HOW MANY BAGS DID YOU SAY? by Gus Cosio

6:40 pm  Tuesday  20 July 2010   Philippine Stock Exchange Index 3405.69 (-0.54%) The Asian markets were all soaring today with both the S&P Asia and the MSCI Asia indices rising by one percent.  Most stock markets were following the direction set in New York Monday.  Actually, more than that is the positive sentiment building up for China.  Stocks in the Mainland has actually been on the down trend  for about a year already ever since investors became suspicious that an asset bubble was inflating in the country.  Today, China opened up some more for capital flows coming from Hong Kong and investors responded more than positively.  With good news from China and stock prices recovering in the developed markets, the mood looks to be turning in this part of the world. Why on earth is the PSEi down then?  It seems beneficial not to be correlated to the major markets, but it looks ridiculous when everyone’s mood is up and things go the other way in our market.  Actually, that 18 point decline in the index came from 5 stocks – TEL, AC, ALI, EDC and AGI.  From that perspective, things do not look bad at all. Two of my favorites – PNB and URC – went against the grain with very good volume.  With PNB, you are seeing a value turnover for the last two days that exceeds half a billion pesos.  That cannot be a bad sign by any measure.  Volume always precedes price and if you look at the volume that has built up in PNB over the past week, it has topped one billion pesos.  Obviously, the market is already predicting that the merger is days away.  I have liked PNB for about a year now and I had never left my position without it even as it went up and down.  It is looking like a two-bagger already and still going.  I am very happy for those who believed in this stock.  I ill say the same for those who stuck with URC, especially to those who stayed with URC for the last 12 months because it is now a three-bagger. These recent price movements in particular stocks simply proves my point about picking the strong and credible stories.  I always believed that stocks with a story to tell will have the longevity that investors are looking for.  Yesterday, I referred a bit to DGTL which has been intriguing me since it spiked in June.  Ironically, it was a case where we saw the volume spike to be met with strong selling.  Recently, the volume had eased already.  What is curious is the fact that huge volume changed hands successfully, even as prices declined.  I think what we are seeing is some redistribution in the stock from investors that probably have gone impatient.  This is why I think taking a contrary view to those who sold heavily may just prove profitable in the intermediate future.  The market is looking for potential two- and three-baggers and my instinct tells me that DGTL could be a leading candidate. Way back in 2002, DGTL’s cellular business was just targeting 2 million subscriber because that was what it took to break even.  In 2010, it is supposed to have 10 million subscribers and growing.  I have seen market research that DGTL indeed has eaten up market share from GLO.  Of course, I think deeper research needs to be done on the stock, and that is what I am headed to do.  In the meantime, I think I will be willing to put some money in an idea such as this simply because I need another two- or three- bagger.  It is a gamble that can be calculated.