Figuring out the stock market

Investing in the stock market is like walking on a tightrope and requires being nimble and proactive. It is wonderful to talk about all the money being made on the Initial Public Offerings and with the “rocketchips” before they crash.

However, most traditional investing practices such as buying on news and earnings are precarious. Along with that, part of the problem is that investors and players are looking for anything to hang their trades on. They are suspicious and that is the right attitude to take.

Let me share some thoughts. I had been anticipating for a long time that 2020 was not going to be a good year economically as the cycle was due to change to negative in January. I did not anticipate that the global everything would turn to dust so badly and quickly. But I did write last December that I would be looking for companies with creative thinking for the glorious year—at least in the forecasts of some Feng shui experts—that 2020 would become.

I wanted to see flexible funding and financing in a world of low interest rates, I wanted to see new business models that could better operate in the light of the declining economies of China and the United States.

The “fundamentals” of a company are not that important to me as far as the ratios and relation to the stock price in the short term are concerned. But I am concerned with the overall trend of revenues and profits because that tells me if the people in charge know what they are doing. Full-year and last quarter 2019 revenues indicated if there was upside business momentum, since 2019 was bumpy.

The results from first quarter 2020 gave some interesting insights into the corporate management. For those companies that reported dismal results, it was all because of the “quarantine.” For those that turned in respectable results, it was noted how much better things would have been if not for the quarantine. Remember, the lockdown was only for the last two weeks of March. Of great importance was whether or not companies reduced expenses in the first quarter since things turned ugly on January 12 with the Taal eruption.

April and May will be “black holes” on the income statements of virtually every company. June will see some small “green shoots” for a few but nothing exciting. What I have been watching is what companies have been doing to survive and what some that have started operating since the first of June have been doing to thrive in the future.

All forms of hospitality businesses—hotels, gambling and airlines—are still dead meat. Retail and food services are slowly starting to wake up. Property companies are making adjustments not only in capital expenditures but also to the potential loss of foreign and OFW business.

Now that I have covered all that brilliant nonsense, how do we make any money?

I still believe that we are at the beginning of an historic upside rally and will keep that forecast until something changes. When the market was much lower I said the year would end with the main index at 6,300. That idea did not take much brains or cojones. But anything above that level is bonus money as far as I am concerned.

Looking forward, the Great Beasts of Gorgoroth—go watch Lord of the Rings—stand guard at 8,000. Until then, buy the movers particularly on higher volume and as the economy recovers.

E-mail me at mangun@gmail.com. Visit my web site at www.mangunonmarkets.com. Follow me on Twitter @mangunonmarkets. PSE stock-market information and technical analysis tools provided by the COL Financial Group Inc.


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