Miko's Blog for December 2011

I'm glad this year is over. To say that 2011 was a very difficult year for trading is an under-statement. For a trend-follower like me, the worst market condition to trade in was a sideways market. It's much, much easier to trade a bear-market because you don't get tempted to buy.

Year-to-date ROI of PSEi - 4%

Year-to-date ROI of Tsupitero Index - 9%

Top Gainers (illiquid stocks):

1. PORT - 2,890.29%

2. AAA - 1,033.33%

3. SMP - 912.99%

4. AGP - 582.50%

5. CPG - 496.92%

Top Losers (illiquid stocks):

1. ATNB - (68.17%)

2. PO - (53.64%)

3. MJC - (52.00%)

4. MEGW2 - (51.41%)

5. MEGW1 - (48.94%)

Top Gainers (liquid stocks):

1. LCB - 293.41%

2. ZHI - 288.60%

3. LC - 236.96%

4. MA - 160.87%

5. MAB - 156.52%

Top Losers (liquid stocks):

1. MRC - (60.56%)

2. SLI - (58.38%)

3. CEB - (42.86%)

4. HLCM - (39.35%)

5. PCOR - (33.05%)

As for my own trading, this year was one of my worst performances ever. My big fund lost 10% this year but, had it not been for Lolo, I probably would have lost more than 20%. Guess where I lost the most this year? You'll be surprised to know that I lost the most in AP. That's due to the whipsaws while AP was moving sideways. My small fund was up by a mere 7%. The gains here would not have been possible if not for PXP and IP. Where did my small fund lost the most this year? JAP's AGP as I tried to buy it on the dips while it dropped from 50.00.

My year to date returns:

2008 - (27%)

2009 - 83%

2010 - 53%

2011 - (10%)

For funds that have at least P20 million under management, the best that you could have done was to have been able to position in one of the Lolo stocks early on. Had you been stuck with the blues, you would have ended up just break-even for the year. For those whose funds are small say, P2 million or less, it would have been much, much easier as there were quite a number of small caps that went to the roof this year.

Position-traders probably did a lot better than Tsupiteros, assuming the Position-traders stuck to their game plan and continued to hold on to their positions during the downswings. As for the Tsupiteros, it was a very frustrating search for the next big thing, which almost always ended up being a loser. Normally, two to three stocks, which would go to the roof would already make your total returns for the whole year. This year, it was very frustrating because you couldn't buy and hold. If you buy and hold, 8 times out of 10, you would have made a wrong decision, thus, I always end up taking small profits. The problem is, to make money by taking small profits, you need to have a very high batting average. My success rate this year was merely 40%, which means I only made money on 40% of my trades. I guess, unless you get really lucky or you are a very exceptional trader, the only way to make money really is in a bull market. In a sideways market, one ought to cut position-sizes and just play small because the odds would still be against you. This year, traders lost money but brokers made a lot.

I'm not sure if this one year consolidation that we are in is a toppish pattern or is a continuation pattern. All we know is that this consolidation will lead to a very big move either up or down. We don't even know when the markets will begin to trend. Thus, next year is going to be a very, very challenging year once again. Hopefully though, these whipsaws will eventually lead to a bull market, otherwise, there will be no chance to recover the small losses. How do you plan for a market condition such as this: Assume that the sideways market will continue but be ready for the market to either trend up or trend down soon? I guess stock picking is essential so that even if the whole market drops, you wouldn't get hurt a lot if you pick the right horse. Other than that, you just got to get lucky.

Kung Hei Fat Choy Tsupiteros!

Dec 28, 2011 (10:30 p.m.)

I guess this December just sums up what happened to the market in the rest of the year. I bet a lot of people, myself included, has become quite disappointed in the last two days, given that there doesn't seem to be window-dressing this year once again. I'm sure there will still be some selected issues that will head to the roof by tomorrow but trying to find them is like trying to find a needle in a haystack. All those people who are planning to sell by tomorrow should be able to get out or else...

A lot of people probably positioned in some blue chip stocks thinking that they will be window-dressed this year. Who would have known that one ought to have just bought JAP issues instead.

Dec 26, 2011 (11:30 p.m.)

Despite the denials from Ayala, despite the insider selling from Westlink (I suppose), WIN bulls just doesn't want to give up. Either there is really something going on here or the buyers are in for a big surprise. Personally, I'm scared for the buyers of this one.

