MP, Metro Pacific and Manny Pacquiao

The index recently broke the 3,000 barrier and closed up at 3,034 last Friday for the year. Due to losses in the US (and perhaps people cashing in to bet for Pacquiao-Cotto fight) the market lost momentum on the 13th. Philex also lost its luster Friday and fell by 14% to 16.75, bringing down with it the mining index. Those who bought at the 19 range better be wary.

Having risen by 100% in such a short time may mean a free fall in also the same short period to God knows where. There is no strong support for the stock having risen continuously when it breached the 10 barrier. The good thing though, at least for those who bought at the 13 level, is that they still made money (assuming they exited at 19). That's still almost 50%.

I could be wrong.

The performance of these two stocks this year - Meralco and Philex - reflects the state of our market. It is both bullish and speculative. Basura stocks are gaining and even blue chip stocks are being speculated upon. Some of the other winners for this year was WEB, and the Angping stocks, especially Nihao is back with a vengeance. As we reach the year end rally (hopefully), you may wish to take the time to think about 2010.

If you think 2010 will be a better year, then hold on to your stocks and buy the corrections. Otherwise, this could be your time to scale back and take profits while there is one. I wanted to look at the volume, as well as the amount of foreign buying for this year, but I don't have access to those information. Those are also good indicators as to the sustainability of the recent bullishness in the market.

Winners during the past week were Philex (double your money in less than a month, code: PX), Century Peak Minerals (code: CPM), Alsons Consolidated (Code: ACR), I-remit (I), and TK Steel (T). There were also other stocks that rose, mostly basura stocks, and index issues. The worst performer, at least based on the stocks that I monitor, was Metro Pacific, falling by almost 30%. What's amazing is that they recorded huge revenues.

The stock price perhaps does not reflect the correct value. At least for now. Having made so many acquisitions, as well as the possibility of diluting shareholders, bearish sentiment has killed the stock. But as Buffett is says, "We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful."

I visited their website and looked at the businesses they now hold - hospitals, toll roads, water utilities. These are businesses that do well when the economy is good, and don't suffer as much when the economy is bad.

Using common sense, I think Metro Pacific is a buy, although it will definitely be a long term buy (as long as 2-3 years from today) as we still have to wait what happens when they list new shares (unless they've done so already, I don't track the news that much). Its 52-week high is 7.10 and 52-week low is 2.08. Trading volume for the stock has increased substantially this year. But of course, there's the threat by GSIS over the recent acquisition of Meralco shares.

GSIS killed Meralco last year and they migh very well do the same for MPI this year. Sniff the news whenever it's out in the press.

I also don't know much about financial ratios so I don't bother reviewing them. What I do know is that perhaps, there's a lot of debt going around at MPI.

Of course, this is just my opinion. Investor discretion is advised and you should consult with your own financial advisor. Investments take time to generate consistent cash flows and 3 years is about the right time frame to expect the kind of revenues that MPI holdings should have with its current portfolio of companies.

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At least the other MP (not listed in the PSE) made winners of those who betted for him in today's fight. I'm talking about Manny Pacquiao. He beat Cotto with a TKO (hey that rhymes).

Congratulations to Pacquiao! I just hope he doesn't enter politics.

In the U.S., there's been an attempt to correlate Tiger Wood's golf games to the performance of the Dow Jones. Perhaps, we should do one for Manny Pacquiao and the Philippine Index.

Until then, be careful where you invest. Tomorrow may be another up day because of the euphoria as well as the positive end for the Dow last Friday.

Stock Market or Stuck Market?

A few weeks after I posted about the lackluster performance of PX (Philex Mining), it made a high. Not just a 52 week high but I think an all time high. I do not trade actively anymore, much as I would want to, so frankly, I missed the boat (or train). I'm sure there were a lot of people who made money with PX.

I just hope newbies to the stock market don't get fooled and join the train ride. Looks to me there's going to be a helluva fall soon. I have a funny feeling that there is a mix of speculation and gold play in there, fueling its fantastic flight to 13.50. Lucky 13? Haha. But when there's speculation, then there's fire. So don't let your money get burned. Be on your toes if you bought this in the range of 13.

