BPI Securities sees potential in undervalued stocks amid easing of lockdown

BPI Securities Corporation, the stock brokerage arm of the Bank of the Philippine Islands (BPI) sees an opportunity to snatch up undervalued stocks in this next phase of market or trade recovery, as most areas in the country have now been placed under General Community Quarantine (GCQ).

“What triggered this is the easing of lockdowns that are happening in some parts of the US and some parts of Europe. So there is a degree of optimism for travel and, maybe, the general economy,” said BPI Securities Corporation President Haj Narvaez.

He said it is time to look at what’s happening in other markets in preparation for a similar recovery trade in the Philippines. Potential players, he said, include Bloomberry Resorts Corp., Jollibee Foods Corporation, Cebu Pacific Air, Megawide, and Shakey’s Pizza Asia Ventures Inc.

“These names are quite interesting. If you look at the year-to-date (YTD) performance, most of these stocks have been battered. Some of them have fallen as much as 70% YTD. And the past months, performance hasn’t been strong. But I think you have a lot of investors now who are kind of looking at a quick bounce play,” said Mr. Narvaez.

“The reason there will be some investors interested in these names is because some of these stocks, in a general sense, have been oversold. If you look at the difference between analysts’ price target and the current price, it does suggest a lot of upside,” he added.

For those who want to invest in the said stocks, Mr. Narvaez suggested a “barbell approach” to benefit from the potential upside and minimize risks from the downside.

“This is where you can play the two extremes and kind of have, on one side, the COVID-proof stocks. These are the likes of Puregold, PLDT, Globe, and Century Pacific Food. And on the other side of the barbell, you could have the so-called recovery stocks and have a bit of exposure to the likes of Bloom and JFC, for example,” Narvaez said.

Economic activities will ramp up in the near term, he said. “But we remain cautious as a whole. There will definitely be a recession in the country this year. And even next year, we are not seeing a V-shaped recovery and we are looking at an economic growth of 5 to 6%.”

“The lesson I think is that we still need to be very nimble, to keep an eye on volatility. You want to balance out some of your high-yield investments and defensive stocks.”

Mr. Narvaez commended the commitment of the government to stimulate demand, especially noting the recovery strategy of the National Economic and Development Authority.

“What they want to do is to equip the healthcare system or probably make sure that a lot of the infrastructure investments are put towards improving healthcare and infrastructure. So that’s a priority. I think improving the food value chain is another, and finally, you have impactful infrastructure projects.”

“The Philippines is still a consumer-driven economy. In the medium-term, once we get past some of the initial hiccups borne out of this pandemic, we can resume the high-level of growth that we have in the past,” he said.

June 3, 2020