DMC/SCC are the exceptional ones among the blues but, given how high they are right now, I think they got quite out of line with what the rest of the market is doing.

At 1.70, F. Yap Securities was seen buying heavily but, how come, at 1.60, he no longer is buying as aggressively? Could he have sold thru other brokers when he was seemingly buying? Could he be doing the same thing in MA right now? You have to hand it to Lolo. A master at work!

Some sneaky market players are using huge cross transactions to attract buyers into their stock. Be careful Tsupiteros. Not all those cross transactions have real buyers and sellers.

Aside from some action in some basuras, the rest of the market is in limbo and are just waiting for window-dressing on Thursday. I'm sure there will be despite everybody expecting it. The problem is how to choose the right horse.

Dec 24, 2011 (8:00 a.m.)

Amazing! Despite WIN already denying that they are not in talks with the Ayalas, the stock continued to trend higher. I would have to give an "A" to Tower for courage. I don't think I can still get myself to buy that one at current levels. You can have it boys!

Something happened today that wasn't exactly favorable for the bulls - some basuras are moving.

Everybody is anticipating window-dressing by Dec 29, which is the last trading day of the year. Let's just hope it will be as spectacular as some people would think.

Feliz Navidad Tsupiteros!!!

Dec 23, 2011 (6:00 a.m.)

All Gatchalian stocks are moving strongly, with WIN and PHES even doing parabolic spikes. Obviously, based on their behavior, the T+3 will be lifted already soon, however, I expect sell on news behavior once the news is out. Actually, WIN and PHES already looks like a "sell" right now. WIN may no longer be a WINner. Thanks for the tsups Gatchi!!!

Could LC have bottomed-out already? I think the more important question is, will Lolo let "Bensaldo" make money?

Market liquidity now starting to dry up. This is a normal market phenomena everytime we reach this time of the year. Expect lackluster trading up to maybe the last 2 to 3 days of the year.

Dec 21, 2011 (11:45 p.m.)

Obviously, window-dressing season has already begun with no other than index heavyweight, PLDT, leading the way. The thing is, despite the run-up of the market in the last four days, I hardly felt it. I wonder what the PSEi would be now if TEL was still trading at 2450.00.

I think properties have bottomed out. Notice the big cross transactions in SMDC, ELI and FLI yesterday. Notice the big rally in MEG and SMPH.

Win is definitely a WINner! Parabolic spike in the works. I'm not touching that one anymore though.

Could this be it for CHIPS?!

Can somebody please explain to me why there are a lot of people buying DGTL at P1.61?

Dec 20, 2011 (12:00 a.m.)

Impeccable timing by JAP. Just when nothing is moving, he starts pushing and becomes the star of the show.

Lolo, on the other hand, is either in a coma or is in life support. I'm not sure if he will survive the operation. He may die but, if the doctors do a good job, then, he will have renewed vigor and will have a second life.

I can't understand PNB. It jumps everytime there is some headline news about the merger but every knows that there will be a merger already, right? So, what's new?

Among the four IPOs in the last few weeks - PGOLD, CHIPS, H2O and TSI - only PGOLD and CHIPS are still above their IPO prices up to now. That means, only the two stocks are probably worth looking at. However, I don't think PGOLD is still attractive anymore at these levels so that only leaves one IPO stock left worth looking at. :-)

Dec 15, 2011 (11:30 p.m.)

I have to say, I am quite impressed by how resilient our market is. Watch TEL, I think that one is about to breakout!

The only real strong stock I saw this morning was CYBR. Could that strong move today be related with AAA?

With Gold dropping by more than $80.00 last night, the mighty LC has finally fallen. Congratulations Mr. Bennett! Some may see Mr. Bennett as being a very wild trader in the market but, judging by his performance in LC, he is not haphazard at all and he does know what he is doing.

I would also like to congratulate El Kapitan for his successful offering of TDY. But for those who bought into the offering, now what?

Some companies are skirting the PSE requirement of having at least 10% free float by doing private placements. Why do a secondary offering when one can just create a dummy and sell shares to his dummy? Very sneaky!

Dec 14, 2011 (10:30 p.m.)

Isn't it weird that we have stocks like CEB and MEG, among the big caps, and, IP and BHI, among the small caps, which are trending down strongly. Then, we have stocks like the Lopez group and the LR/BEL tandem, which are trending up strongly. We even had another ceiling today - AAA. It's like 20% of the market is trending up, 20% is trending down and the rest are moving sideways. The net effect - PSEi was up by 3 points.

