Thursday, August 15, 2013

Oh, Barnacles, SM!

SM gave back all its gains this week and shed more!

Major reasons should be another destructive MSCI re-weighting, and foreign sell-off from Deutsche, et al. Both reasons could be related--we dont know which one is the cause, which is the effect.  

But in any case, the more important puzzle is on when and where to get in. 

These are points for consideration. 

1) Chartists believe that next support is at 760. 50% FIbonacci retracement level also have support price at 750 -760 range. If true, this is going to be painful for fellow forum members at SMP who entered at 840 - 900.  

2) I believe that SM cannot go down -20% inside one month. This is a bellweather company. If SM suffers that much, something must be seriously wrong with our economy (which is contrary to S&P and 3rd party analysts' pronouncements), or there must be serious negative news again from overseas (like Moody's announcing we failed their recent evaluation, or Bernanke saying that QE tapering will start pronto).
3) Recent MSCI re-weighting causes 'instant' downtrend by 5-10% on affected stocks, within the week/day the re-weighting becomes effective. In this case, Sept 02 is the date to watch out for.
4) I believe SM is a bargain at P/E below 19. Fund managers should also be aware of this, because...
5) ... If you visit Megamall, SM North, MOA, you can see how full-packed they are compared to other malls by Ayala and Gokongwei. Esem is still Esem. And if our growth as a country is driven by domestic consumption, SM should be one of the main beneficiaries.

Given these considerations, I will enter starting at 775 or at whatever price SM is closing on September 02. I think 750 is too low, but if it reaches that and further down, I'll average down even until 700.

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