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Electric
rice cookers have taken all the challenge and most of
the fun out of making rice.
Before
these modern appliances, you had to think about the
amount of flame under the pot. You had to consider the
length of time of cooking. You had to check if the rice
should be stirred halfway through the process. Sort of
like investing in the stock market before 2006.
For the
last 12 months, making money on the Philippine Stock
Exchange (PSE) has been as easy as cooking rice. All you
had to do was follow the easy directions and keep it
simple.
Look at
the performance of three stocks on the PSE.
In May
2006, PLDT traded near P2000. You could have invested
your life savings in these shares at P2,100. In May
2007, you could have sold at P2,500 for around a
20-percent profit. Megaworld traded at P1.50 last year.
A purchase of these shares would have more than doubled
your money. From P15, Meralco traded one year later at
P90.
Simple,
simple investing. PLDT is THE blue chip stock. Megaworld
is the high-flier in the booming property sector.
Meralco shines with increasing economic activity and
overall growth.
These
three stocks were not the only big companies that
provided big profits. Ayala Land rose from near P10 to
P18. Shoemart started at P8 and traded this May at P12.
Another Lopez company, Benpres, finished in the last 12
months at P4. You could have bought it at P1.
So why
didn’t everyone make a fortune through investing on the
PSE this past year?
For the
same reason that not every family owns an electric rice
cooker. “What happens if there is a brownout? How can we
eat rice?” “I need to see the rice cook. How can I trust
a machine to make sure the rice is cooked?” “Maybe it
won’t work!”
It is
exactly the same way with stock-market investing.
Last
year, you could find 100 reasons not to invest in the
stock market: high gasoline prices, politics, the war in
Iraq, the 2007 elections, economic slowdown in the
US,
high unemployment, the “brain drain,” and manufacturing
and imports down. Maybe we should throw in also the
nursing exam scandal and the oil spill.
Even
with all of these “problems,” by September 2006, it
should have been obvious that the market had survived
all these factors and was looking to a brighter stock
price future.
If you
look at a chart of prices, you can see that from the
beginning of the third quarter of 2006, share prices in
general never looked back. It did not take an “expert”
to figure it out.
Just by
reading BusinessMirror every day would have demonstrated
that company after company are allocating increasing
amounts of money to expansion, from the property sector
through outsourcing. And beginning with the
second-quarter income results, companies told of
increasing revenues and profits.
And most
potential investors sat on their wallets, avoiding the
stock market, predicting that things were going to get
worse.
Here we
are with the PSE index at an all-time high and many are
convinced that the “rice cooker” really cannot do the
job properly. Sure, prices have doubled, or even
tripled, in the last year, but what about now?
The
market is taking a breather to form a support at 3,400.
What was a strong price resistance must now be shaped
into strong support. It is unlikely that we will see
extraordinary price increases in the next two months.
Having said that, the market could surprise and move
toward 3,600.
This
most likely scenario of prices remaining somewhat flat
over the next six weeks will bring out comments that the
market has topped out. This view will come from the same
people that thought the market would never take off.
Don’t
believe it.
By the
end of the year, the PSE index will trade about 15
percent higher. But that will not be the story of 2007
as far as the market is concerned. What will happen
between now and then is that issues that did not give
investors profits for the past year will be the golden
investments of the next 12 months.
The
reality is that the beginning of a blue chip bull rally
is the easy time. If you did not increase your wealth
during this first phase, you are going to have to work
harder for the second phase. Finding the second line
stocks that will yield large gains over the next nine
months will take some effort. However, they will be
there and I guarantee we will be talking next year of
how well they performed this year.
E-mail comments to mangun@email.com. |
