First Metro Asset Management Inc

TURN, TURN, TURN

8:00 pm   Wednesday   June 17, 2009   PSEi 2441.75 (down 2.88%)

The Philippine stock index dropped by as much as 100 points at mid-session but managed to end down 74.42 points.  That is 171 points lost in 2 days.  Does this disappoint investors?  I don’t think so.

Let’s put things in perspective.  We ended May with the index at 2,389.31.  We’re now at 2441.75.  We’re simply giving some of the overvaluation back.  Markets always makes adjustments for differences in appreciation of the value of individual stocks.  If everybody had the same idea on stock prices, we would not have a market.  It is precisely these differences in opinions which provides understanding and depth to the discovery of stock prices.  Remember, every order posted by a broker is a vote on what the price of the stock should be.

What is interesting at this point is the strategy that an investor should take given what we expect.  I for one think that the broad market will probably move sideways for a few weeks before we see a clear direction.  What this means is that over the next few weeks, I think we will see some stocks going down while others go up.  It is not going to be the one way traffic that we had seen for the past 2 months.  As I have been harping on all along, we must do some stock picking.

There’s a stock that I think is worth looking at:  Semirara Coal (SCC).  This company is the only commercial producer of coal in the country, but what I’m really concerned about is the rising price of oil.  I don’t think that oil will come down the way it did last year.  I think that it will slowly creep up as the global economy recovers.  The theme that I see in SCC is that energy prices are going up and it’s the only energy commodity play that is in the Philippine market today.  Furthermore, this company paid 6 pesos dividend this year.  I see it paying the same next year.  That’s a 15% dividend yield at today’s prices.  Furthermore, my information is that this company’s reserves can last 30 years.  With a good number of coal using power companies in the country, this company only stands to gain whether or not energy prices go up further.

Anyway, with the market being more cerebral, I will have time to blog about specific stocks which I am following.  There is a time and a season for everything under heaven.  I hope you appreciate my sharing it with you.

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First Metro Asset Management Inc