Incidentally, I heard some rumors this morning about AAA being linked with Ramon Ang. Could that be the reason why it went to the ceiling today?

Another strong group of stocks today were the Gatchalian stocks. Could it be true that the PSE has finally lifted their punishment of being T+0 this afternoon?

The PSEi and LC have something in common - they are both trading in a very, very narrow range and are about to explode. The question is, which direction will they be heading?

Dec 13, 2011 (11:30 p.m.)

Dow goes up, PSE goes down. Dow goes down, PSE goes up. Dow up 100pts as of this writing, PSE will drop tomorrow? ... It is when Dow goes up and PSE goes up as well that Christmas rally begins.

Everyone getting dizzy with LC already but I needed to stand up in attention today after seeing a pole and a flag.

Trick question: If EDC and FGEN goes up, ___ goes up next.

WIN is a WINner!

Dec 12, 2011 (9:30 p.m.)

The whole market is still in "the calm before the storm"! The question is, will the storm blow to the north or to the south. In my 16 years of trading the PSE, I don't think I have ever experienced the market crash in December. The worst thing that normally happens is a sideways market. Of course, there could always be a first time.

Will you buy a company for P76 billion in cash right now but is hardly making money and will only be making money 3 to 5 years down the road? Or, would you rather buy a company for P108 billion in cash right now but is already making P4 billion a year? Of course, almost everyone will choose the latter. In the stock market though, realities such as these don't matter and what actually matters more is the P.R. and Marketing. :-)

Property issues were very weak today as highlighted by MEG. Could this be because of the accounting changes that will take effect on Jan 1? On the other hand, notice that almost all the Gatchalian stocks were strong today. Could T+3 just be around the corner?

Dec 8, 2011 (10:00 p.m.)

I'm happy to have sold all my LC near the highs for a quick 5% gain. Is the play over? One indicator that made kind of think whether to hold it or not is the value turnover - P1B. Could everyone been caught looking at one direction?

The Lopez show has begun!

Some players, on the other hand, has begun shifting from Lolo to gaming instead.

World markets now just one day away from the EU Summit. This could be the trigger for the PSE to move in a very big way. Question is, which direction will it move? I'm betting up. :-)

Dec 7, 2011 (4:00 p.m.)

I bought back all my LC today. Lolo for President!!! :-)

NI stockholders' meeting will be on Friday, yet, prices are very weak. Bad news coming up in the meeting perhaps? tsk, tsk, tsk

No one interested in CHIPS? I guess it's just me and Chucky then. Let's go Chucky! I'm a believer! :-)

Something is cooking with RLT. Anyone noticed the huge cross transactions in the last few days?

PSEi to retest all-time high?

Dec 6, 2011 (10:30 p.m.)

Just as I suspected, a disclosure in LC was forthcoming and, just as I expected, it sold on the news. The question now is, is this an opportunity to buy the stock on the dip, or, could there be a much bigger drop? Coming from an extremely optimistic stage, I would tend to think that there will be a much bigger drop, however, with Lolo, one can just never be too sure.

While LC was suspended, the market started bidding up MA and ZHI instead. The thing is, aside from being Lolo stocks as well, these two companies won't really benefit from the Far Southeast Project, if I'm not mistaken. Did I see Lolo sell both MA and ZHI this morning?

Without Lolo, this market is just dead. Thank you Lolo!

Dec 5, 2011 (9:00 p.m.)

LC continued to power higher today with the B shares even registering a new 52-week high. I'm not too keen on buying LC anymore at this point. Technically, it is quite overbought already. Fundamentally, it is now very expensive. Market cap of LC is now a whopping P79 billion. To justify this valuation, the company should be earning at least P3 billion this year. As a basis for comparison, PX, which is making P4 billion a year, currently has a market cap of P112 billion. I don't know but I think prices have gone way ahead of its fundamentals already at this point. But, of course, if Lolo still wants to push it, no amount of fundamentals or technicals reasoning can stop the freight train. I sold my last batch of LC today. Thank you for the memories Lolo!

Lolo should be voted as jockey of the year! :-)

Dec 3, 2011 (11:00 a.m.)

