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I wrote this blog yesterday, the 1st of june, but hey, the market is just as strong today.

You can’t argue with money.  This rally in stocks is pretty strong.  There is just too much money fueling this market.  People have been sitting in low yielding cash for too long and have gotten impatient.  Stock prices are rising simply because investors are thinking that they could be higher.  What gives credibility to today’s strength, though, is that it was led by Ayala stocks – AC, BPI, ALI and GLO – meaning investors appear to be buying stocks that have solid fundamentals.  Never mind that these stocks already look expensive from an earnings and valuation standpoint, people want to be on board for the the next boom in the market.

Fair enough.  There is really no ideal time to be in the market.  We just know that it is cheapest when everybody is afraid to get in and we appear to be way past that already.  One thing that we need to bear in mind particularly is that speculators need to take profits.  When that will happen is anybody’s guess.  I can only surmise that there were enough people who bought the market when the index was at 2000.  Today, it closed 2458.69 – an increase of 69.34 points or 2.9% in one day.  I can feel my eardrums getting clogged.

But, as I said earlier in this blog, the trend is your friend.  For as long the party is rolling, why rock it.

There are stocks that are nevertheless cheap in spite of a stratospheric level of the index.  MWC, AP and TEL are some favorites that I think will weather any storms up ahead simply because they are cheap valuations wise.  Even FLI which has started to move again will like rise further simply because its fair values still need to be realized.  I also like PNB even if its merger with Allied Bank has been moved back.  That merger is going to happen anyway and PNB on its own is trading at a fraction of its book value.  The point is that there are stocks out there that have not yet found their fair value.  That is what late comers should be checking out.

The mood is extremely optimistic and when everyone is bullish, I find it wise to be a skeptical.  I don’t think that greed has pervaded the market yet because people are buying simply because thay don’t want to miss the boat.  People should remember, nonetheless, that returns from the market must be realistic.  So far some stocks have returned over 100% since March.  Others have yielded 50% or more.  Whether your time horizon is long or short, any return above 50% is already a bonanza.  My economics professor always stressed that a bird in hand is better than two in the bush.  I wouldn’t mind staying away from the bush if I had a bird to lock in a cage now.

I would not keep away from the market either because I would not want to lose the flow, after all, the rest of the Asia is rallying strongly.

Have a great week ahead.

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