Wednesday, July 29, 2009

Who got a shock from Meralco (MER)?

Not me.

I bought Meralco (MER) stock at 125 and sold it at 175 and 225. The reason I bought the stock even if at 125 the P/E is already more than 50x, is because of the battle for the Lopez' 13~% share. When the Lopez' announced that they would sell their 13% at the right price. I quickly bought a sizable amount of MER and SMC, thinking that SMC is bidding for a controlling position of MER and the Lopez' are waiting for the right price for MER. I was expecting at least 175.

When it reached 175, I quickly sold 75% of my shares thinking that, it was the peak, and I was expecting to move a bit higher around 180-190 due to momentum. Then, rumors circulate that the 13% of the Lopez' was already sold. Thus, I quickly sold the rest at 225.

I must admit that I'm glad I made those moves now, but before today, I was regretting it. I could have doubled up my stock if I sold all of it at 250, instead of 175 and 225, and that would still be a bargain given that it reached a high of 300+.

But still, I'm happy I played it safe, always watching the P/E, and I did not let greed get in the way.

Also, I'm pleased with myself for pulling out majority of my stocks out to the sidelines, except of course for SMC and SMB, because I believe MER will be the catalyst for the probable August to September PSEi correction.

However, I'll still keep an eye on MER, if it passes the 350 mark, I'll probably put some money on it, expecting it to go past 400.

As for now, I'm still holding on my SMC and SMB stock. Even if SMC might not have won the battle for control of MERALCO, they might made a huge profit, if ever they already dumped the stock. SMC's resistance at 63, I'm putting a stop loss for SMC at 58.

Tuesday, July 28, 2009

One more good reason to buy SMC

I've just posted that I'm pulling all my stocks out because I am expecting a major correction. However, I'm leaving behind 2 stocks, SMC and SMB.

I've also posted on my previous PSE Stock Tip entry why I chose SMC and SMB.

Now, there's one more reason to buy into SMC, and that is, as I am typing now, SMC is up 7.87% and is at 68.5 from 63.5 the other day.

Also, SMC and SMB are two of the RSA-Related Stocks that are not up astronomically. Thus, there is still potential for these two stock to be at the same level as the other RSA related stocks.

Download the PDF from
Philequity Corner: Beneficiaries of the Turf Wars

Based from the article above, you can see that SMC, SMB and Petron are among the stocks that has not significantly gained due to the MVP and RSA rivalry.

But still, Q2 earnings for SMC is not out yet, I expect a drop in the EPS given all these acquisitions, but SMC is a long-term buy for me. So whatever happens to their short term financial statements, I'll still keep on accumulating this stock.

Sunday, July 26, 2009

Major Correction before the Bull - SMC & SMB

I just sold all my short term stocks today. Leaving only two of my long term picks.

San Miguel Corporation (SMC)
P/E Ratio: 14.28
Current Price: 63

San Miguel Brewery, Inc. (SMB)
P/E Ratio: 14.31
Current Price: 9.30

I've read a lot of analyst views that mention that the PSEi is way too over valued at 2732.62.

It may sound that the negative comments are just done by bitter bears who are trying to pull prices down so that they can re-enter. However, based from the chart above the current valuation of PSEi is already equal to it's value last May - August 2008, and this is even before the start of a lot of bankruptcy fillings in wall street.

Personally, in the IT sector, the demand for COBOL and RPG experts, which is widely needed in the banking sector to handle their mainframe application, just started to pick up this July 2009.

However, the people I know, who at last got a job after almost a year of trying to look for one, informed me that the salary they got was almost half what they were making the previous year. So yes, there are clear signs of recovery in the banking sector but it's not quite there yest. Thus, I still do not believe that 2732.62 is the right value for the PSEi right now.

My analysis is that the investment banks were the first one to get hit by the credit crisis, and they should be the first ones to bounce back. Thus, I'm keeping an eye on the demand for Mainframe programming Jobs.

Why SM and SMB? Well SMB is a no brainer for me, I don't even look at the charts, I just know that a lot of people enjoy a weekend night out with San Mig Light. Even during bad times, like when my team mates got laid off, we drank our problem's away with a case of San Mig Light. Also, my close-friend and I, who now works for JPMorgan after months of looking for job, celebrated the event with another case of San Mig Light. Good or Bad times SMB sales won't get affected. The difference is just that on good times we might drink in a nice bar/club, and during bad times we drink at home. Either way, SMB will get their profits. It's just the bar/club selling their beer for Php75/bottle will get hit. See the financial statement if you don't agree.

As for SMC, since SMC is trying diversify similar to AC (sold at 285) and SM (sold at 325), I would not be surprised if the value of their stock would be at level of AC and SM, in 3-5 years after they make profits from their recent acquisitions. Also, I like the move with LIB. People are commenting about SUN Cell not even making a profit after years of entering the market as the third player so SMC-LIB will encounter the same problem. Well, SUN Cell is making a profit, however it's just DGTL (Sold at 1.2) the landline division is pulling it back. Thus, there's still room for one more player.

So I'll be waiting for the next correction in August or September of 2009, then I'll go all in. Analyst are projecting PSEi at 2400-2100 level as their buy target.

Thursday, July 9, 2009

Ayala, San Miguel, SM Investments

Just when I thought that the economy is on it's way to a new bull market, the Dow Jones Industrial Average dropped to 8100-8200 level. US Job losses is at 9.5%. And personally, the company I'm working for just CUT 5% jobs.

When the DOW dropped to 8400, I've already sold all my stock, because I was expecting the PSEi to take the same route. However, this was not the case. PSEi just dropped slightly and now it is moving slightly upward.

I can conclude that the US economy might now have a lesser influence on our market. My theory is that, Filipinos were always frugal with their spending. Maybe because in the Philippines the unemployemnt rate is always constant at 7-10%, thus people are forced to save.

Further, it is very difficult to get approval for a credit card or loans. Bank usually do not approve of loan application when there is no collateral. Thus, banks might not make really good profit, but it is unlikely for a banking meltdown in the Philippines.

As I said before and I'm saying again (April 2009 Stock Picks), I'm putting my money on these stocks, since AC and SM has a diversified portfolio and I feel safe. Also, I picked SMC for the same reason, but still waiting for the next good news to go all in.

Ayala Corporation (AC)
P/E Ratio: 17.70
Current Price: 270

San Miguel Corporation (SMC)
P/E Ratio: 13.60
Current Price: 60

SM Investments Corporation (SM)
P/E Ratio: 13.30
Current Price: 305