WARNING: SPECULATIVE. Picks of the week for Wk11 is slight buys on issues with apparent foreign buying

There's a "Warning: Speculative" in the title, but aren't all stock purchases speculative? Well, this only means that I see risks here more than our normal picks of the week.

Anyway, I suggest you make a criteria to sift through # of foreign brokers buying the stock that youre eyeing, before you get in. For my own, if I see three foreign brokers like UB, JPMORGAN, and DEUTSCHE appearing together in the net buy side, inside the top 6 buyers, thats significant.

I havent peeked through that many stocks yet. but in the group that I saw, I liked the foreign buying that I see in AGI so I added (buy up) one tranche more. AGI is our pick this week, together with two speculative picks.

Not, in these two other 'extra' picks, you should enter at your risk... but arent all buy at own risk, you say?

In any case, be ready to cut loss when you suddenly see yourself holding -8% in a few days. On the other hand, when you see a profit. sell also as quickly... the extra picks are

...GMA7 and MWC! Buy a few tranches each then follow closely.

James K Nava will blog on GMA7 in Filipino, I'll do a separate post on MWC.

Index uptrend intact?

For fun, let's validate if the runup of the PSE index is still intact based on one Technical Analysis (TA) concept that's fairly easy to follow.

The check is through MACD analysis. The requirement is actually just a quick glance to see whether or not the short term moving average (orange macd in the most bottom graph below) is above the intermediate moving ave (violet) and long term (green). If the orange is above the other two, that's good, the uptrend is suppose to be "holding."

Further in TA parlance when any of these lines cross, it is an important event.

This means we should have bought some time end-December when orange line crossed intermediate-term (violet) and bought even ore when orange crossed green (long-term). 

Same principle applies when lately orange crossed below violet when you should have sold the index, if you are trading only for the short and medium term. You should have gained minimum 7.5% through this system. If you are in it for the longer term, you should still be holding because the orange line is still above the green, and moreover, orange is threatening once again to cross above intermediate just last Friday.

Not that hard to follow, aint it? It is also not that hard to do as well given that BPI and most other banks have UITF anchored on index today that you can quickly invest in online. FMETF also exists and can be traded in the PSE. Youre not any more relying on bogus fund managers who pick speculative LC, DMPL, and the likes that can deplete your hard earned money.

But among the problems in using this method is 1) when the index breaks down too fast and too hard. You might not have the time to pull out. 2) You wont have the chance as well to "beat the market" (beat the index) on the basis of your own belief on companies and strength of your own research. It also doesnt take into account how expensive (can be interpreted as how 'scary' in terms of risk/reward) already is the market, and 3) the lines might be crossing too often in a volatile market, every investment just becomes virtually casino bets.

As Ive written elsewhere, Im not a full believer in TA. Im more into the value of the company (I wont call it pure value investing yet a la Buffett) and the caliber of the people that run the company. I also get a bit of 'entertainment'--I get fulfilment and satisfaction in managing my money myself rather than just allowing the market or another fund manager to do it for me.

To compensate, I invest in UITF that is based on index invested on the side, but the bulk of the funds are still divided between a nimble 'short-term' traded portfolio (brokerage under BPI), and intermediate and longer-term under Firstmetrosec. It works for me. Although Im not beating the index year to date, it brings me fulfilment to pick and put money where my talk is.

Pick of the week for Wk10 is to ready cash

My bet is that index will go down 5-8% from yesterday before going up and successfully breaching 8K. So my bet is there will be a chance to get in at cheaper valuations. What's my basis on this belief? Nothing solid. Only that the foreign buying is small and scattered. There's no consistent push even across index issues.  And then the volume is also distributed to bazurs rather than blue chips or solid second liners. The atmosphere is partially speculative than a consistent rise (on the backdrop of growing corporate earnings, as newspapers say, or otherwise)

If you have TEL, AC, GLO, other big index contributors in green, sell.

But if you bought PGOLD, like I did when it dipped to 38, hold muna. There might be fuel until 45-48.

Also, if youre still holding the likes of SECB,SCC, GTCAP, ABS, DNL and picks, which are now showing all-time highs after all-time-highs, congratulations. It's up to you how long term is really long term. If you think funds that placed in them has no other better chance elsewhere, yes youo can still hold. In any case, your paper gain is already impeccable and hard to erase (save for a major crisis or a dreaded Black Swan).