Gold is already at 1,100 in US trading, if I'm not mistaken. So perhaps PX still has some more room to grow. It's the only gold stock that's stable. Other gold stocks listed in the exchange don't have the stability that it has. And, GSIS is buying into it right?

Speaking of the government, I was heartened when I read news recently that the PSE is going to launch spot trading for selected commodities. Filipino investors should be given a wider array of investment choices outside of savings deposits and time deposits. While the growth of mutual funds and unit investment trust funds have risen to offer Filipinos more choices, I feel that these are still not enough.

The local market has not been that exciting recently, and I'm a bit wary. Lately, it's been speculation that's been driving the trading. Most of the blue chip companies have been flat, consolidating or worse, falling. I remember having learned from the horrors of 2007 that when the market is fueled by speculation, the bubble will burst soon. In Tagalog, kapag panay basura stocks na lang ang lumilipad, mag ingat ka na.

Even a (former?) blue chip stock has been the darling of speculators - MERALCO. The swings have been crazy this week. News came out after trading hours that Sy was rebuffed because Metro Pac exercised its first right of refusal - personally, a euphemism for biting the bullet. The bullet costs 300 per.

So it remains to be seen what happens to Meralco on Monday. I would think that the stock will be suspended in the first hour of trading, as is the usual practice when there's a major deal involving a listed stock. Perhaps it will go up like crazy, or it may not. I'm not endorsing a buy on it, but if you do wish to buy the stock, just be aware that the reason for buying it is pure speculation. (If you have a chart, then you can take a look at it. Unfortunately, I don't have a charting software after terminating my Technistock service a year ago).

So if you have money in the stock market, be careful where you put your money in the near term. We will still take direction from the US, and we are at the mercy of foreign brokerages, i.e. if they will buy up the blue chips or not. Of course, if you believe in a long term strategy then you can do peso cost averaging. The strategy would work, and perhaps you'd make money a year from now if the elections next year are relatively clean, and we get a President that has sound economic policies.

Bonda rito lang po

I write for Tulay, an English fortnightly publication of World News (a local Chinese language daily). For some time now, I've been writing business articles after doing features and what not in the previous issues. I am supposed to contribute also to Money Sense, a personal finance magazine, but due to my work, I experience difficulties submitting articles. It disappoints me that I can't contribute as much. It means I have less time to give people ideas about investments, savings, et. al. (likewise for this blog)

Most of my later business articles with Tulay were about personal finance and retail investment opportunities for the local market. As I began doing those articles, it became obvious that the available instruments are redundant. There are too many providers offering you the same stuff. But don't get me wrong, these are all good and the fund managers and the banks managing the UITFs or mutual funds actually serve as institutional investors, particularly for the stock market.

The one market I would like to understand is the bond market. It's not as exciting as the stock market but bonds are generally accepted as safer security investments. Usually, most of the bonds issued are gobbled up by banks and financial institutions, and there's really nothing left for the retail investors.

Every now and then though, something does pop up as opportunities for the small investors. These are the corporate bonds and retail treasury bonds. The problem with these two types of bonds, at least to my knowledge, is that they do not offer this neat investment trick called compounding.

Why?

Upon investment of a bond, the interest is credited monthly to your account. So in effect, you're giving your money to the lender, letting him use it, and then returning it to you after 3 or 5 years - but only the principal because the interest has been credited to you already. Classic case of OPM, other people's money. Of course, that's just a jaded view of bonds.

The plus side of investing in these kinds of bonds is that you let your money work for you. So at least you can expect something quarterly that's higher than the regular savings or time deposit. But in the long run, you should also be looking at investments that have a compounding effect.

Compounding means that the interest you earn is rolled back into the principal, thus earning you more each time there's additional interest applied to it. Supposedly, stocks and mutual funds have a compounding effect.

What I do know is that they appreciate in value over the long term, so your original investment is getting bigger. So there's capital appreciation, but not necessarily compounding. Compounding will happen though, if there were dividends, and you invest it back to the fund or stock.

Compounding is also one way, if not the only way, you can escape the dangers of inflation.

Until the next post, invest wisely.