basic intro to stocks 2013 11 08
DESCRIPTION
philippine stocksTRANSCRIPT
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You become part-owner of Corporation
OWNERS
BOARD
MANAGEMENT
WORKERS
Shares of Stock are
“pieces” of the
“corporate pie. “ When you buy a share of
stock, you become:
ONE OF THE
OWNERS OF the
COMPANY.
Customer So far:
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Mr. Prudent Investor
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Lucky Guy
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Mr. Media Man
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Ms. Long-Term Investor
You can be one
of the owners…
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Ms. Long-Term Investor
You can be one
of the owners…
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Ms. Long-Term Investor
You can be one
of the owners…
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Ten million
Pesos
= Ten
million
Shares
ONE million ONE million ONE million ONE million ONE million ONE million ONE million,
each
ASSUME:
Ten founders chip in:
One million each.
Start a Company…
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Market
Value:
rises over
time
“Par Value”
Constant 1 peso
= 100 PESOS
One hundred shares:
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Market
Value:
rises
Original Cost:
One peso per square
meter Just like
real estate
“Land TITLES”
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when many
Customers
The
Company: shareholders
Market Value rises...
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Cash Dividends
You
become a
“Winner”
BUY
Shares of
Stock
Capital Gains
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Capital GAIN:
70% a year for 5 years.
390
P60 in 2008
20 300 / 60 = 5x
Meralco
262
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Cash Dividends
= Yield
Price
Cash DIV ÷ AEV = 4%
AP = 4%
GLO = 5%
MER = 3%
RLC = 3%
Semirara = 4.5%
TEL = 8%
URC = 4.5%
Cash “incentive”
ANS
1 / 5 =
20% !
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Cash Div, 1
--------------------
Share price, 5
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1.00 / 5.00 = 20%
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CHINA
Bank
12 / 57
= 21%
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Net profit in
2008: 292m
PhiL WEB
59% a year, for the
past three years
“I cannot put up
my own Lottery.
But I can be part-
owner of one.”
In 2011: 916m
Capital GAIN
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Net profit in
2008: 13bn
In 2011: 18bn Union Bank
61% a year, for the
past three years
Capital GAIN
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18
*One peso
per share,
at start
47 D M Consunji
*SOLD at Six pesos
Gosh, 61
DMCI. 30 years in
construction
firm, …
on retire-
ment… lump
sum P1m
Share price: One Peso
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15
Dizon Mines
55
6
P100K from uncle..
U, expert on Economy,
…on Business.
IF Price of Copper
& Gold
Will Sales UP ?
IF SALES go
WILL Profits UP
IF Profits UP
WILL Share Price go UP
Exports Copper &
Gold…
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P1 million of ABC 100 sh
P1 million of DEF
P1 million of GHI
Auntie’s Portfolio:
Shares
500 sh
600 sh
Value
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AYALA LAND
ABOITIZ POWER
ABOITIZ EQUITY VENTURES
BELLE CORP
ICTSI …… JG SUMMIT
JOLLIBEE ..… MERALCO
METROBANK ..…. PLDT
UNIVERSAL ROBINA
Imagine, that you had invested in THREE stocks, some
years ago. Write down the names of the three stocks.
“Choose Three of these Stocks”
?
?
?
1. ...............
2. ...............
3. ...............
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35
10
Ayala LAND Malls, Build-and-
Sell, Offices
x 3.5
Next: A Pwr
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Aboitiz Power 37
10
Generate
Electricity
x 3.7
Next: A E V
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2008 Profit 4.3bn
56
10
Aboitiz Equity Ventures
Electricity,
Banking
x 5.6
Next: BELLE
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Belle Corp. 6.5
1.5 x 4.3
Next: ICTSI
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94
24 x 3.9
ICTSI Next: JG
Summit
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Cebu Pacific AIR
Robinson’s Land
Summit Media
JG Summit
47
5 x 9.4
Next: JFC
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Jollibee F.C.
