Some questions from my readers
Q: Thank you for your valuable insights, sir jack. In the light of the recent market dive, are there any changes on your views regarding the property sector? How long will it take for the three stocks (LND – P0.84, SMDC – P3.85 & CMP – P2.50) you reviewed to attain the price targets? -cocoy71@ xxx
A: The fundamentals of the property sector remain intact. I continue to believe that we are just seeing the "beginning" of the property bull-run.
As for stock prices, I guess we just have to wait a little bit longer. Stock market fundamentals have changed. It might take awhile for the market to digest the selling pressure that we saw this week.
Unfortunately, I cannot predict the exact time line as to when the stocks (that I mentioned) will attain the price targets. However, as always, my investment philosophy is to buy stocks with limited downside risk. LND, SMDC and CMP are all trading below their book value (BV) and Net Asset Value (NAV). Considering that property values have not moved for the past 10 years - in dollar terms it is still down by 75%, the odds are, asset values will increase in the coming years.
Q: How do I play the market in the coming weeks? – mjoy@xxxx
Play it safe. Let me quote Investor Business Daily (www.investors.com):
“Throughout the past few days, we’ve highlighted strategies for coping with the market’s correction. Cut losses from initial buy prices quickly and sell your laggard stocks. Selling weaker stocks should naturally help you raise cash and protect yourself against the market’s choppy waters.
Don’t even consider buying stocks until you see the market hit bottom and stage a follow-through day. Even then, don’t buy until leading stocks break out of sound basing patterns.”
In my case, I have sold out all my speculative bets and reduced my holdings in my long-term portfolio. I have kept my patient bets intact. Please read
Rule of three
Q: What’s your view on Philippine Stock Exchange (PSE – P740.0) after the recent market sell-down? inqui@xxx
A: PSE is part of my “patient money” portfolio. Its share price has performed beyond my expectations. However, I continue to remain bullish on the stock and will hold it for the long haul.
As mentioned, the paradigm has changed. The recent market swoon further reinforced my belief. Here’s why:
1.) Average value turnover has increased to P4.0bn per day compared to P1.07bn last January’06.
2.) Last February 28 - during the market panic, turnover reached a record high of P12.0bn. This shows that liquidity will continue to flow into the market, despite the recent sell-down.
3.) There are more IPOs and M&A deals in the pipeline. Last week the PSE approved the merger of Banco de Oro (BDO – P55.00) and Equitable PCI Bank (EPCI – P100.0). Based on my estimate, the deal alone netted PSE close to P50m in listing fees.
4.) Investing is becoming more global. This is positive for the exchange. Fund managers can no longer ignore the Philippine market.
I maintain that PSE can easily make P500-600m in net income this year. For 1Q07, I expect PSE to report P150m in net income. This is 3x what it made in 1Q06.
Note that earnings growth is the key driver for valuation. If we expect the exchange to grow 100% this year, there is certainly more upside to its valuation. PSE is currently trading at about 18.5x PER. It is one of the cheapest in the region.
A: The fundamentals of the property sector remain intact. I continue to believe that we are just seeing the "beginning" of the property bull-run.
As for stock prices, I guess we just have to wait a little bit longer. Stock market fundamentals have changed. It might take awhile for the market to digest the selling pressure that we saw this week.
Unfortunately, I cannot predict the exact time line as to when the stocks (that I mentioned) will attain the price targets. However, as always, my investment philosophy is to buy stocks with limited downside risk. LND, SMDC and CMP are all trading below their book value (BV) and Net Asset Value (NAV). Considering that property values have not moved for the past 10 years - in dollar terms it is still down by 75%, the odds are, asset values will increase in the coming years.
Q: How do I play the market in the coming weeks? – mjoy@xxxx
Play it safe. Let me quote Investor Business Daily (www.investors.com):
“Throughout the past few days, we’ve highlighted strategies for coping with the market’s correction. Cut losses from initial buy prices quickly and sell your laggard stocks. Selling weaker stocks should naturally help you raise cash and protect yourself against the market’s choppy waters.
Don’t even consider buying stocks until you see the market hit bottom and stage a follow-through day. Even then, don’t buy until leading stocks break out of sound basing patterns.”
In my case, I have sold out all my speculative bets and reduced my holdings in my long-term portfolio. I have kept my patient bets intact. Please read
Rule of three
Q: What’s your view on Philippine Stock Exchange (PSE – P740.0) after the recent market sell-down? inqui@xxx
A: PSE is part of my “patient money” portfolio. Its share price has performed beyond my expectations. However, I continue to remain bullish on the stock and will hold it for the long haul.
As mentioned, the paradigm has changed. The recent market swoon further reinforced my belief. Here’s why:
1.) Average value turnover has increased to P4.0bn per day compared to P1.07bn last January’06.
2.) Last February 28 - during the market panic, turnover reached a record high of P12.0bn. This shows that liquidity will continue to flow into the market, despite the recent sell-down.
3.) There are more IPOs and M&A deals in the pipeline. Last week the PSE approved the merger of Banco de Oro (BDO – P55.00) and Equitable PCI Bank (EPCI – P100.0). Based on my estimate, the deal alone netted PSE close to P50m in listing fees.
4.) Investing is becoming more global. This is positive for the exchange. Fund managers can no longer ignore the Philippine market.
I maintain that PSE can easily make P500-600m in net income this year. For 1Q07, I expect PSE to report P150m in net income. This is 3x what it made in 1Q06.
Note that earnings growth is the key driver for valuation. If we expect the exchange to grow 100% this year, there is certainly more upside to its valuation. PSE is currently trading at about 18.5x PER. It is one of the cheapest in the region.
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