PSE 2020: Get creative
OUTSIDE THE BOX
ThE Philippine stock market broke a lot of hearts in 2019. Just when many thought they had it all figured out, it all changed quietly and subtly.
It was not like your significant other suddenly walking out after the final big argument and slamming the door. This was more of slow burn where you finally discover that she or he just isn’t into you anymore.
Economic data that was supposed to move prices higher did not. Big announcements from individual companies seemed to eventually fall on deaf ears. Some of the good news turned out to be “fake,” which is a stock market disaster.
Consistently higher company profits are “always” followed by a higher stock if you wait long enough. Not this time. A company that goes public through an initial public offering is always supposed to provide good investment opportunities. This year’s IPOs are pretty much dust and ashes so far.
Going into 2020, here are some thoughts. The first thing that will be missing in the next 30 days will be all the results from the experts’ favorite stock picks from 2019. We all look forward to that because it is good to have the winners pointed out. Maybe the best we can now hope for is, “My picks did not go down as much as your stock picks.”
This coming year is going to be difficult for companies that want to do an IPO. But like the man that picked up and ate the first raw oyster, it will be the brave heart that steps up to list first next year.
It will be also difficult to justify a higher price for an individual issue based on corporate fundamentals. It is not that earnings were completely
The next IPO needs to have a more persuasive business model rather than “the offering is three times oversubscribed.” I want to put my money on new consumer products since it has been a long time since “C2” drink and “Magnum Ice Cream Bars” were introduced. I want to find a company breaking new ground and not just plowing the same field for the tenth time.
ignored in price movement. But while earnings may have met analysts’ expectations, price movement did not. Sure there have been many issues hit by “controversy.” But SM Investments and SM Prime Holdings are not in that category. SM profits were up 26 percent in the first nine months while SMPH saw an 18-percent increase. Yet, both have stock prices about 15 percent higher. The traditional parameters for “undervalued” and “expensive” are broken.
Maybe you want to justify the PSE performance because of the “trade war.” Why then are the US stock markets at historic highs? W hy is the Euro Stoxx 50 at four-year high? Why is China A50 index at its 2019 high?
In my opinion, making good stock market money in 2020 is going to require getting creative. By that I mean finding companies to invest in that are being creative.
I want to see a property developer that is doing something differently than relying on POGOs and BPOs for rental income. I want to see developers and banks doing some creative financing for the middle class and not relying on the rich guy adding another condo to his portfolio.
The next IPO needs to have a more persuasive business model rather than “the offering is three times oversubscribed.” I want to put my money on new consumer products since it has been a long time since “C2” drink and “Magnum Ice Cream Bars” were introduced. I want to find a company breaking new ground and not just plowing the same field for the tenth time.
I want to see more creative corporate action and not creative press releases. It is time for—if not some new blood—at least some new thinking in the Philippine corporate world.