141
55 x 2.5
Next: MER
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395
200
x 1.98
Meralco Next: MBT
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134
48 x 2.8
Metrobank Next: TEL
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3190
2600
x 1.23
PLDT Next: URC
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130
20 x 6.5
URC
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“What if” Portfolio
P1 million of BEL = 4,300,000
P1 million of MER
P1 million of AEV
x 1.98 = 1,980,000
x 5.6 = 5,600,000
Belle + Meralco + Aboitiz Equity V
= 11,880,000 TOTAL, three-years’ investment
x 4.3
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You may Calculate:
P1 million of JFC x 2.5 = 2,500,000
P1 million of JGS
P1 million of PLDT
x 9.4 = 9,400,000
x 1.23 = 1,230,000
Jollibee + JG Summit + PLDT
= 13,130,000 TOTAL, three-years’ investment
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Why do
prices move
up, or down
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Who wants to buy
Who wants to sell
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Toyota CAR
900K
Buyer Sellers
700K
900K
900K
900K
“I want to
buy that
car, for : “
I “bid”... I “ask”...
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House for Sale
5 million
Buyers Seller
4m
“I want to
sell this
house for
...” 5m
6m
7m
I “bid”... I “ask”...
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Buyers & Sellers …fight over the price.
LATEST
TRADE:
12
BID
10
8
6
volume
5,000
10,000
60,000
ASK
12
14
16
volume
3,000
15,000
100,000
Who wants to buy Who wants to sell
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BID
10
8
1.06
volume
5,000
10,000
60,000
ASK
12
14
1.16
volume
3,000
15,000
100,000 Who wants to buy Who wants to sell
BID HIGH
at “12”
Ask for a
LOWER selling
PRICE of 10
INSERT INSERT
You may post any price. You may jump the queue
LATEST
TRADE:
12
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LATEST
TRADE:
12
BID
10
8
6
4
2
volume
5,000
10,000
60,000
29,000
30,000
ASK
12
14
16
18
20
volume
200,000
15,000
100,000
100,000
100,000
Seller can PLACE 5 orders, to capture all the BIDS
02
12
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LATEST
TRADE
10
BID
10
8
6
volume
315,000
10,000
60,000
18
16
14
12
ASK
15,000
100,000
100,000
100,000
volume
BUYER can place 4
separate orders, to
capture all the ‘ASK’
10
18
LATEST
TRADE
18
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Buyers
Today:
BID
Sellers
Today:
ASK
You can SEE
All the BUYERS & SELLERS
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Buyers Today:
which Brokers
Sellers Today:
which Brokers
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When can you execute trades?
till
When can you ENTER an online ORDER?
ANY
TIME It gets
implemented
by 930am
AFTER HOURS !
NEXT DAY
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Yesterday:
20
What’s the
mood of the
market,
today?
Computer: matches
“buy” orders with“sell” orders
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What IF:
More
Sellers
Less
Buyers
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What IF:
There are
More
BUYERS
FEW
Sellers
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Investing in Equities
Investing
versus
Trading
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Cash
Bonds
Over TIME In Three Years…
Money
Money +/- 1
+/- 1
+/- 1
+/- 1
SAME
Amount
at the start
5
4
3
2
1
0
18
16
14
12
10
8
6
4
2
0
+/- 1
+/- 1
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Money
170
160
150
140
130
120
110
100
90
80
70
60
50
40
30
20
10
0
Stocks
In Three Years… Over TIME
200
BUY !
THINK
WAIT
WAIT
KEEP COOL
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54 Buy NOW Buy Now
You get the
“average”
Disciplined, Patient
WIN
Decide to invest, then...
Make a plan. Stick to it.
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1. Persistent, Disciplined
BUY
100
200
BUY
BUY
BUY
3,000
“Investing”
“Way, Better” Years
and
years
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BUY
THINK
WAIT
WAIT
2. “Patient,
Long-term”
“Investing”
Years
and
years
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3. How to buy stocks, like an expert: style of impatient short-term “maximization”
BUY BUY
BUY
BUY
BUY
BUY
SELL
SELL
SELL
SELL
SELL
“Trading”
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Check the sales, profits, of the listed company
Do research, before buying.
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Check the economic forecast, the outlook for industry, the flow of money.
Check the Price History, and
find out the Potential of a stock.
Get the news first, ahead of the rest
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RetaiL Investor:
is in the cozy bedroom.
www.firstmetrosec.com.ph
If PLDT goes up 1 dollar, then + P41
Monitor
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BUY ! Amateur, beginner.
Indecisive: Afraid to Make a Move.
WAIT “Afraid”
WAIT
WAIT
WAIT
WAIT
WAIT
WAIT
WAIT
WAIT
WAIT
WAIT
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Amateur client :
BUY
BUY
BUY
PARALYZED
WITH SHOCK
CRY
SELL
SELL
SELL
Forecast
NOW
WAIT
FROZEN WITH FEAR
WAIT
Indecisive,
always Late.
