COL Model Portfolio - Stock Market Update

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COL Financial Released the composition of their model portfolio last July 10, 2013.  The Model portfolio contains the list of recommended stocks from the firm.  In the latest release, they removed MPI (Metro Pacific Investments, MER  (Meralco), and MWC (Manila Water Company, Inc.) due to "heightened regulatory risks."  If you followed their advice, and removed MER from your portfolio right away, you would have been spared the recent drop in the shares price due to SMC's (San Miguel Corporation) sale of MER shares at a discount.

Here's the latest COL Model Portfolio:
COL Financial Model Portfolio
Among these, MBT and BDO probably has the best potential for future gains.  TEL is currently rising probably in anticipation of dividends in August.

Meanwhile, Gus Cosio of FAMI (First Metro Asset Management Inc.) has this to say about the Philippine Stock Market:

"I haven't been commenting on Philippine stocks since I left for my vacation early in June. Since then, prices tanked in both equities and fixed income markets due to signs of improvement in the U.S. economy. I can understand how that could spook fixed income investors, but it runs counter intuitive for equities, in my opinion.  
Of course, a large proportion of those investing in stocks are in the market because of the abundance of cash in the global monetary system. The liquidity pump from Central Banks of the developed economies led by the U.S. Fed have been priming their respective economies with cash in order to stave of a global depression. They have succeeded to some extent but the recession that plagued countries from 2008 have taken away so many jobs that sustained growth of developed economies is still uncertain. Nevertheless, what is encouraging is that the recession is definitely over. Now, those countries are seeking ways to raise employment.

In Philippine stocks, investors still have to get used to the high valuations inherent in rapidly growing economies. For the unconvinced, there would be no way to reverse their bearishness. However, among local investors, many seem to believe that the sell-off in June was a mere consolidation of the bull run that took place from the beginning of 2012 until about April this year. I tend to agree.

I believe that the bulk of serious foreign investors looking for growth markets have yet to feather their portfolios with Philippine stocks. The country only received its investment grade status from two of three rating agencies on March 27 (Fitch) and May 2 (Moody's). Pension funds, endowments and government sponsored investment funds which can only invest in countries that carry two investment grade ratings have yet to venture into the Philippines. Looking at the time line, they have had little time to evaluate the country's fundamentals since the second investment grade rating came On May 2 and the market was already easing slowly.

I think we are in that period when serious institutional investors are profoundly doing research. In past emerging market breakthroughs, notably when the tiger economies of Korea, Hong Kong, Taiwan, Malaysia and Thailand came to the attention of global investors, valuations were sky high. This was understandable because their growth was similarly very strong. Recently, we had seen the same phenomenon in Philippine stocks, and this is the reason why investors will be attracted. In essence, I believe that Philippine stocks will be doing better; but, there is no need to rush. Uncertainties by foreign investors will be a deflating factor to fundamentals of local stocks because the early wave of foreign entrants to our market have been the hedge funds and opportunistic investors. As prices move lower and valuations become more interesting, I have no doubt that the true long term allocations to our market will start pouring in again.
In my opinion, we locals should use this general weakness to accumulate our favorite stocks." - July 21, 2013 Gus Cosio's Facebook page.
"The behavior of both local and foreign investors in today's trading day is not at all convincing that all is well as far as market psychology is concerned. Many would like to sit this one out. My only suggestion if you're sitting on the bench is not to simply twiddle your fingers or sit on your hands. There are a number of sources to research which stocks to follow. There is the PSE, Reuters and Bloomberg on the web. You can search individual PHL stock on their sites. 

If you want my suggestion, I suggest you look at MBT and BPI among the banks; MER among power companies; COSCO among consumers; MWIDE in construction; and of course there is the usual favorites such as AC, ALI, GTCAP, SM, SMPH and TEL. Of course there are many others that will present good value but you can reference their value and attractiveness based on what you see in the aforementioned stocks. Bear in mind that valuations are both intrinsic as well as subjective. It is always good for constructive thinking to make comparisons.  

As far as timing the market is concerned, that is a very tricky situation. There are the lucky ones and the jinxes. The difference between the former and the latter is that the lucky ones spend a lot of time studying the market. Furthermore, they have the gumption to act on their studies. Those that are jinxed are those who simply move with emotions because they end up buying when the market is strong then selling when it is weak. THE SUCCESS IN BUYING LOW AND SELLING HIGH CAN ONLY COME IF YOU STUDY VALUE." - July 22, 2012.
"care needed in taking more equities risk at this point. actually, stocks are cheapest when risk is highest. it's the rule in capitalism." - July 23, 2013 (00:00 am)

Technical Analysis / Outlook for PSEi

Technical Outlook PSEi July 2013
A higher low has formed announcing a B-Wave recovery.  Look at the picture on the left to understand how a B-wave is depicted.  What follows a B-Wave is a C-Wave which is a move downwards which ideally should not fall lower than the second low (6,300 level) produced at the start of the B-wave.

How high will the B-wave reach?  Target is the 61.8% Fibonacci retracement level at 6,793 - 6,800.  Juanis Barredo of VP and Chief Technical Analysis of COL Financial suggests that an "Emotive Hurrah!" might ensue after the PSEi breaches the 6,800 level.  This could bring the PSEi back to the 7,000 level.  

However, what appears certain for now is that a C-Wave will occur.  The PSEi as of this writing already breached the 6700 mark.  This could reach the 6,800 level within the week given possible releases of weaker than expected economic data in the US.  Whether an "emotive hurrah" will ensue is not certain and whether the market will be able to sustain the 6,800 level is also unlikely.  If you want to be on the conservative side, we suggest you wait for the C-Wave before re-entering the market.

If you are currently invested in the market, lightening positions around the 6,800 level might be prudent.  

Stock investing carries a lot of risk.  Please invest or trade at your own risk.

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  1. Johny Depp said,
    This comment has been removed by a blog administrator.

    on August 14, 2013 at 4:07 PM  

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    on January 17, 2014 at 4:57 AM