Philippine Stock Market Research

Climbing and Value-Investing                                                  

May 1, 2013

The PSEi has reached 7,000.  We think there’s more to climb in the rest of the year.  Many fear the high market PER, but low interest rates water this down.  We see the PSEi ttm PER peaking at 25.58x this year along with the PSEi at about 8,000.  Big funds keep on buying the high-PER blue-chip stocks.  Philippine ETFs are even composed of these stocks.  To have superior returns, one has to be selective in picking stocks for their portfolio.  Instead of URC and RFM, buy PF.  Instead of MER or EDC, there’s a less-known stock called PERC generating strong earnings from Gabon oil and will commence with its 20 MW Maibarara geothermal power plant this October.  No volume?  Then create it because it’s worth it.  Instead of BEL and BLOOM, buy LOTO.  We value it at PCF because of its strong cash-flow, and it can continue servicing PCSO or morph into another kind of gaming-related entity in two years.  Instead of ALI, there’s an alternative MEG, FLI and VLL combo.  There are other less known but stocks with value such as STI and PHN.  There’s lots more, lots of superior alternatives.  This labor day, however, we would like to take a break and pay tribute to a club that has taught qualities which we use in value-investing.  This club is a well-known mountain climbing club in the Philippines.  This club is called AMCI.

AMCI Mountaineering Club, Inc. marks its 30th anniversary this year.  Back in 1983, a bunch of guys working in the Makati commercial business district (CBD) regularly went off to climb mountains during weekends.  Equipment and clothing were not as sophisticated then as now, but those guys just went out in their jeans and rubber shoes to climb and enjoy the great outdoors.  This soon turned out to be a club called the Ayala Mountaineers because most of their members were office-people working in the CBD.  The club turned office-people into athletes.  Today, the club is called AMCI.  Every year, a group of inductees undergo four training climbs and the 15 km run under 2 hours to become members.

I am not active in the club now.  I was 99-020, the 20th member of Batch 1999.  I trained when I was a stock market analyst, was inducted by the club and was let go around the same time by the company.  The market was not doing well that time and costs had to be cut down.  Jobless for ten months, I climbed with the club and became a mountain man.

Climbing is dangerous.  In our induction climb in the 9,000-feet Mt. Kalatungan, some of us got hypothermia when a storm passed by when we reached the summit.  In 2000, in the Leyte mountain ranges, we were attacked by wasps when one of our climbers accidentally hit their camouflaged ground-hive when we were already trekking down in our last day of climb.  My face was swollen with stings, and my right ear and lower lip were over-swollen.  Our digestive systems rapidly dispelled the venom from the stings.  It was a hassle defecating every five to 15 minutes, but it saved our lives.  The stings could kill a carabao.  In March 2004, in my last climb, I was pressed to the 150-feet wall on top of the crater of 7,000-feet Mt. Banahaw.  There were just a few handholds and an old prickly rope.  I was slowing my heartbeat from fear by taking slow deep breathes because my heartbeat was pushing me off from my grip.  The wall was wet as the crater had its own cold weather even in summertime.

Climbing is also great.  I remember the foggy mornings in the mountain-peaks, the water-slides of Mt. Malipunyo, the clean flowing river of Mt. Mariveles and reaching the table-top peak of the 8,000-feet Mt. Halcon on Day 3 of the five-day climb.  They were beautiful.  Air was thin on the peak of Mt. Kalatungan.  A swarm of bats came out of their cave when we were having lunch along the Mt. Mariveles waterfall, and I swam in the sulfuric water of Mt. Pinatubo’s crater where the previous great eruption came out and spewed ash all the way to space and Metro Manila.  Those were great memories that seem like dreams now.  The best memory was reaching the Banahaw crater and drinking from the Tubig ng Kabuhayan (Water of Life).  It was like a fountain covered with plants with flowing water.  It was the purest water.  Some said it was magic water.  I felt it to my bones.  I drank and drank it when I was there.  Nine months after that climb, my wife and I had our first and only child.  Before that, we couldn’t mainly because of me.

I now climb a different climb.  I recommend Philippine stock portfolios.  The lessons I learned from AMCI I also apply to value-investing.

“Prepare for the Worst and Hope for the Best” – This is our mantra same as having margin of safety in value-investing.  Anything can happen up in the mountains from storms to floods to wasps.  Climbing and value-investing are not about thrill-seeking.  Maybe trading is.  It’s about having margin of safety all the way from your analysis to your valuation of a stock.

“Take Baby Steps in Steep Ascents” – This is the best lesson I learned mainly from Mt. Ugu in Benguet and Mt. Halcon in Mindoro.  Steep ascents are like walls in front of you.  You have to scale or walk up through them with your load.  If you do it aggressively, you will risk being stuck for a long time at the side of the mountain resting your swollen thighs and catching your breath.  But if you take continuous baby steps with deep breathing and little rests along the ascent, you will reach the top faster.  This is the power of long-term investing and not day-trading.

“Climb With a Group” – Climbers are like stocks in a portfolio.  With different personalities, social and professional backgrounds, strengths and weaknesses, climbers in a group are all one and equal.  Though others outperform in the start, the others pull the group up in the end.  As a group and not just one or a couple of climbers, each other’s strengths compensate for each other’s weaknesses.

“Popular Don’t Mean Reliable” – Use proven gear that works.  Do you know that Nike, Adidas, Merrell and even Salomon are popular footwear but they flunk the Philippine mountains test?  There have been more damages with those brands than other less-known brands up in an actual climb.  Philippine mountains are wet, muddy, rocky and unstable enough to tear them apart even in the first climb.  The less-popular brands like Hi-Tec, and in my experience, Coleman, have been more reliable in the long run.  Same with stocks, popularity doesn’t equal to superior returns and resiliency.

“Keep Fit” – Remain tip-top even when not climbing.  Keep learning and expanding your investment knowledge.

“Pack Light” – Just bring what you need with the essentials like water and your headlamp on top and the heavy stuff like your tent and clothing at the bottom.  Simplify your analysis and valuations.  There are a lot of stocks, and you’ll never discover ones with true value if you’re top-heavy.

Happy 30th AMCI.  Climb On.  Thank you for the mountains, memories and lessons.



Mt. Kalatungan Summit October 1999 (9,000 vertical feet.  9,000, where the PSEi is seen in 2014)

First Halcon

Mt Halcon near the Table-top Summit May 2000 (8,000 vertical feet.  8,000, where the PSEi is estimated to be in June/July 2013)


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