Over TIME
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Amateur, beginner.
Buy, when i’m excited. Sell, when i’m depressed
BUY BUY
BUY
BUY
BUY
WAIT SELL
SELL
SELL
SELL
“Emotional”
SELL
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Phone
Investor
Broker
Walk - In
Internet
Phone in: Several minutes, per order
INTERNET…
MANY ORDERS
per second.
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100
120
160 Stocks
80
40 Stock FUNDS
Also:
Next Month
Or, Next Week
You buy at …
What
should you
do, this
this case?
OK! …
Now, when
do i sell?
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CASE ONE: recovery
25
16
Yes, you can
BUY, and BUY,
and WIN
22
24
30
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Vista Land. Brittany, Crown Asia, etc. Housing
160
3
Down from 1998 to 2012
2012 1997 2003
BYE BYE
CASE TWO:
this happens
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130
65
BYE BYE
CASE TWO:
this happens
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Investing in Equities
How to set
“take Profit”
&“CUT Loss”
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100
120
FOR
Trading:
80
Monitor !
Always
What to DO?
Something Wrong …
You buy at …
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100
120
300 FOR
Trading:
Monitor !
Always
What to DO?
You buy at …
Let profits
run
600 !
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100
FOR
Trading:
80
1 Monitor !
Always Something Wrong …
You buy at …
Emergency
Exit.
CUT loss.
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100
“What
iF…”
Stocks
80
8 Stock FUNDS
Also:
You buy at …
1
“Sell,
na nga...”
“Bui-set”
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The ‘execution’ REQUIRES
superhuman
strength. 74
Buy NOW Buy LOW
Sell HIGH
Wait
The ‘principle’
is easy.
The Objective
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75 Buy LOW
The rational
approach
SELL HIGH
WAIT…
1 …know
the future
2 … execute trades
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76
Forecast,
then Invest
PRICE TARGET
1 …know
the future
2 … execute trades
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77
Forecast,
but WAIT (?)
PRICE TARGET
1 …know
the future
2 … Hesitate WAIT
BUY?
CONFIRMED?
BUY !
huh?
SELL !
WAIT
CONFIRMED?
BUY ! TOO
LATE The Amateur
Beginner
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78
Regular Intervals
Fixed amount
BUY PLDT, Meralco, GT
Capital…
Consistent,
disciplined
Cure:
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Start
BUY STOCK "A"
BUY STOCK "A"
BUY STOCK "A"
BUY STOCK "A"
BUY STOCK "A"
BUY STOCK "A"
BUY STOCK "A"
So on 12x
Buy P30,000 of
Stock A, per month,
for one year
PLDT, for
Year 1
JAN FEB MAR DECEMBER
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Start
BUY Stock "B"
BUY Stock "B"
BUY Stock "B"
BUY Stock "B"
BUY Stock "B"
BUY Stock "B"
BUY Stock "B"
So on 12x
Buy P30,000 of
Stock B, per month,
for one year
Meralco, for
Year 2
JAN FEB MAR DECEMBER
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Start
BUY Stock "C"
BUY Stock "C"
BUY Stock "C"
BUY Stock "C"
BUY Stock "C"
BUY Stock "C"
BUY Stock "C"
So on 12x
Buy P30,000 of
Stock C, per month,
for one year
___?, for
Year 3
JAN FEB MAR DECEMBER
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Month
Month
Month
Month
Month
Month Stock Price
CONSISTENT, REGULAR
“Accumulate”
₱
₱ ₱
₱
₱
₱
₱
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• stocks to choose from . PPT
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PRICE
TARGET
Emergency EXIT
Standing Order,
“Good Till Month”
ENTRY PRICE
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Emergency EXIT !
In case “something
wrong went”….
PRICE
TARGET ? Might not
reach ?
Evacuate !
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Active trading requires expert control over Emotions. Buy, when “stocks are down” Sell, when “stocks are UP.”
BUY
BUY
BUY
BUY
BUY
SELL
SELL
SELL
SELL
SELL
“Trading”
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The Amateur
Beginner
Falls, from the sky.
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Amateur, beginner: Buy, and then.. Bahala na. DO nothing, even if “FAIL.”
BUY
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91
Regular Intervals
Fixed amount
BUY PLDT, Meralco, GT
Capital…
Until you
have
plenty of
of stocks
in your
account.
