Phisix (August 29, 2008)

The Philippine Stock Market Index closed at 2688.09 last Friday. It is up from 2653.18 last week. Although long term is still uncertain and mostly bearish, the short term is starting to pick up. The 25 day average is up and went past the 75 day average this week. MACD line is going towards positive land, and RSI is also up.

For short term investment (up to about a month), this could be a signal to buy. For intermediate term investing (6 months to a year or two), the best thing to do is buy a balanced mutual fund, or find some good deals by searching the companies you are interested in buying. The same goes with long term investment. The data this end-September is starting to clear out, and will most likely be the data to anticipate.

I believe that most of the listed Philippine companies are very much resilient. I am looking at the Ayalas as usual, and perhaps Jollibee, SM, and Manila Water. Next blog, it will be the fundamentals of the said companies.

Hey, something is cooking on BPI-Trade. You can invest in the Philippine market for as low as P5,000.00. You just have to enroll your account with your branch. I bank online at www.bpiexpressonline.com and I pay most of my bills there. Of course, my advice is to study first before investing. It takes a lot of time to buy the right company, and only seconds to decide not to. That's Buffett. At his simple best.

Google. Back at one.

Google is numero uno! Best big company to work for. Rank number one.

This is according to the ranking of Fortune Magazine this year. Google is ranked 150 in the Fortune 1000, and gives stock options to 99% of its employees. Why is it number one? Read the previous statement. And add this: GOOG (Google) went past US$700 a share. Go figure.

Stronghold Game

This is the cover of the Stronghold Game as can be accessed here.  It was released in 2001.  One thing that keeps me up all night.  A strategy game set in the Age of Castles, one learns a lot from this.  Here are some of my realizations from this game that can be applied in life, and in managing companies:

1.  One cannot be too goody-goody.  When people are not afraid of the leader, the subordinates wander around.  They are not efficient, and can often be seen resting and being lazy.  One needs to be tough and fill the castle with "bad things" in order for people to be afraid of you.

2.  Religion cannot affect work.  I remember one office mate back in the 90s who would absent himself during devotional days.  He was told: "Duty first before devotion".  He filed for resignation.  

3.  To balance fear, you have to give them a lot of food (double rations).  Applied today, one must fulfill the lower physical needs (Maslow, Herzberg) in order for them not to leave the "castle".

4.  If they leave the castle, you have to either give them more food, or lower the taxes, even give them a little bribe to make them stay.  You can also give them entertainment (traveling fair, jester, marriage) in order to turn their minds away from the empty granary.  In present day companies, if one cannot give enough compensation, management can resort to entertainment - company programs, outings, team building whatever.  It can also resort to giving small gifts in order to keep key players/employees.  When things turn right, then go tough again.

5.  No matter how high the taxes, people will be happy if they have food, food, and food.  Fulfill the physical needs and then, tax them like crazy.  In the macroeconomic scenario, one can raise the taxes if the basic needs of the people are taken cared of.  This should be the priority of the government.

6.   The machines should be placed considering time and motion.  Else, the time required to produce goods will be multiplied.  Realization:  We need more (Industrial) Engineers.  We should listen more to the science of the experts.  Finally, we should study our production cycle.

7.  Everybody must be in their proper place.  We cannot have more quarrymen than we need.  We cannot multiply woodcutters aimlessly.  I am sure I am going to hurt a lot of people but here goes:  We cannot send all our children to Nursing because the projected demand we are contemplating (behind the background of 70-80k a semester program) may not be realized after four or five years.  Else, we produce underemployment or a terrible mismatch of skills and position.  The Government should prevent an overflow of one program by mandating stiffer regulations on schools.  There are schools who have yet to produce a board passer.  Yet they advertise nationwide, using those artistas.

8.  All surplus must be sold.  Applying now, we must be lean and mean.  All unnecessary things must be sold and converted to liquid assets.

9.  A huge amount of gold, after some time, gets boring.  One should experience war from time to time.  In life, success is sweeter after every battle.

10.  No matter how hard the terrain, one can build a castle and become successful.  No matter how hard the times, one can be successful in business.  One needs a lot of expertise. One needs to study a lot.  The leaders can show the way.  

11.  In any siege.  If the leader is killed, no matter how many soldiers you have, you lose.  One must then take care of keeping the leaders.  The others are just wheat grass.  In the company, workers can come and go.  But the leaders must be kept.  Else, the stronghold falls.

Your stronghold awaits you.

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.

Shares close higher as PLDT advances ahead of results

MANILA, Philippines -- (UPDATE) Shares closed a choppy session higher Friday as optimism about corporate earnings outweighed domestic political concerns, although the thin volumes reflected caution ahead of another anti-government rally later in the day.

