Today was a bloodbath in the market. Everything was red. I was actually expecting it to go down but for the wrong reason. I was thinking that if the debt ceiling will be raised, and it was, then there would be a measure of recovery in the US market. It had been going down for some time due to uncertainty brought about by the prolonged debate on raising the debt ceiling. And once that uncertainty is lifted, I was thinking some capital would flow back. But it seems the reason for the bloodbath is that with the uncertainty lifted, the shape of the economy went fore into the picture and it wasn’t good. So downward the US market continued. Enough to jitter everyone else.
SMC Pricing
I read that the upcoming SMC offering has a new price range of P110 to P140 per share. Lower than the P150 per share before the trade suspension and much lower than its peak of about P180 per share. Comparing it with some back-of-napkin figures to similar diversified/diversifying conglomerates:
| Price | EPS | P/E | Return (E/P) | |
| SMC | 110 | 6.14 | 17.92 | 5.58% |
| SMC | 140 | 6.14 | 22.80 | 4.39% |
| SMC | 153 | 6.14 | 24.92 | 4.01% |
| SMC | 180 | 6.14 | 29.32 | 3.41% |
| AC | 17.01 | 5.88% | ||
| JGS (’09) | 19.28 | 5.19% | ||
| AGI (’09) | 23.77 | 4.21% | ||
| AEV (’09) | 26.97 | 3.71% | ||
| MPI | 27.03 | 3.70% |
JGS, AGI, and AEV will probably have a lower P/E and higher return for 2010 due to higher earnings. While MPI is just expensive at this point. In any case, this seems to show that the quoted price range imputes a significant risk premium. I can think of the ongoing SMC ownership issue. I guess if the government gets ownership, they can screw up profitability :P Anyway, it seems to me the premium is too high and results in a comparatively low/cheap price. Hmmmm, should I buy up?
UPDATE: Looks like everyone bought up. Shares got gobbled up before you can say “gook”. What do you expect? SMC is a well-established company with good management, profitable existing businesses, and forays into promising new businesses as part of its expansion and diversification. Wishing for a piece of that pie.
PLDT-DigiTel Share Swap
Two days ago, there was an 18% spike in the price of DigiTel because of rumors of it being acquired, supposedly by San Miguel who denied it. Unfortunately, I had let go of DGTL a few months back because it wasn’t moving and I figured I’ll just get back soon as I have some cash back. Unfortunately again, I never got back. Besides, I wouldn’t have been able to take advantage of the spike as my horizon is more than a single day.
Bloodbath
Today was a bloodbath in the market. Everything was red. Maybe in the coming days the market would go up, maybe it would go down. It’s anybody’s guess. But if you find something with good long-term value (as opposed to short-term price) and have the cash, it would have been a good day to buy. Even Henry Sy got in on it.
Pump and Dump
Last night, I saw this blog post recommending buying of a rather obscure stock. Things like these always remind me of the pump and dump scam. Maybe not to the letter as described in the link but similar: a known expert or guru, a lot of noise and a “buy” recommendation, price rise, sudden price decline, and then no more mention of the stock or, if you’re lucky, a short and belated “take profit” note.
Call me cynical, but I don’t just swallow whatever those so-called experts and gurus are saying hook, line, and sinker. They may know more than me but still I try to study the company, read the news about the company, analyze the information, and come up with my own conclusion whether it’s a good buy or goodbye. It’s usually the latter.