Archive for September, 2011
You know what I’m thinking? The Philippine Mining Index fell from a high of 27,105 down to the 18,000 level last Monday. Yesterday it gained by 7%+ to closed at mid 19,000 level.
I got this kakaiyak message from a lady investor named Aiz. She message Commander Ollie of http://www.stockmarketpilipinas.com and it was written by the heart. Its like a father going home tired from work and upon seeing his wife and kids, an energized man suddenly come into being. Well this letter is like a family. Just a few words and it will keep you energized to share your experiences to good people like Aiz.
Hi Comm, good morning!
Checked out the SMP blog and actually commented on yesterday’s entry. Nice! I remember nung super newbie ako (until now newbie pa rin haha) and all I resorted to was hypes and recos from gurus. If there is one “sayang” happening, hindi mo pa naisip or na-establish and SMP nun. So nangyari, I gained SOME and lost MORE. 25% of my meager capital was swept away from the day I started trading in Oct 2010 until Jun 2011.
Pagdating ng SMP, nagkaroon ako ng “close encounter” (online) with people not pretending to be gurus but certainly have the necessary know-how’s and the experience. Best of all, sila yung may mga puso na tumutulong sa mga newbies and kahit sa hindi na bagitos. That’s YOU, my sis RUACH, boss SPY, A1, sir BORDZ and marami pang iba.
And now, yung 25% losses ko in 9 months, 4% na lang in just 2 months. Walang bayad yun ha, take note .
So I really am very thankful to SMP and to you, comm, for inviting me to join the forum. It is indeed a blessing…
I congratulate you that you are now achieving the goals envisioned for SMP and for yourself, as well. Please do not tire to educate newbies and ipit masters alike.
Take care and thank you once again.
For a start, what are etfs?
Based on the nasdaq.com website. Here’s a a brief definition of what etfs are.
What Are ETFs?
In the simplest terms, Exchange Traded Funds (ETFs) are funds that track indexes like the NASDAQ-100 Index, S&P 500, Dow Jones, etc. When you buy shares of an ETF, you are buying shares of a portfolio that tracks the yield and return of its native index. The main difference between ETFs and other types of index funds is that ETFs don’t try to outperform their corresponding index, but simply replicate its performance. They don’t try to beat the market, they try to be the market.
ETFs have been around since the early 1980s, but they’ve come into their own within the past 10 years.
ETFs combine the range of a diversified portfolio with the simplicity of trading a single stock. Investors can purchase ETF shares on margin, short sell shares, or hold for the long term.
Passive Management – Harness the Market
The purpose of an ETF is to match a particular market index, leading to a fund management style known as passive management. Passive management is the chief distinguishing feature of ETFs, and it brings a number of advantages for investors in index funds. Essentially, passive management means the fund manager makes only minor, periodic adjustments to keep the fund in line with its index. This is quite different from an actively managed fund, like most mutual funds, where the manager continually trades assets in an effort to outperform the market. Because they are tied to a particular index, ETFs tend to cover a discrete number of stocks, as opposed to a mutual fund whose scope of investment is subject to continual change. For these reasons, ETFs mitigate the element of “managerial risk” that can make choosing the right fund difficult. Rather than investing in a fund manager, when you buy shares of an ETF you’re harnessing the power of the market itself.
Cost-efficient and Tax-efficient
Because an ETF tracks an index without trying to outperform it, it incurs fewer administrative costs than actively managed portfolios. Typical ETF administrative costs are lower than an actively managed fund, coming in less than .20% per annum, as opposed to the over 1% yearly cost of some mutual funds. Because they incur low management and sponsor fees, and because they don’t typically carry high sales loads, there are fewer recurring costs to diminish your returns.
Passive management is also an advantage in terms of tax efficiency. ETFs are less likely than actively managed portfolios to experience the trading of securities, which can create potentially high capital gains distributions. Fewer trades into and out of the trust mean fewer taxable distributions, and a more efficient overall return on investment.
Efficiency is one reason ETFs have become a favored vehicle for multiple investment strategies – because lower administrative costs and lower capital gains taxes put a greater share of your investment dollar to work for you in the market.
