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DISCLAIMER: I AM FAR FROM A STOCK MARKET EXPERT. I’VE HAD TONS OF MISSES AND WRONG SHOTS. I’M JUST SHARING MY MARKET HITS.

If you’ve managed to take positions from the market’s drop during the last week of May, then you would have enjoyed generously high returns by now. In fact, if you listed all of the index stocks in a dart board, and if you just threw five or six darts to the board and tapped the stocks where the darts landed, you would probably earn a return that could at least be at par with the index. Year-to-date earnings of the index as I write this stood at roughly 4.2%. Of course I did at least almost twice as the index, haha.

In my very short exposure in the equity capital markets, and in my one year experience of being a part manager of my employer’s proprietary portfolio, one thing that I’ve learned is to always buy stocks on sale provided that you are a value investor. I managed to do this especially during the months of March and May on the following stocks: Atlas, Philex, San Miguel (I’ve been saying that since they had a secondary offering at PHP110 per share), Aboitiz Power, PNB (yup, I kept on buying at PHP59-60 and selling at PHP62-63), RFM, SMDC, JFC (similar to PNB, I kept on coming in at PHP85-86 and selling at PHP89-91), and RCBC. Of course I had a lot of misses and early selling decisions, including Security Bank and Aboitiz Equity Ventures. My most fantastic experience was/is with San Miguel and Atlas. For the case of San Miguel, I bought during the secondary offering, and sold at PHP119, and came in again at PHP126.30. Today, SMC closed at PHP130, haha. For Atlas, I managed to came in lucky at PHP16.94. For my personal trades, I sold at PHP19.

For the case of mining stocks, I have two additional simple rules:

• if you believe the mining company has a story (i.e. it has more existing mines than exploratory sites), and if you believe in the prospects of the commodity they are mining, go for it! Nevermind the periodic drops, just average your costs down.
• though there is really no perfect correlation, it is typical for the market to view commodities as a hedge in case the other investment instruments drop. If the underlying commodity goes up, more often than not, the stock of the company that mines the underlying commodity also goes up.

However, there are also serious reasons as to why you should be cashing in more than 50% of your equity exposures at the moment:

• the threats in the US and Europe, particularly in Greece, remains uncertain
• ghost month is fast approaching. So far, no matter what the level of the index is, it has been consistent in dropping during the month of August. Shown below is a historical 12-month chart of the index for all years (source: IGC Securities).

My two cents: cash in at this point and nevermind your potential forgone income, except on bullish industries like power and construction. But buy some stocks that have moved way slower than the index, including Nickel Asia and Semirara.

There are also some stocks that seems to be on sale now, both in terms of price and valuation multiples. So far, my recent picks include Nickel Asia, RFM (thanks to my colleague’s excitement over this stock) and BDO. I think Nickel Asia is just a rocket waiting to be launched into outer space, haha.

If the market starts to drop for let’s say 3 or 4 consecutive days, then I’ll start buying again. If a 3 days drop-1 day up-x more days drop behavior happens by August, I’ll definitely take positions and average my costs down.

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