Drugs Wholesale

For drugs wholesale, the following are my indicators:

1. Market cap > 1Billion US$
2. P/E < 18.45 (12.30 x 1.5)
3. ROE > 22.8%
4. Debt: Equity < 0.96 (0.48 x 2)
5. P/B < 18.6 (12.42 x 1.5)

For 1, the following were ok: ABC, CAH, HLF, MCK, and NUS
NUS drops out because of high P/E
For ROE, I was not so strict, allowing the companies to qualify with lower ROEs
Considering 4, only ABC and MCK remained.

Technicals:

Using technicals, ABC (Amerisourcebergen) shows a downtrend. I must wait for a reversal.
For MCK (McKesson Corp), it's prepare to buy. The uptrend is not yet established.

Semiconductors - Specialized

The following were the considerations:

1. Market cap greater than US$1Billion
2. PE < 27
3. Debt: Equity < 0.70
4. PB < 8

Only three companies qualify:

Microchip
NVIDIA
Xilinx

Microchip's debt to equity (1.11) however is a bit too big for the group.
For XLNX , it seems too late to buy as the trend has started already.
NVDA's MACD is not too good yet. So we can watch and see this stock and prepare to purchase if the technicals look good.

PSE stocks May 23 2008

Results of my bets last week:

Out of my 7 bets, I was correct 5 times. I was incorrect with my buy of SM (week on week), and FLI held on to 1.00

Over all, my winnings stand at P2,625.00 (+1.71%)

For this week, my bets are:

BUY AC, EDC, TEL
SELL BDO, BPI, GLO, JFC, PCOR, SMPH
HOLD SMC, SM, FLI, MWC

Internet Software Services

For Internet Software Services, the following are my considerations:

1. Market capitalization should be above US$ 1 Billion
2. PE should be lesser than 105 ( 70.40 x 1.5). This is quite high.
3. ROE should be greater than 3.3%. The average ROE of ISS companies is quite low.
4. Debt to equity should be lesser than 0.58 (0.29 x 2)
5. PB should be lesser than 30 (20.27 x 1.5)

The following companies qualify and were tested along technical lines:

GIB is trending downwards
SYMC PE is 39. Perfect buying point was on April 2008
SINA and OTEX are both trending downwards.
DRIV (Digital River) - prepare to buy on trend reversal coming up.
RNWK (Real Networks) - a little too late to buy. Buy cautiously.
GIGM (Giga Media) - Prepare to buy.

My PSE Companies

I limited portfolio monitoring to just 13 stocks. Ok. I know. 13. What the hell.

May 16 2007 eps Mar 2008 eps
1. AC 345.00 37.80 6.06
2. BDO 48.00 2.86 0.58
3. BPI 53.00 3.78 0.57
4. EDC 5.50 0.577 0.08
5 GLO 1340.00 100.07
6. JFC 45.00 2.364 0.4698
7. PCOR 5.90 0.68
8. SMC 44.00 2.74
9. TEL 2685.00 188.42 54.71
10. SM 265.00 19.67 6.2
11. SMPH 8.30 0.481 0.128
12. FLI 1.00 0.071
13. MWC 18.00 1.06



I considered momentum in earnings, and technicals. The following are my bets on the above. I did not include the companies that I consider to be a HOLD.

Sell BDO, JFC, PCOR, SMC
Buy EDC, SM and FLI (weak buy)

Internet Information providers

Going through the companies classified as Internet Information Providers, I considered the following:

1. Market capitalization should be above US$1 B. Else, I believe the stock is vulnerable to whipsaw of price movements even from small players.
2. P/E should not be 50% above the industry average.
3. ROE should be equal or greater than that of the industry average.
4. Debt to equity, should not be greater than twice the industry average.
5. Price to book value should not be greater than 150% of the industry average.

1. Taking market cap, the following stocks qualified: AKAM, BIDU, CNET, EXPE (Expedia), GOOG (Google), SOHU, WBMD, and YHOO(Yahoo).

2. For Price to Earnings ratio, the Technology sector's average is 18.18, and the IIP's sector is 29.50. Hence, I consider 43 (150% x 29) to be the upper limit of PE for stocks. With this, AKAM, BIDU, GOOG, and SOHU dropped out.

3. For ROE, Technology sector's average is 14.33%, while IIP's is 14.60%. Taking this into consideration, EXPE (6%), WBMD (11.3%), and Yahoo (10.96%) dropped out. CNET alone remains.

4. For debt to equity ratio, Technology has 0.68, while IIP has 0.08. Doubling this (0.16), we find that CNET's ratio (0.13) is within acceptable range.

5. Price to book value scenario is the same. Tech has 5.20, while IIP is 6.38. PB ratio then should be below 150% of 6.38 or 9.57. CNET's P/B is way below at 2.43.

The five way test then produces a winner - CNET!

After the fundamentals, we can check its technical specs. I used only 50 and 200 day averages, and the MACD indicators, to check its long term trend.

CNET passed the technicals test - although at this point it is not clear whether the direction will be for the long term. Heck. Buy CNET at 7.50

Industries that rock

According to Yahoo! Finance, the following industries are tops when it comes to Quarterly Earnings growth (% year-on-year):

1. Farm products - 1317.30%
2. Drugs wholesale - 843.19%
3. Broadcasting-radio - 587.64%
4. Agricultural Chemicals - 427.56%
5. Marketing Services - 350.15%
6. Internet Software and Services - 256.19%
7. Semiconductor Specialized - 249.04%
8. REIT - residential 246.55%
9. Farm/Construction Machinery - 168.96%
10. Music Video Stores - 155.75%

Now, when I looked at Longterm growth rate (5years), this is what I saw:

1. Internet Service Providers - 40%
2. Dairy products - 28%
3. Recreational Goods, Other - 27.50%
4. Pollution and Treatment - 27.25%
5. Auto Parts Wholesale - 24.36%
6. Internet Information providers- 23%
7. Biotechnology - 22.87%
8. Medical Instruments and Supplies - 22%
9. Drug Manufacturing Other - 21.96%
10. Health Care Info Services - 21.50%

The two lists are in contrast to one another. The first looks at the past year, while the second attempts to predict the future.

The first step I could do is to look at the above industries and find out something I believe I can understand and try to pick a stock or two that are leaders in their industries. See what happens.