Just make sure you'll have the extra cash to deposit when the prices become more attractive.

Live Long and Prosper

"Insufficient facts always invite danger."

I was not as old to have caught the original series, but have read up a lot on the Trekkies from college until now. Nimoy's contributions in actionable (although cold) logic, pride in being nerds (although not knowing how to sing or dance), dignity in introspection (rather than pure gut feels), are beyond TV. It makes people that choose logic above else proud. And yes, in trading stocks, it's better if there is zero emotion. 

Thank you, Mr. Spock. 

Seed, retreat, harvest, in-and-out, push, take, reentry, prune, harvest again

Writing a quick entry on trading moves since December--

After I wrote this post back in December, I was alarmingly back to 10% cash in both nimbler and main ports from all the buy points that have been hit. Some were fresh buys, others additions to existing positions. But almost ALL these buys turned out hugely profitable, overall.

MBT buys at 82, 81, 80.3, 78.5, 79, at one tranche each were all sold at 93.

Adds in FLI, where I suddenly found my position ballooning to 16 tranches were sold at 1.69, 1.73 and 1.75. Im holding only 4 tranches now, still showing 5%+ positive as of today.

Earned in TEL at +9%, GLO at 6% (yes, I sold wrongly/very_early here).

The biggest winner is in LRI at close to +30% on 4a  tranches bet.

UBP at a quick entry in 70.5, then sell at 72 (placed ahead as usual) in a few days were also profitable. I knew there was a swing up happening in banks.

Three tranches in perennial favorite TA bought at 2.25, 2.23, 2.22 were all sold at 2.44.

Four tranches in PGOLD were also profitable--accumulated at 37.8 - 39 range, then sold at 42.

All the buy and sell points were placed ahead (GTM), usually evenings. I did not have the time to trade and observe daily given the hell demands of day job. Save for a quick cursory look in forums when meetings at the office became boring, I was not opening my two brokerage accounts at all, but apparently I was trading actively.

Among the winners who were showing a strong upward trend, I was only able to buy up in MBT at 86 and PGOLD at 39. Buying up is a discipline that I need to improve on.

I did not participate in any bazura like CAL and IS, although the forums are teeming with praises and potential bonanzas on them. Obviously, they were not needed.

Since reaping profits, I bought again (one or two tranches) in AGI, TA, LRI, FLI, when they went down. These reentries are now showing green. Old MWC is also still showing green, but Im not selling it until disclosure on the recent application for water rates increase comes out. I also still trust the management of Ablaza.

Everything should have been hunky-dory, and I surely should be beating the index year-to-date; there should have been vacation money again, if not for the huge sell-down in BEL and MCP. I cut-loss at MCP at -12.5% on three tranches, and still holding a big 22 tranches of BEL (averaged down here; did not cutloss). The bets on these two are based on
1) the opening of the City of Dreams Manila, which I also checked out, and seems to be showing promise given all the sugarols inside (90% of them Filipinos, disheartening to know... more on this in a later blogpost).
2) My man, Scorsese's commercial (one of my top 3 Directors of all time!)

3) BEL's high dividend yield
4) BEL's disclosure that they are going to buy back shares.
5) MCP's media blitz with Stanley Ho's son and Packer leading the charge no less.
But all the positive things were thwarted obviously by the Chinese government.

And so, the index year to date is showing 7.55%, while Im barely making 5%. Im also back to 50% cash position in both ports.

+2.55% is a lot of catching up to do, but Im not willing to bet all-in in just one stock or dabble in bazura to beat it. Better to be conservative since P/E of the index is already at a very expensive 22, and bazuras, well, they are still bazuras. If youre still holding index issues, I'll be leaning towards unloading all as PCOMP nears 8000. If you have a bazura showing more than 10%, sell already for goodness's sake!

Affinity and Biases

"We feel an affinity with a certain thinker because we agree with him; or because he shows us what we were already thinking; or because he shows us in a more articulate form what we were already thinking; or because he shows us what we were on the point of thinking; or what we would sooner or later have thought; or what we would have thought much later if we hadn’t read it now; or what we would have liked to think but never would have thought if we hadn’t read it now."

— Lydia Davis

SIDE COMMENT: This is actually one whole short story by Lydia. If you loved it and its length, you should buy The Collected Stories of Lydia Davis. That book will give you tons of reading pleasure.