*** Still, corporate results may outweigh political woes.

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Banks end-2007 bad loans ratio at 4.45%, lowest in 10 years

MANILA, Philippines -- Banks' non-performing loans ratio dropped to 4.45 percent at the end of 2007, the lowest in about a decade, from 4.99 percent in November, central bank data showed Friday.

***Good news

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EU slaps Microsoft with $1.35 billion fine | Tech news blog - CNET News.com

EU slaps Microsoft with $1.35 billion fine

Posted by Mike Ricciuti | 241 comments

This post was updated several times, most recently at 7:40 a.m. PST, with additional reporting provided by CNET News.com's Dawn Kawamoto.

European Union regulators on Wednesday fined Microsoft a record 899 million euros, or $1.35 billion, for failing to comply with sanctions.The fine specifically addresses sanctions over the pricing structure Microsoft had set for licensing of its interoperability protocols and patents.

EU slaps Microsoft with $1.35 billion fine | Tech news blog - CNET News.com

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Phisix - Where is it going?

It would seem to be turning sideways. But looking at a 5-year view, it would be different:




Based on long term trending, it is clear that the overall market trend is downwards. Bollinger bands (top image, uppermost window) however seems to signal a firming up. This signals a strength that may indicate an uptrend in the short term, given enough fuel that is.Relative Strength Index (RSI) is still in its downtrend. It is also still far from oversold levels (usually pegged at 20). Hence, if it continues in its downtrend, it will go farther down.MACD is still downtrend.Stochastic clearly paints a dismal figure.Technical analysis signals our exit from the market. It remains to consider things from fundamentals side. My whole porftolio was sold way back during the first signal of downtrend, except for Manila Water Corporation (MWC). I think it will also give way this week.

Blackstone shares jump 19% in debut

Blackstone shares jump 19% in debut

Shares of private equity titan Blackstone Group jumped about 19 percent in their market debut Friday, further enriching the firm's two founders and raising the specter of more scrutiny from lawmakers.

BFAD notes sanitary flaws at Wyeth warehouse

BFAD notes sanitary flaws at Wyeth warehouse

Dead insects, sputum on the floor, damped environment�these were some of the unsanitary condition at one of the warehouses of the embattled multinational giant Wyeth Philippines in Laguna that the Bureau of Food and Drugs (BFAD) noted in its inspection report.

Best Buy Q1 falls 18 percent

Best Buy 1st-quarter profit falls (AP)

AP - Electronics retailer Best Buy Co. on Tuesday said first-quarter earnings fell 18 percent, hurt by weak profits in China and increased sales of lower-margin products such as notebook computers.

Home construction fall 2.1 percent in May

May housing starts fall 2.1 percent (Reuters)

Reuters - The pace of U.S. home construction fell 2.1 percent in May to a slightly lower rate than analysts had expected while building permit activity, a signal of future building plans, increased more than anticipated, a government report showed on Tuesday.

Survey: Q2 earnings forecasts rise

U.S. Q2 earnings forecasts rise: survey (Reuters)

Reuters - Wall Street is raising estimates of second-quarter earnings growth, estimating profits will be up 5.9 percent on average, according to Reuters Estimates, which compiles analysts' forecasts weekly for the Standard & Poor's 500 index (.SPX).

Microsoft to buy $12 million stake in China TV maker

Microsoft to buy $12 mln stake in China TV maker (Reuters)

Reuters - Microsoft Corp. has agreed to pay 94 million yuan ($12.3 million) for a stake in Sichuan Changhong Electric Co. (600839.SS) and will form a cooperative alliance with the TV and electrical appliance maker, the Chinese company said on Monday.

PSE: JFC now the sole owner of China's Yonghe Kin

Jollibee Foods acquires sole ownership of China's Yonghe Kin

MANILA, Philippines -- The Philippines' largest fast food operator, Jollibee Foods Corp., bought the remaining shares in the Yonghe King restaurant chain in China that it did not already own for $6 million, making it the sole owner of the chain.

Shares close higher for 3rd day

(UPDATE) Shares close higher for 3rd day, PLDT gains trimmed

MANILA, Philippines -- Share prices closed higher for the third straight session following another rally on Wall Street Friday as a decline in US bond yields and mild inflation eased market worries that US interest rates would rise later this year.

May BOP surplus up 3x

(UPDATE) May BOP surplus up three-fold at $665M

MANILA, Philippines -- The Philippines’ balance of payments (BOP) surplus expanded nearly three-fold to $665 million in May from $282 million in April on the back of strong remittances from Filipino workers overseas and other inflows, the central bank said.