Holcim Philippines (#HLCM): Best Performing Stock in 2019 with a 134% Gain

Holcim Philippines, Inc (#HLCM), a company that is engaged in the manufacturing of cement and supply of aggregates like crush stone, gravel and sand, was the best performing stock in the Philippines in 2019 with a 134.48% return. Its magnificent rise had nothing to do with it being “cheap” at Php5.80 at the start of the year. It also did not have anything to do with it having a robust top line and earnings growth. The main catalyst that started driving Holcim’s share price was the news that its parent, LafargeHolcim Ltd. was looking to sell its Philippine unit as it sought to reduce its debt. An earlier report stated that LafargeHolcim may be seeking to value its Philippine assets by around $2.50 billion. Note that at Php5.80, Holcim Philippines only had a market capitalization of Php37.81 billion or just $756 million, giving it a potential upside of 131% should a sale occur at the firm’s ‘asking price’ price occur. Even at Php7.30, which was the price the stock rose to when LaFargeHolcim’s plans were first brought in the open, still provided a potential upside of 83%. Of course, it was only purely speculation at that time but the writing was already on the wall as LaFargeHolcim’s Indonesian unit was sold for $1.75 billion just two months prior. Of course, the potential buyers would be San Miguel President Ramon Ang’s Eagle Cement (#EAGLE) and Cemex Holdings Philippines (#CHP). But given the latter’s recent financial struggles, it appeared that Eagle Cement would be the top candidate to buy out Holcim. It turned out that by May, it was San Miguel Corporation (#SMC) itself that bought 85.73% of Holcim for $2.15 billion to value the entire company at $2.51 billion or Php125 billion or about Php19.50 per share, perhaps to go around a potential restriction by the Philippine Competition Commission.

We know that hindsight is 20/20 but the stock offered several buy points where seasoned technical traders would be able to ride at least a good portion of its ascent. First possible entry was right at the moment of its pivot from a rounding bottom marked as ‘entry 1.’ It was also the day when it was reported that LafargeHolcim Ltd. was said to have been looking to sell its Philippine unit for ~$2.50 billion. If prices went ahead quickly and left one behind, of course, it was not advisable to ‘chase’ the stock when it was already far away from its actual pivot level. As you can see, the still provided another entry when it based into a short run flag or pennant at around Php8.50. The stock later formed a distinct consolidation or Darvas’ box under the Php10.00 handle. A break from which also provided another possible entry point. Lastly, the stock made another pivot on increased volume from an ascending resistance on April 30. Now buying is just half of the equation. Selling would be just as important. In Holcim’s case, the day that the San Miguel purchase was announced on May 10 would be the classic case of “sell on news.” Price-wise, it was also the day when an exhaustion top (unsustained candle accompanied by huge volume) can be seen. That day marked its top so far at Php15.30 to Php16.00. You see, even if one missed all these it is nonetheless important to continue to study the past. It is only by doing so that we will be able to pick up the scent of a potential winner moving forward.

HLCM write-up from the Trading Edge Equity Advisor:

January 31, 2019

Holcim Philippines, Inc. (HLCM) may likely add onto its recent surge. As you can see, the stock has just crossed above the resistance of what appears to be a bullish pennant formation (although its volume signature over the past few days does not actually match the book definition of the said pattern). In any case, a sustained rise above Php8.50 may then send it to its next resistance at Php9.90 to Php10.00. Note, though, that a stop loss trigger must be strictly placed below Php8.50.

HLCM write-up from the Trading Edge Equity Advisor:

March 24, 2019

Holcim Philippines, Inc. (HLCM) may likely continue to run higher in the near term. As you can see from its chart, the stock has just broken past the resistance of what appears to be a high tight flag pattern. Following its move above Php10.10 on good supportive volume, the stock may then take aim for an estimated goal of Php12.00 to Php13.00. Note, though, that a stop loss must be placed below Php10.00.  Additionally, a short run MA should be used as a trail stop in case the stock fails to reach its possible measured goal.

HLCM write-up from the Trading Edge Equity Advisor:

May 1, 2019

In our Equity Advisor issue last March 24, we noted that Holcim Philippines, Inc. (HLCM) would continue to run higher and reach for around Php13.00 following its breakout from a bullish flag pattern. As you can see, the stock has indeed reached for the said score. Moving forward, it appears that the stock will continue to extend its run and reach for an adjusted goal of Php14.00 or more given its recent jump (on volume) over an upward sloping resistance line.

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*Consensus target price or average target price given by the major foreign and local brokers of various stocks on top of index names are available in our Equity Advisor!