Philippine Stock Market Trading Advisory as of April 9, 2010
After a continuous upward trend, the PSEi closed at 3,256 on Thursday. The computed PSEi PER limit is now 13.7x, while the Blended Multiplier limit is now 20.6x.
It is good to review which stocks are already pricey at these levels. Of the stocks covered, SMDC is the priciest of the pack with a Blended Multiplier of 138.64x. The company aiming to be one of the top three property developers in the country in two years’ time is trading at a PER of almost 40x its earnings. The market is exuberant with SMDC’s success in its residential condominium projects situated near SM malls and universities.
A more rational exposure to this high-flying stock is its mother company, SM. It is only trading at a Blended Multiplier of 24.32x, only a slight premium over the current Blended Multiplier limit of 20.6x. SM’s Price to Book ratio (PBV) of 1.42x is likewise trading below our PBV limit of 1.5x and has a Margin of Safety of 0.01%.
Stocks still trading at a discount to the PSEi are still the ones highlighted in our previous Trading Advisory. It is significant to note that five of the biggest banks of the country and PSEi heavyweight, AC, are still in that list. We prefer AC’s income stream and stable financial condition as well as UBP, SECB and CHIB.
Pymwymi Fund Performance
The Pymwymi fund is a basket of 15 stocks Corpecon Research has assessed as having high growth, the most resiliency to negative economic factors and high free float. They have been screened and selected using our investment methodology as detailed in the Philippine Stocks Guide 2010. The Pymwymi Fund is up 14.4%, while the PSEi is up 8.4% from the start of 2010.
The purpose of the Pymwymi Fund is not to beat the PSEi but to offer an alternative basket of stocks to invest in. It is also not prone to market factors which will cause the Fund’s gains to fluctuate daily. However, in the long run, we expect the Fund to produce excellent gains for the investor.