For Newbies--

There are 'predators' (out to get your money) scattered in forums that are presenting themselves as oh-so experts. And they are experts indeed in phrasing their recommendations according to what appeal to your biases. Usually an issue that is lightly-traded (bazura) will be recommended for an upcoming big jump up, because the item is ultra-solid fundamentally, and that management have something up their sleeve, that good news is coming soon, and that this issue will yield 30 - 100 % in few short weeks. And that you should enter now before the increase starts, etc. These persons will also add something about earning big bucks recently from this issue, or compare the upcoming jump to another stock that made a similar leap, and where before they rode and where they gained hundreds and thousands of profit a few months ago--implicitly saying that you should join them on the bonanza this round.

Be careful taking advise. You should know yourself. Before acting on a recommendation, stop and reflect/self-introspect--what personal bias (greediness, tolerance for risk, for example) is being strummed in you? Sometimes they even dare--are you brave enough? You can double your money in one month if you are brave enough! (And who wouldnt answer yes, I want! Im brave! I want money! Money!)

When an honest reco should be asking--do you have time to do research yourself and read disclosures first?

In general, be suspicious if they are recommending bazurs (very lightly traded). If you decide you want to get in anyway with PHA, MACAY, TUGS, and other obscure issues, do it by all means for the adventure. (There are also manipulators' favorites like CAL, BHI, MED). Just make sure you have the stomach to cutloss--accept defeat--when the fall is impending deep and apparent. And again, only get in in Bazura when you have the time to monitor.

Pick of the week for Wk9: LRI (buy a bit also of AGI)

First a word of warning: my own style prevents me from buying up already expensive stocks, so Im wary in endorsing DNL, for example, or buying up DNL if you already have one. Those methods could suit perfectly these times when the PSE is on a tear to attempt to breach 8000, but that is not in my personal disposition to pursue.  

And so my pick this week is LRI 

LRI will open their new cement processing plant soon. This will immediately add to the top and bottom lines of the company. It's also heartening to see foreigners maintaining buying interest here last week, and that the trading volume in this issue is still high. 

For medium term, construction in the Philippines is still booming (a big contributor to the GDP good news). And Cement should be one of the main beneficiary of this continuing boom. When a bubble is detected, then LRI and MEG and the rest will go down, down. down. But so far, no indication of a bubble yet.

Disclosure though,
1) I already profited here. I sold all my position (four tranches) in this stock at a hefty +29% gain just a few days back, and reentered one tranche at 10. Im waiting to add at 9.8 and 9.5.
2) Im also waiting and personally, secretly, pining for a bubble so those condos would be priced right, so I can buy one near office.

***

I will also probably buy back the chunk of position (5 tranches) of AGI that I sold at 25.25. Re-entry price shall be near 24 or 24.5. This is on the belief that this conglomerate should catch up soon to its peers.

When Seeing Green, When To Sell?

(I always advocate enjoying your profits NOW! If you have a day job, all that you 'earn' from the PSE should be extra money. Use it to take a vacation now! You wont be able to enjoy trips as much when you compound compound compound and then by the time youre willing to shell-out money, you're rickety old! You cant walk 500 meters any more out of the hotel!) 

I need to re-start this blog, because several people are asking me specific questions through email.

Im certainly not an expert and my profit from the PSE will not be enough, on its own, to raise a family. But I got both my two kids' tuition fee + a trip to El Nido - Miniloc for 3 from the surge in the market last year. Im not [yet] the swashbuckler who can resign from a dayjob to trade full time in the comfort of home, BUT expert or not, still, I'd like to attempt to answer specific questions.

One perennial question is something along this line... Im already in GREEN (profiting), but how do I know WHEN TO SELL?

If you'll follow CANSLIM, the recommendation is to sell when you see +20%. They say that even in an upsurge (and CANSLIM does not recommend that you enter a market without seeing a general market upturn), the stock will take a breather (go down) after achieving +20%. And so it is recommended to sell at +20%. If the stock that you sold is a favorite and you truly believe it is still cheap, follow the stock and buy again when you think it's done taking a breather. I usually buy back if the stock has gone by -5%, -8%, or -10%. Those buy-again points are not based on any scientific or statistical analysis, I just like to buy at those level.

