I’m pumped for the 6th instalment in our 2014 outlook series. Guesting in this edition is a good friend and very sound fundamental fund manager – Ren Agawa. He is one of the most calculative and conservative fund managers that I know. He is the type of person who makes sure he has a well calculated in his entry and exit strategy before buying or selling stocks. I like his approach on being profitable regardless of the market conditions, be it bull or bear.
I believe he is good at what he does and we can all learn from what he can share to us! We are almost at the tail end of our Outlook series. I hope this have served you well to create a better conviction on how you trade our market. I wish you all the best and I really believe knowledge and the application of it is the best way for you to make a splash in the stock market!
1. What is your outlook for the PSE this 2014?
2014 should be a less volatile year for the PSE since the tapering of the quantitative easing has already begun. However, investors need to deal with two realities this year. One is that foreign fund managers would continue their re-allocation from emerging markets to developed markets. Second is that the listed companies in the PSE would require capitalization due to their capital expenditures. These realities would be the one that would push the market in a sideways trend, negative externals and positive fundamentals. In that regard, it would be best to go defensive this year. Accumulating stocks with high dividend yields and low PEs in my opinion is the best strategy. Market appreciation would be very challenging so it’s best to have something to work as your cash cow. Also, our country remains to be a consumer driven economy and with the strengthening of the Dollar those benefiting from remittances as well as the BPO sector should increase their spending. As such, for capital appreciation purposes, it would be good to invest in companies that are included in this sector.
2. Given that the FED disclosed that they would taper off QE, in your opinion what is the effect of this in our market?
The tapering is a signal of improvement in the US economy. Always remember that in any market, signals are important. The up-swings in any market happens when things are about to happen or speculated to happen for that matter, not when it has already happened. As such foreign funds would continue to transfer from our emerging markets, including ours, to developed markets. This is a sad reality but even though our domestic market is resilient, we are still very much affected by decisive foreign fund managers. These managers transfer their funds in a calculated and swift manner which is why we are finding it challenging to breach the 6,000 mark again. In the short run, most likely until the 1st half of the year, we would continue to see foreign selling. In the 2nd half of the year however, especially after the ghost month, as valuations go down again, we should see foreign buying in the PSEi.
3. Sector to watch out for?
Consumer, Telecommunications, and Conglomerates
4. Will the PSEi hit 7,400, if so what is the trigger for this to happen?
Yes, 7,400 is very much reachable, not for this year unfortunately. As long as there are developed markets that have higher earnings potential like Japan, Korea, and the EU, emerging markets, including us would find it difficult to reach our all time high.
If we are to reach 7,400 mark though, what should trigger this is improvement in government spending. Foreign investors find it really frustrating that our government is in the final stretch of its term and we have not yet actuated the projects that we showcased in the beginning. Remember, investors are output oriented. As long as output remains to be meek, then we are to remain in our current levels.
5. Year end projection for the PSEi?
6. If there is one stock that you are bullish about, what would it be and why?
Meralco (MER), power is something that our country would always need and the entity is very much in control of that. When you have a company that posts a double-digit (average of 21% for the past 4 years) and improving ROE every year (average of 3.5% for the past 3 years), this means that the fundamentals of the company is good. Corporate governance is a positive also for the stock since it is managed by one of the top executives in the country. It is also reasonable in sharing its earnings with an average dividend yield of approximately 3% for the past 3 years. Also, technical wise, it has been on a consolidation phase and year to its oversold levels since it has been questioned for price related issues. This means, MER is a profitable, dividend-paying, well-governed, and almost-oversold stock. Where else can this stock go?
7. Message to newbies and veteran investors a like for 2014?
Set your goals, check and discern the realities, and always be prepared for the volatility in the equities market.
Catch me this Saturday in GMA News TV at 5pm as I get featured this in a new show catered to OFWs called “Boarding Pass” I will be sharing on how OFWS should have the proper mindset in saving while they are based abroad.
I will also be having a talk on How to Find The Perfect Timing in Buying and Selling Stocks this Saturday at 3:30pm at the Berjaya Hotel!
Thanks to everyone who tuned in today as I guested in UNTV’s Rise and Shine!
My book Stock Smarts: Stock Investing Made Easy is now a best seller! Thanks to everyone who took part and grabbed a copy. If you would like to order and have it delivered to your doorstep: Click the Link to Register and Order.
If you want to catch our seminar sessions here some of my public talks:
If you’d like to learn more how to invest in the stock market and learn how to make your money work hard for you. I’d like to invite you to our upcoming events:
- February 1st How to Find The Perfect Timing in Buying and Selling Stocks
- February 8th Stock Trading Timing Workshop
- February 14th Wealth Conference .02 : Doha, Qatar
- March 1st Stocks Smarts: How to pick good stocks and avoid bad ones
*pictures from google search