For investing
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Mistake of the
Beginner
Focuses
on the
PAST
Thinks only
of the
PRESENT
“Ang
Taas na,
ng
Market”
“Ayoko
Bumili”
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Mistake of the
Beginner
Focuses
on the
PAST
Thinks only
of the
PRESENT
“Ay,
DOWN
ang
Market”
“Ayoko
Bumili”
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Excuses,
not to BUY
Sayang, I
missed
that
move
Wait for the
stock to
come down!
“Sobrang
mahal na,
lahat ng
stocks”
“mag-
research
muna
ako”
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If the price
comes down…
This
must be
a lousy
stock
Because the
price is
dropping!
“Masama
ang
Panahon”
“mag-
aral
muna
ako”
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By FACING YOUR FEARS…
Not by reading books
Not by watching other drivers
How do
you
learn to
drive?
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How do you …
learn to Swim?
By diving into
the water.
When you
are about
to drown..
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Mistake of the
Beginner
Focuses
on the
PAST
Thinks only
of the
PRESENT
What is
the
mark of
a
profes-
sional
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Mark of a
professional
Focuses
on the
FUTURE
Thinks only of the
STRATEGY, to get from
HERE to THERE.
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“COOL under Fire,” training.. Face your fears “I’m not afraid of
bullets.
I have my own
weapon.”
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Investing in Equities
Method for
buying stocks:
ON-site / Phone /
Internet
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Phone
Investor
Broker
Walk - In
Internet
Phone in: Several minutes, per order
INTERNET…
MANY ORDERS
per second.
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How to open a
stockbroker account
How to buy
Mutual Funds
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Deposits are
insured: For Risky Assets:
Universal
Bank, does
both, plus, it can
own insurance
company.
Stockbroker
They put money
“to work”
PRIVATE MUTUAL
BANK FUND &
“U.I.T.F.”
Savings B
Comm’L B
Investing
your millions
for you
“Safe” Unsafe, Uncertain !
Investing your
thousands for you
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Which “bank” invests
your millions for you?
Minimum = 5 million
Charges = 4% per year
$ DOLLARS
Private Bank:
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Who can invest your
P5,000 for you, at low cost.
Mutual FUND. The “private bank”
for ordinary people.
Minimum = P5,000
Charges = 1.7% percent a year.
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107
Mutual
Fund 1. You have
money.
2. You hire a
professional,
to manage it.
Unit Investment
Trust Fund: 1. BANK Trust
Fund, open to
the public.
2. You buy a
UNIT.
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109
Mutual
Fund
Unit
Investment
Trust Fund
OPERATED
BY A STOCK
BROKER
Sold by SALES
AGENTS
OPERATED
BY A BANK
Sold at bank
branches
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Buy 100K of
stocks, directly
Buy 100K of
mutual funds:
Pay P2000 now.
(2% of assets)
Pay P1700/year (1.7% of assets)
Like: Hiring a
“Driver”
Pay P 261 in commissions,
for the entire
trade.
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Fixed-Income and
other Stocks
47%
Power
10%
Telecoms
7%
Holding
Companies
13%
Properties
21%
Transport
2%
• P 8 bn
• Growth -Oriented
• All Stocks
• For Aggressive Investors
Equity Fund 2006 Net Yield 67.58%
2007 Net Yield 12.62%
2008 Net Yield -30.70%
2009 Net Yield 53.11%
2010 Net Yield 63.37%
2011 Net Yield 8.18%
YTD Yield (8/23/12) 18.88%
CAGR 24.40%
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How to buy mutual funds
Get application forms at:
www.fami.com.ph
Invest 5,000
At 5 / share
1,000 shares
Buy MORE
shares, each
month
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Inflation, 4%
To Choose
High returns, %
Safe (good credit) RISKY (uncertain)
CONSERVATIVE MODEST GAINS
11% / year
Moderate
CAPITAL GAINS
18% / year
ALL
Bonds
Half
Bonds,
Half
Stocks
AGGRESSIVE CAPITAL GAIN
24% / year
ALL
Stocks
Your
personality
determines
your approach
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Inflation, 4%
Track record
High returns, %
Safe (good credit) RISKY (uncertain)
“Save & Learn”
Fixed-Income Fund,
11% / year
“Save & Learn”
Balanced Fund,
18% / year
ALL
Bonds
Half
Bonds,
Half
Stocks
“Save & Learn”
Stocks Fund, 24% / year
ALL
Stocks
Get Forms:
at www.fami.