One exception to the +20% rule though: if the 20% was achieved in a few short weeks, CANSLIM recommends that you hold the stock and study more, to check if there's probably some more juice left. Why is it jumping so high? Is a big fund hell bent on buying it up? Is there news of a potential big, big change? If yes, continue to hold. BUT for me, I'll sell any stock that I have +50% on.


Investopedia also has particular suggestions. The two theses that apply to our case in that article:
2) sell when the price appreciation is rapid ("The best investors are the most humble investors")
3) the price is too expensive (valuation is no longer justified by earnings). In short, too high a P/E.

Sets of experts (or believing themselves experts) in local forums will strongly object to these two proposals. For #2, many believe that you should ride the stock until the upside is over. BUT how do you know when the runup is done until the following day you see the stock breaks down 3-5%?

And then for #2, JFC and DNL are seemingly clear exceptions. Both now at astounding 40-50 P/E's but still are showing strength. How do you know when the limit is really the limit?

As usual, the final method will be according to what suits your personality and poise (you have to know yourself!) I for one sell when I think Im already comfortable with the profit on one stock. When you reach that 'satisfaction,' it wont be too much of a heartbreak if you see the stock surge further. (There will still be that bite, but not that much any more). You trade stocks one at a time after all. If PGOLD already gave you 5000 PhP on a 30000 PhP accumulated position, wouldnt you be happy with 5000 PhP already even if it still goes up in the next few days? Only greedy lizards wouldnt say theyre already happy. And would you want to be tagged a greedy lizard?

These rules by the way don't apply to bazura stocks.

Bazura stocks you only ride on an apparent swing, and when you have the time to closely follow the trades (by-the-minute, daily). I sell a bazur when see +15%, and then thank heavens I was there when the manipulators selected that specific bazur to push up.

SECB--my biggest winner this year

Im writing for posterity that I sold three weeks ago all of my SECB at 23%+ gain. SECB delivered the highest absolute gain for me this year because I accumulated quite a huge chunk since last year (part of the total holdings has been with me for more than a year).

It took some time for the market to digest the growth promise, ambitious plans, and vaunted results (earnings report) on recent quarters, but SECB reached there in the end. I also though the increases were strong and fast this last 6 months, which eliminated my temptation to dispose all at 10%.

Im still beating the index this year, but the gap has been lessened. I was keeping more cash than should have been, while the index bounced already from 6900 to 7300.

My buy posts have been hit! My buy posts have been hit!

Im writing for posterity that my bid posts at AGI at 24 and 23.5 (one tranche each) have been hit. I will accumulate this stock at every one or two peso breaches, even if it tumbles down to 10 PhP per share.

My buys were also hit in MBT at 81 and 80.3. Let's see how hard this bank will be hit again. I bought and bought here last year even if it went down to 70 - 72 range, and then only began selling when it neared 80. 

My add (main port) at 1.50 in FLI  were also hit. I also purchased (comeback) FLI in my nimbler port at 1.51. FLI is a decent-dividend paying property issue, so I will buy and buy even if this goes below 1 peso. 

I placed buys in TEL at 2700, PGOLD at 36.1 and 37.3. 

Looks like the cash position that I rigidly kept will be put to good use use in the coming days. Im not minding much the oil price angle this round that's supposed to be pulling down prices of equities worldwide. Will just need to concentrate on a few favorite, fundamentally-sound, preferably dividend-paying stock. 

If youre short on cash position, it could also be good to cut loss and dispose of your speculative stocks now. The fund could be put to good use somewhere else. 

Noticed that BLOOM went down 9%, MPI back to below 5, SMBPH back to 16 again,... hmmn. Need do a deeper study, sifting, and hunting during the weekend.  

For now, I need to go back to work. Day job beckons. 

WARNING: The foreigners are selling

Whether it is due to Hagupit or low GDP is not that important. 

The more important thing is to ready cash to get in to favorite stocks previously left behind.

My buys in TEL at 2900 and 2800 at one tranche each were hit in a few short days.

Since I don't have time to monitor the market, I will likewise place good-til-cancelled buys on other faves.

The locals are defending. I suspect our countrymen will be successful on other stocks, but will fail on others.

It's should be exciting to observe how resilient are we this round compared to last year.

