7:25 Wednesday 10 August 2011
After a good bounce in Philippine stock prices, I believe what is going on in investors minds is the anxiety whether or not the selling has ended. The rally today does not overshadow yesterday’s blood bath. Many investors are still hurting, and many more are worried that the remaining profit in their existing positions might be eroded further in the coming days. For those who are deep in the red, what is in the back of their minds is how to limit the damage. I do not believe that there is a closet bull in our midst today.
Of course, many would turn to the fundamentals as earnings growth of 80% of S&P 500 companies reported better than expected profits. Locally, there have been a fair share of disappointments coming from the power sector; but the banks and property have been on an earnings roll. One can argue that at the end of the day, it is earnings growth that drive stock prices. I do not dispute that notion. The hurdle being thrown in our path is global investor sentiment to which Philippine stocks cannot be impervious to.
While I consider myself a long term investor, I cannot ignore the imperative that I must preserve my principal to the best of my ability. I think the prudent thing to do is what I have stressed all along – have around 20% of your portfolio in cash most of the time. This means that when you find a good stock to buy and you have no or low cash, sell something to bring cash back to your portfolio.
In short, I do not see stocks in general to rally to last July’s levels in as far as headline or index stocks are concerned. However, I feel very comfortable owning the mining sector particularly because the sector is still predominantly owned by local investors and will therefore be a bit immune to selling by foreign funds. I think AT, LC/B, MA/B, ORE and PX are still a worthwhile hold at this point. Personally, with the cash I raised selling some stocks today, I added to positions in these mining shares. I believe the risk reward ratio at this point is quite attractive in the mines.
I may not be able to update this blog tomorrow as I will be in Cebu as a panel speaker for the Global Corporate Social Responsibility conference in Cebu. I am also guest speaker at the monthly lunch meeting of FINEX Cebu Chapter. Busy days to come, but I always enjoy my Cebu stays because of the Marco Polo whose food and service is worth the visit