ETF shares trade exactly like stocks. Unlike index mutual funds, which are priced only after market closings, ETFs are priced and traded continuously throughout the trading day. They can be bought on margin, sold short, or held for the long-term, exactly like common stock. Yet because their value is based on an underlying index, ETFs enjoy the additional benefits of broader diversification than shares in single companies, as well as what many investors perceive as the greater flexibility that goes with investing in entire markets, sectors, regions, or asset types. Because they represent baskets of stocks, ETFs, or at least the ones based on major indexes, typically trade at much higher volumes than individual stocks. High trading volumes mean high liquidity, enabling investors to get into and out of investment positions with minimum risk and expense.
It was in the late 1970s that investors and market watchers noticed a trend involving market indexes – the major indexes were consistently outperforming actively managed portfolio funds. In essence, according to these figures, market indexes make better investments than managed funds, and a buy-and-hold strategy is the best strategy to reap the advantages of investing in index growth.
How do indexes work?
A stock market index is a list of related stocks, together with statistics representing their aggregate value. It is used chiefly as a benchmark for indicating the value of its component stocks, as well as investment vehicles such as mutual funds that hold positions in those stocks. Indexes can be based on various categories of stocks. There are the widely known market indexes, such as the Dow Jones Industrial Average, the NASDAQ Composite, or the S&P 500. There are indexes based on market sectors, such as tech, healthcare, financial; foreign markets; market cap (micro-, small-, mid-, large-, and mega-cap); asset type (small growth, large growth, etc.); even commodities.
It’s about time to have one, but unlike the mathematically flawed bear funds, i think it is best to have a single etf for the whole psei, and sector etfs to our sub indexes.
In the US markets, they have these bull and bear fund etfs designed for commodities, indexes and markets (emerging markets for one).
I say bear funds are mathematically flawed in the sense they were doomed to failed over time.
PSE should consider having an ETF where investors can trade on the long and the short side of the fund. Investors can then have the option to hedge their position such as these parabolic bursting time.
Parabolic burst (paraburst) is a very fearsome pattern. I’ve been vocal about the effects, and how the mother of all stock pattens looks like. I have posted lots of these charts pertaining to such. But then again, its just me.
The mining index today took a beating (chart maybe over the weekend if i have time). In fact not just a beating, but it was brutally tortured. Now it gets me into thinking, is this a capitulation?
My question. Market to answer.
BOH ALPHA PRIVATE INVESTORS (BOH-API)
Asset Allocation * Fundamentals * Technicals * Strategy
http://genkumag.wordpress.com * email@example.com
INITIATING COVERAGE: ABRA MINING AND INDUSTRIAL CORP. (AR)
19 September 2011
Price target: P0.02/share
We are initiating coverage on Abra Mining and Industrial Corp. (PSE: AR).
Abra Mining and Industrial Corporation (AR) engages in the exploration, development, exploitation, processing, manufacture, extraction, milling, and sale of construction materials and minerals in the Philippines. It offers cement and metal concentrate, marbles, building materials, and other minerals, such as copper, gold, silver, iron, and lead. The company also involves in the processing and manufacture of non-metals for industrial and commercial purposes. Abra Mining and Industrial Corporation is based in Quezon City, the Philippines.
On November 23, 2006, Olympus Pacific Minerals Inc. (TSX: OYM) entered into an Option Agreement with AR and Jabel Corporation (Jabel), subject to completion of due diligence, whereby OYM and associated Philippine interests can earn a 60% interest in the 43 square kilometer Capcapo Project (OYM press release dated November 23, 2006). Also part of agreement terms is a Right of First Refusal covering approximately 320 square kilometers of other AR / Jabel tenements within this highly prospective area.
The Capcapo property is located just to the north of the prolific Baguio-Mankayan Gold District, which has a combined production, current reserves and resources in excess of 60 million ounces of gold. The project area exhibits many analogous features to those productive deposits to the south.
On June 25, 2007, OYM announced results from on-going drilling completed on the Capcapo Project, located in Abra Province, Northern Luzon, Philippines.
On September 10, 2011, AR approved and adopted the authority of Mr. Jeremias B. Beloy, President and Chairman of the Board to execute and sign the Joint Venture Agreement with OYM involving the mining tenement covered by MPSA No. 144-99-CAR located at Capcapo, Licuan-Baay, Abra. AR also approved the application of the cash advances by affiliate Jabel Corporation in the amount of P77,900,000.00 as of
June 30, 2011 as additional payment on its unpaid subscription and allocation of P100 million from the authorized capital of AR for stock option plan and other incentives to deserving employees, officers and directors.