Pick of the week is FLI

First-off, a warning: I dont get to check the market these days even on weekends, so Im stuck with the mostly BPI's capsule briefs. In this short recap, I check of course the volume and net foreign buying (or selling), and then check separately (at night) in forums specific stocks that they foreigners buy. BPI also usefully includes highlights of earnings report of some company. FLI was highlighted recently for having still an impressive year-on-year top and bottom line increase.

Further, FLI seems to have a healthy dose of foreign buying  I added (to my existing holdings) at 1.57, Im now seeing 1.62-1.63. My bet is the foreign-buying would have fuel until 1.69-1.71. I will unload some at that level, depending on how thick the bid vol vs. sell side. If FLI goes back to 1.55 or less, I'll add more.

On the macro and other possible picks, consistent foreign buying at at least 400 M daily could also mean taking us back to 7400 PSEi and threatening 7600 this time, so continuously watch your favorite index stocks. AGI, SCC, et al. GTCAP and MEG--perennial picks of the week before--have surged ahead and left me. I hope theyll come back in my arms again...

Pick of the week is to wait

The volumes are thin. There's no clear direction. Only buy when conservative buy points are hit. And never buy in a bet-everything poise. You must have funds to average down on your favorite stock, in case you need it.

If you're positive, sell if youre comfortable with the profit. Do not be greedy especially at this time, when foreigners can easily unload and elect to position in bonds again. It will be a deep downturn if this happens, and we must have cash to buy at that point.

Pick of the week for Wk42 is increase Cash position (to minimum 50%), but also follow possible short-term bounce, and get in if your conservative buy points are hit

This is that time of the balancing act, where the confident buyers of fundamentally-solid companies win. Where the right portfolio mix, built at the right entry points, will deliver the money (for that long-planned vacation, for the upcoming kids' school fees, for that hoped-for gadget...)

We might get sold down to 6500-6700 PSEi, so if you don't have at least 50% in cash position to use to start entering at that point, you have to adjust or add funds now.

If you want to be entertained though and have time to monitor, go in and out quick, you can take advantage of expected short-term bounce. How big a bounce? The DOW and SPX will give a clue on how high and how long. (You have to open every morning and check these US indices). But in general, you shouldn't aim for more than 3.5% profit in these hit and run transactions. And then there's should also be a time limit--if you dont get 3.5% in one week, still... get out

Now, for intermediate and long-term, we also shouldn't waste the opportunity to get in on favorite stocks once they get to tasty valuation points. Last year, the big bucks came from our confident conviction in buying MEG, DNL, TA, TEL, AGI, URC, even when they were being sold down hard.

So if we get a chance,
TEL at 2900 is a buy.
AGI at 23 is a one trench buy
SECB at 126 is a buy.
MEG, Im pining for, at 4.3
BPI at 88
SCC at near 100
GLO at 1600 is one tranche entry
DNL at near 10 is one tranche.

Patience, Luke.

Stay at 50% cash and enter your buy points ahead, if you dont have time to monitor closely. Play the short-term bounce if you have time to monitor.

(Bear? And what to do?) Pick of the week is to have cash ready and prepare conservative buying points

There are soothsayers abound again portending doom. It'd be fantabulous for them to be proven wrong, and be exposed as bastards who just want to enter again at good prices. But it is also right to be prudent with your money. 

I know that it was only 2 weeks ago when I wrote that indications point that we are in a bullish period. But since then, the moving average of the PSEi was brought down below where it should it be. It looks like sellers really sold hard when the index reached 7400. It seems that that high point was what many (even retail investors) were waiting for to take profit in droves. Good for those who sold at the very top. Congrats. I only sold a few back then. Sold way more positions yesterday. My profit lower than if I took them a few days ago.

More than bag the highest profit though, my objective now is to have again a substantial cash position and prepare conservative entry points in favorite and fundamentally-strong stocks. When bought at the right support, gains will come in again anyway. There could also be a Santa rally this year (there was none last year). 

First entry at GLO at 1600 remains a pick. MEG at 4.3 would also be very tasty. PGOLD at 32 is also a one-tranche entry. Would also be thankful if I would be given the chance to go back to TEL at 2900. 

Dont be rattled though by the doomsayers. It's still good to have positions remaining in the stocks you believe in (good managers, good growth forecast, fundamentally solid, and preferably dividend-paying) in case they are proven wrong.