One would tend to wonder, why the hell is Lolo buying so much shares at these prices? Of course, I'm not complaining but why? Could it be that he already has a buyer at a much higher level? I bet everyone is guilty of selling too early yesterday. I myself am guilty of that too but left some shares just in case this one goes to where no man has ever gone before. :-)

Aside from LC, is there anything else to talk about in this market?

CHIPS Ahoy! Chucky! Chucky! Chucky! :-)

Dec 2, 2011 (1:00 a.m.)

Finally! The PSEi has rallied. The market has got a lot of catching up to do if we compare it with what other regional markets have done in the last three days. The thing is, our market may not do that because we hardly dropped as well compared with other bourses in the last couple of weeks.

I attended the Christmas party of FinanceManila this evening. I had a fun time chatting with everyone there. Not much people attended it unlike parties in the past. Could that be a sign that not a lot of people are interested in the market? Could that indicate that this market is still headed higher?

What Lolo did this morning was just phenomenal. I pity those who were forced to sell LCB at the lows. If I'm reading the chart correctly, you may no longer see 1.63 in LCB again.

With regards to the MSCI stocks, I bet people are wondering why they are still acting weak despite already being included in the index as of today (Thursday). As I said, that's because the market has discounted it already. I'm not touching any of those MSCI stocks right now.

Could it be that the big banks have formed significant lows in the last couple of days?

CHIPS Ahoy!!!

Dec 1, 2011 (5:30 a.m.)

I bet a lot of people got quite disappointed with the behavior of the PSEi Last Tuesday but with this worldwide intervention by the Central Banks, I'll be damned if we still don't rally today.

The market was quite extraordinary last Tuesday due to the re-alignment of the funds due to the changes in the MSCI index. Most notable was the shifting of Credit Suisse from BPI and MBT to those stocks that were recently included in the MSCI - URC, SMC and ICT. Some people might be wondering though why those MSCI stocks were still down for the day. That's because the market has discounted it already. If that's the case, then, BPI and MBT may already be a buy at this point?

Because of this worldwide intervention by Central Banks, a lot of stocks will probably rebound right now, however, while most stocks will merely rally because they are oversold, there are still a handful of issues that will rally because people are really anticipating something bullish will happen to that company in the future. One stock in particular that I am looking at is CHIPS. Why CHIPS?

1. Low Valuation - At P7.60 per share, the stock is merely doing 7.25x its 2012 earnings with a price to book of roughly 1.00 only. The market's average P/E is currently doing at around 13x and the market's average price to book ratio is 2.00.

2. Low Market Cap and Low Float - At P7.60 per share, the stock's market cap is just a mere P1.38 billion. With 42 million shares being offered to the public, free float is merely P319 million. But is the free float still really that big? From what I've been hearing, there were two big groups that took half of the total offering. That means, the shares which are really "free", is just 21 million shares or less than P160 million. Furthermore...

3. Chucky - Some would view him as negative, given his reputation in the market, however, he is still a known jockey, who can work magic in the stock if he so wishes to. If rumors are true, then, he is one of the two big groups who has bought a substantial block in the company in its IPO. The thing is, is he really just holding 10 million shares? Rumor has it that he has already bought an additional 9 million shares in the open market. If this is true, then, Chucky is now holding 19 million shares or almost half of the total free float. Again, if this is true, then the real free float is now just 13 million shares or less than P100 million. I can see only one reason why Chucky is accumulating so much shares. He is probably going for a board seat. How many shares does one need to get a board seat? If my math is correct, he needs roughly 23 million shares, thus, he needs to buy an additional 4 million shares in the open market.

4. Everybody made money in the IPO - This is one of the very few stocks in the whole market wherein you won't see anyone say anything negative about the stock. Why? Because everybody made money in it. At current levels, those who bought the IPO are still up by 8.5%. Why is this positive? With the situation of the world market nowadays, almost everyone wants to make a quick buck, thus, almost everyone who bought into the IPO may have sold already by now. That's a good thing because, if almost everyone who wanted to sell has already done so, then, there may no longer be anyone left who is willing to sell lower.

After ACR last year, I have never really promoted any stock here in my blog. I do not dare so, not only because of the condition of the whole market but also because I couldn't find a "sure thing". However, in the case of CHIPS, I think it's a no-brainer so I'm staking my reputation here. What's my target? 10x P/E, do the math. As always, disclaimer please. :-)