com.ph
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www.firstmetrosec.com.ph
www.firstmetrosec.ph
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FAMI “Equity Fund”
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Stocks
49%
Bonds
26%
Deposits
24%
Others
1%
• P3 Bn
• Launched in May 2007
• For Long-term investment
• Moderate Returns
• A balance of stocks and bond investments
Balanced Fund 2007 Net Yield 4.07%
2008 Net Yield -4.86%
2009 Net Yield 45.36%
2010 Net Yield 61.97%
2011 Net Yield 6.62%
YTD Yield (8/23/12) 17.26%
CAGR 18.54%
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To consistently
make money:
invest LONG-
TERM 118
Buy NOW Buy LOW
Sell HIGH
Wait
The principle is
the same:
The Objective
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With Stocks: With Mutual
Funds:
You ‘drive
your car.’
You decide
freely.
They ‘drive
your car.’
They decide
freely.
You get the stress They get the stress
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Stocks: Mutual Funds:
You choose the
companies. They choose the
companies.
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121
Drive your car,
yourself?
Or: hire
a driver
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50,000
65,000
46,000
52,000
48,000
JULY
2012
FEB
2013
FAMI EQUITY FUND
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Adjust the percentages.
Depends on your info. __% in Stock market
MUTUAL FUND
__% in Stocks that you
will personally select and
monitor
A
B
C
D
E
F
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124
A B
Time
B.... (BLUE) is
leading
Which fund:
best track
record
Depends on
the TIME of
Measurement
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Fair
CLAIM
ALL are
“number
ONE”
125
A B
Time
A.... (RED) is
leading
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126
A B
Choose
a FUND
Performance
is the same.
The FUND that
> takes care of you
> answers your phone calls
> replies to your emails.
Test their
customer service
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Earnings in 2013
Earnings in 2012
Earnings in 2011
2011 2012 2013
Expensive
Cheap
Cheap
Expensive
What drives the market upwards: earnings growth
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-1%
2008 2009 2010 2011 2012 2013 2014
-1%
61%
-7%
14% 12% 11%
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Earnings grow
+12% in 2013
Earnings grow +14 % in 2012
Earnings -6% in 2011
2011 2012 2013
Expensive
Cheap
Cheap
Expensive
Know when to BUY, know when to SELL.
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The price moves from “cheap” to “expensive,” and
cheap again.
Company
Earnings = net
profits
BUY
BUY
SELL BUY
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Which is cheaper
Can of fuel
P50/Liter
Same fuel
200/5 Ltrs More
expensive
per Liter
Cheaper
despite bigger
price tag
Big Can Small Can
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Cash Dividend
Share price
= 8% - 11%
Earnings per
Share x 10%
PLDT
Common Shares PLDT
Preferred Shares
Therefore:
Cash Dividend:
10% / share
Earnings per
Share x 10% Share Price
...varies
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Deposits are
insured: For Risky Assets:
Universal
Bank, does
both, plus, it can
own insurance
company.
Stockbroker
They put money
“to work”
PRIVATE MUTUAL
BANK FUND &
“U.I.T.F.”
Savings B
Comm’L B
Investing
your millions
for you
“Safe”
Unsafe,
Uncertain !
Investing your
thousands for you
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6700
12,000
Outlook for PHILIPPINE
stock market index
2013 2017
Now
Normal Trend:
zig zag
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1990– 2000: 2.5%
Yes, stocks have overshot
their Long-Term Average. 6,400
1987 – 2012: 10%
2002– 2012: 20%
1,200
2000 -2010: 4.5%
2010 - 2020: 6.5%
YEAR
2002
YEAR
2013
6,000 ECONOMI
C
GROWTH
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13,200
Participate for the
LONG TERM !
Stocks have overshot their
Long-Term Average
6,600
1987 – 2012: 10%
2002– 2012: 20%
2012: 33%
Next 5
years:
+ 15%/yr
1,200
6,000
Annual
growth of
INDEX %
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The value that investors attach,
to Philippine stocks
PER: 16x
PER: 12x
1980 1990 2000
“Moderate Value”
PER: 12x
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140
3,000
2,700
3,500
2,500
PLDT .... “Telephone”
Forms a CUP and HANDLE
2012 2013 ‘14
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141
P166 bn market value of these stocks
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Alexander Gilles
• Lecturer on “MARKET EDUCATION” for
First Metro Securities (stockbroker)
• Financial analyst. Educator.
To introduce:
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www.SLIDESHARE.COM/SANDYGILLES
8590600 / customerservice
@firstmetrosec.com.ph
Invite me, to conduct seminars;
to give lectures