Financial Adviser: 5 Best Performing Stocks This Year That Gained Up to 155% in 8 months and How to Profit from Them
It has been a volatile ride so far for the Philippine stock market.
Only a few weeks ago, the PSE Index broke out of its long-term resistance at 8,150, which sent the market to reach a 52-week high at 8,419.
Just as everyone thought that the bulls were finally back, the PSE Index started to correct sharply, falling as much as 650 points to a low of 7,720 in less than a month.
Although the PSE Index has recovered about one third of the losses, there seems to be strong pressure for the market to fall further.
Persistent fears of intensifying trade wars between the US and China continue to hound the market amidst falling interest and inflation rates in the local scene.
For the first eight months of the year, the PSE Index has hardly advanced with only 5.2 percent gain so far.
Despite the low returns of the market, there are stocks that still managed to outperform the PSE Index. In fact, about 25 percent of all listed companies made double-digit returns of at least 10 percent.
What are the best performing stocks so far? How promising are these companies in terms of growth? Are they still worth buying at this point?
Here are the top five stocks for the first eight months of the year and how you can profit from them:
1. Ginebra San Miguel, Inc.
YTD Gain: +155.4 percent
Ginebra San Miguel Inc. (PSE:GSMI) is the maker of the world’s largest selling gin Ginebra San Miguel.
GSMI is majority-owned and controlled by San Miguel Corporation, the largest conglomerate in the country, through the 67.8 percent ownership of its subsidiary, by San Miguel Food and Beverage, Inc.
Net sales of GSMI has been growing conservatively for the past 10 years since 2007 at only five percent from Php13.9 billion to Php20.9 billion in 2017.
This mirrors the four percent annual growth in net income of GSMI, which grew to P602 million in 2017 from P394 million in 2007.
But last year, GSMI reported an 18.9-percent jump in net sales to P24.8 billion, which boosted its net income to increase by 75 percent to P1.05 billion.
This year, GSMI’s sales for the first quarter continued to grow by 28 percent to P8.3 billion from P6.4 billion from the same period last year.
Higher sales and lower costs from operating efficiencies enabled the company to increase its net income by 141 percent to P615 million from P255 million last year.
Although the stock price of GSMI has more than doubled this year, its current Price-to-Earnings (P/E) ratio is trading only at 12.5 times.
With expectations of higher earnings growth this year, GSMI can possibly appreciate more before the year ends.
2. Holcim Philippines, Inc.
YTD Gain: +142.4 percent
Holcim Philippines, Inc. (PSE: HLCM), is one of the largest cement manufacturers in the country.
A member of Lafarge Holcim Group, the world’s leading supplier of cement and other construction related services, HLCM’s net sales has been growing by an average of seven percent per year for the past 10 years from P18.1 billion in 2008 to P35.6 billion in 2018.
This resulted to a similar growth in net income at seven percent, which increased to P2.5 billion from only P1.3 billion in 2008.
This year, HLCM reported that its net income for the first six months declined by 10 percent to P1.4 billion from P1.6 billion in the same period last year, as net sales fell by 18 percent to P15.4 billion from P18.7 billion last year.
Despite the disappointing earnings results, the stock price of HLCM more than doubled this year primarily due to the acquisition of San Miguel Corporation.
A few months ago, San Miguel disclosed that it was 85.7 percent in control of HLCM for $2.15 billion. Given the exchange rate at that time and market price of the stock, the shares of HLCM were bought at a significant premium.
The stock price of HLCM went up further by as much as 19 percent at P16 to reflect the premium paid after the announcement. The stock has since corrected to P14.08 per share.
At current Price-to-Earnings (P/E) ratio of 37 times, considering the earnings outlook of the company, HLCM’s pricing looks relatively expensive.
Perhaps it may take some time before the earnings improvements from San Miguel’s acquisition can justify the current price of the stock.
3. PHINMA Energy Corporation
YTD Gain: +131.3 percent
PHINMA Energy Corporation (PSE: PHEN), previously known as Trans-Asia Oil and Energy Development, is engaged primarily in power generation and electricity supply, with secondary investments.
PHEN’s revenues have been growing by an average of 28 percent for the past 10 years, from P1.5 billion in 2007 to P17 billion in 2017.
The growth in revenues supported PHEN’s net income to grow by 16 percent every year to P353 million in 2017 from P78 million in 2007.
But last year, PHEN reported a net loss of P560 million as its revenues fell by 11 percent to P15 billion.
This year, PHEN continued to bleed as its six-month financials showed net loss of P552 million although its total revenues slightly grew by 2.5 percent to P8.3 billion.
Despite the losses, the stock price of PHEN more than doubled this year due to the entry of Ayala Corporation through its subsidiary, AC Energy.
AC Energy recently announced that it has acquired 51.48 percent of PHEN for P3.669 billion. PHEN appeared to have been acquired at almost market price in January.
AC Energy expects to increase its ownership in PHEN to 68 percent after it infuses fresh capital into the company worth P2.6 billion.
Expectations of growth in PHEN’s earnings with the entry of the Ayala group as well as expected renaming of company to AC Energy soon have translated into a huge premium to the share price.
4. 8990 Holdings, Inc.
YTD Gain: +91.2 percent
8990 Holdings (PSE: HOUSE) is the leading mass housing developer in the country with over 58,000 completed housing projects under the Deca Homes brand in just 14 years.
Net earnings of the company have been growing by an average of 19 percent per year since 2012, from P1.7 billion to P4.1 billion in 2017 on the back of strong sales growth.
Last year, HOUSE reported that its net income grew by 13 percent from P4.2 billion in 2017 to P4.7 billion on a 14.8 percent growth in revenues of P11.7 billion.
This year, the company disclosed that its net income for the first quarter grew by 16.7 percent to P1.17 billion from P1.0 billion in the same period last year as total revenues increased by 20 percent to P3.0 billion.
Believing that the stock has been undervalued by the market, HOUSE recently launched a buy-back program with a budget of P2.0 billion. The company has so far spent 43 percent of its budget.
Prospects of higher earnings growth and management buy back should support the stock further to higher valuation in the future.
5. Sta Lucia Land, Inc.
YTD Gain: +75 percent
Sta Lucia Land (PSE:SLI) is the leading developer of residential communities in the country with over 10,000 hectares of completed land development in the last 45 years.
SLI’s revenues, which mainly comes from the sale of real estate properties have grown more than five times in 10 years, from P603 million in 2008 to P3.7 billion in 2017, with an average growth rate of 20 percent per year.
This growth translated to a 39-percent annual growth in net income from P31 million in 2008 to P817 million in 2017.
Last year, SLI reported that its net income grew by 30 percent to P1.1 billion from P817 million in 2017 on the strength of a 15-percent growth in real estate sales.
Net earnings continued to grow this year. For the first three months of the year, SLI disclosed that its net income increased by 27 percent to P338 million from P265 million in the same period last year as total sales jumped by 32 percent to P1.1 billion.
Despite the stock’s spectacular rise this year, SLI remains to be one of the cheapest property stocks in the market, with Price-to-Earnings (P/E) ratio of only 14 times, which is 18 percent below market average.
It is also trading at a deep 45-percent discount to its net asset value per share of P3.90.
The Philippine Stock Exchange has recently revamped its property index by adding SLI into the list. This recognition by PSE on SLI having met the exchange’s standards on free float, liquidity and market capitalization should support the stock’s further appreciation in the medium term.
Henry Ong, RFP, is president of Business Sense Financial Advisors. Email Henry for business advice [email protected] or follow him on Twitter @henryong888