easily. However, at the time I recommended it, I couldn't predict my picks would double over two years. In fact, I sold of my SECB once I gained 25%. I was happy enough with the gain. Yet, seeing it move even higher made me cringe. It's very easy to predict which stocks will eventually go up, it's just so hard to say when. Common sense trading is easier for those who have time on their side. Stocks move up, we just can't choose when. It's having the power and emotional tenacity to wait that will bring success.

SECB: where did this all this come from

Around March this year (2010), SECB was hovering around the low 50s. Now, its parked itself in the low 60s, about 20% higher in just four months.

I was very happy watching the performance of this stock but am still a bit perplexed as to how and why it's beating the other banks. BPI for one has been a bit disappointing to me. Before the last recession wreaked havoc around the Globe, BPI was trading above 60. Now, it doesn't seem like it will return to the level any time soon.

There's a similar story for BDO. It's still significantly far from where it was before the global recession.

So what's with SECB? It appears that their loan growth has been strong and will continue to be very strong. Their current projection is 10%-15% loan growth in 2010.

My broker tells me that even a conservative estimate of less than 10% loan growth shows that SECB provides good value for the buyer even at a price of Php63.00.

place your bets!

place your bets!

"Place your bets!"

That's what Miko Sayo of Tsupitero.com says about the PSEi.

He said we're in some kind of no man's land because of the mixed signals of the market from a technical point of view.

Here's what I'm considering:

ICT (28.50)
ATI (5.3)
MWC (15.25)
SECB (63.00)


Here's a few reasons why:

I'm always partial to relying heavily on fundamental analysis and the fundamentals of these companies are very good.

I like companies that are engaged in businesses that are easy to understand.

ICT and ATI in particular because of the improvements in container traffic. If not for the recent trouble in the euro zone, I think these stocks would have hit the roof by now.

MWC because they enjoy a guaranteed rate of return as a utility company and the rainy season is coming. With el nino out of the way, MWC will be smiling.

SECB because they're numbers are just plain awesome.

Finally, i verified these picks with information from my broker. The most common sense tip of all: ask the experts. :)