OYM together with its subsidiaries, is an international company involved in mineral exploration, development, and mining of properties in Southeast Asia with a focus in Vietnam. The company is building its base with the aim of being a leading gold producer and explorer in Southeast Asia and has commissioned the first two foreign- owned gold mines to be operated in Vietnam since the 1940s. The management team is committed to OYM’s vision of making major discoveries in the region and increasing shareholder value.
We now present our case for the fundamental valuation of AR.
We assume that OYM will proceed with developing the Capcapo property with a 60% interest in future earnings and with the remaining 40% accruing to AR.
A mine of this size is usually associated with 1 to 2 million gold equivalent ounces during its entire mine life. For AR, we assume 1.5 million gold equivalent ounces which may be extracted over a period of 30 years. We also assume a 5 year build time, gold at $1700/oz, USD/PHP at 43, gross margin at 50%, discount rate at 10% (25Y FXTN = 7.5%, 25 ROP = 5.0%). Given AR’s 40% interest, we have computed the fair value at 2.34 centavos per share using a discounted cash flow (DCF) model. Assuming mineralization increases to 5 million gold equivalent ounces, fair value increases to 7.80 centavos per share, all other factors constant.
From a technical standpoint, AR is currently testing 0.60 centavos and is doing so for the first time in two years. The stock was range-bound between 0.36 and 0.46 centavos in 2010 which carried over to the first half of 2011 until it broke out last July on good volume. In September, AR broke out again rallying from 0.46 to 0.60 centavos in just three days with average volume exceeding P15 million, its largest value turnover since 2008.
We think AR will now consolidate above 0.50 centavos before its next push with an initial target of 0.85 centavos on the break of resistance at 0.65 centavos. Our twelve-month technical target is 1.5 centavos
but conceptually, we expect the 15-year gap between 2.3 and 2.5 centavos to act as a magnet for an eventual gap closure.
In conclusion, we rate AR as a SPECULATIVE BUY with a price target of 2 centavos/share given the following:
• We believe OYM will push through with the JV with AR in developing the Capcapo property.
• Fair value at 2.34 centavos per share was made with reasonable assumptions.
• Technical target of 1.5 to 2.5 centavos per share.
• The recent allocation of P100 million from the authorized capital of AR for stock option plan and other incentives to deserving employees, officers and directors implies insider buying which is typical as corporate turning points.
• As of the September 19, 2011 price of 0.54 centavos/share, upside to 2 centavos/share is 270%.
• We think the near term catalyst will be a sudden surge in volume.
The information contained herein does not suggest nor imply and should be construed in any manner as investment advice or solicitation. Fair value estimates and price targets do not guarantee future results. Therefore, no prospective investor should assume that that future performance of the investment referred on this website will be profitable. Investment returns are prospective and based on information believed to be accurate and reliable.
BoH is not licensed as an investment advisor and does not offer investment advisory services in any capacity.
The Peso – Dollar analysis by Elliot Wave Guru Chanerm of Finance Manila. (my special request to the man coz i know very little about elliott waves)
1. Peso strength evident as it’s been moving in a downtrend channel since peaking around Nov/Dec 2008 (50.25 level). Channel resistance presently around the 44 to 44.50 level.
2. The peso also broke out from a Head and Shoulder formation, and is testing and retesting the neckline around the 44 to 44.50 level.
3. Note the presence of a gap at the 44.50 level.
Elliott Wave analysis:
Probable pattern from the late 2008 high is a leading diagonal triangle. Since the 5th wave low around Nov 2010, the peso has moved sideways. The likely pattern for the corrective sideways formation is a 3-3-5 flat. Initial target for wave c of the flat is the level of wave a around 44.50. The peso could also retrace the level of the 4th wave of the diagonal which is at the 47 level, and is close to the 61.8% retracement (~47.3 to 47.5).
The initial target for the flat is in line with other resistances on the chart (as evidenced by the gap, the channel resistance, and the neckline resistance). These resistances, if respected, should put a floor to any further weakening in the peso.
Failure however means flight to safety and risk aversion will be the theme of the day. This theme is likely to carryover also to Phil equities given how both have moved in a sideways market since their respective peaks in late 2010.
Spyfrat’s Call Peso-USD analysis using 50ma and rsi30