Investing in the Stock Market today(2010)
Transcript of Investing in the Stock Market today(2010)
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Presents“Investing in the Stock Market Today”
Presented by: Juan G. BarredoVice PresidentCitisecOnline.com Inc.
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Introduction
•Wealth Building through
Stock Market Investment
•How to Pick Good StocksFundamental Analysis
•Methods of InvestingPeso Cost Averaging
Technical Analysis•Getting Started with
Online Trading
Outline
• Established in 1999, CitisecOnline (COL)
is the leading innovator in online stock
trading in the Philippines
• Management team is composed of
professionals in the financial and ITindustries
• Driven by our core competency in
research, investor education and
technology
• Capitalized at over half a Billion Pesosand a Member of PSE & HKE
• COL publicly listed in the PSE in ‘06
COL: About us
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Wealth Building through Stock
Market Investment
Part One
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Retirement
Children/Education
DreamHouse
I start working for money to
build my nest egg…
However my goal is for money to
one day work for me…
I need to secure my future!
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Interest Rates (91-day T-Bill)
Why Invest?
• Is the gradual acquisition andsafekeeping of wealth
• Rewards: Low
• Risk: Very Low (only Inflation)
Savings
• Provides the avenue for
wealth to grow moremeaningfully
• Rewards: High
• Risks: Low to Very High
Investments
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The Stock Market
• The stock market is the place where you
can invest in other peoples’ publicly listed
companies.
• A company sells shares of stock through
an Initial Public Offering (IPO) to raise
capital to grow their business
• You invest into a company to participate in
its growth through: a) Price Appreciation
b)Dividends
What is it?
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What Stock Markets Offer
• Capital Appreciation – the ability for a stocks’ price to increase in
value as driven by business prospects
• Dividends – company returns wealth back to shareholders
(distributes some profits either through cash or added shares)
Cash Dividend• Money given back to the
investor as his share of
distributed profits
• Ex. A Cash div of
20¢/share: if I had 1000
shares, I would get P200.• Stock price will adjust by
dividend value
• This is taxed at 10%
Stock Dividend• Additional shares given to
the shareholder
• Ex. Stock div of 20%: if I
had 1000 shares, I would
get an 200 additional
shares• Share price will adjust
down by: price / 1.2
• Choice to cash in is yours
Dividend Dates•Ex-Date – the cut off point for
dividend entitlement is a day
before this date (you must be a
shareholder as of the day
previous to this date)
• Date Payable – the day whenthe dividend is given to
shareholder (usually a month
after the Ex-date)
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History has proven that investing in quality stocks
can provide greater
returns than most
instruments; giving a good
run over inflation…
What Stock Markets Offer
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Part Two
How to Pick Good Stocks
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• the real value to which a stock can be said to be worth, it iscommonly stated as Fair Value or Target Price
• studied through Fundamental Analysis
Actual Value
• that value determined by market forces (demand and supply),and is also commonly known as the Market Price
• reviewed through Technical Analysis
Market Value
Task # 1: Know Prices
Ticker
Tape
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Task # 2: Know some Fundamentals
• “Is a technique that attempts to determine a security’s
value by focusing on underlying factors that affect acompany’s actual business and its future prospects.”
•
• We buy quality stocks today for what we believe it willbe worth tomorrow!
Fundamental Analysis
Remember: ‘What you don’t know you don’t touch!
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Task # 3: Do a Top Down Review
• A technique that attempts to determine a company’s
value by focusing on underlying factors that affect itsbusiness, earnings and prospects
Is the Economy growing?
• Are there enough investments and potential moving inon these sectors? Money must be moving in, not out…
What Industry seems attractive?
• Pick out the top performing stocks in terms of valuation,earnings growth, prospects and market participation
What are the best Stocks in that industry ?
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2005 2006 2007 2008 2009
GDP 5.10% 5.50% 7.10% 3.80% 0.9%
T-Bills (IRates) 6.4% 4.89% 3.4% 5.40% 4.2%
Inflation 6.9% 5.0% 2.8% 9.3% 3.4%
Forex (P-$) 53.06 49.13 41.40 47.50 46.40
Turnaround Growth Maturing Consolidating
Earnings and
performance
stabilizes
Profits and
business
opportunity
rise attractively
Profits and
business
opportunity
slow or are
capped
Profits and
business
opportunity
deteriorate or
lose
Economic View
Industry View
Task # 3: Do a Top Down Review
Invest Here
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0
5
10
15
20
Banks Non-Performing Loans % (NPL)
Industry : Banks
Task # 3: Do a Top Down Review
Industry : Property
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Task # 4: Know a Company’s Prospects
Look for companies that show:
•The Ability to Grow Earnings = Look for strong
or increasing profitability; watch earnings per
share (EPS= income / # of shares)
•Good or Cheap Valuations = Look for good
stocks whose Market Value is notably lower
or discounted to its Actual (Fair) Value
•Good Story = Look for new buzz, solid
products/services or catalysts for growth
Company Analysis
PROFITS
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Task # 5: Choose the Best
Company Analysis
Stock “ABC” P5.25 Stock “XYZ” P1.16
2005 2006 2007 2005 2006 2007
Recurring
Earnings (Bil) 3.00 3.45 4.24 1.15 1.60 1.84
(Growth) 7% 15% 23% 43% 39% 15%
EPS 0.28 0.32 0.39 0.11 0.124* 0.125*
(EPS Growth) 21% 14% 22% 22.2% 13% 0.5%
Proj. Fair Value ‘07 P16.50 (214%) P2.10 (81%)
* Sold new shares (dilution)
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Task # 5: Choose the Best
Company Analysis
ABC
XYZ
5.25
1.16
6.23(19%)
1.27(9.0%)
8.54(37%)
1.53(20%)
SUMMARY
Positive impact to price:
1. Growth in Income/Value
2. Prospective Story for business
expansion
3. Potential Buyout
4. Worthy Dividends
Negative impact to price:
1. Slowing Growth or a loss
2. No Story, no dividends, nonothing…
3. Too much debt
4. Inefficiency / poor relative
performance
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Part Three
Methods of Investing
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How to Invest in Stocks
Popular Techniques
• A Gradual Buy and HoldStrategy
• Make steady and fixed
Peso investments throughtime on good companies
Peso Cost
Averaging
• Trading through Technical
Analysis• Time market swings to
provide short term entry
and exit strategies
MarketTiming
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Method #1: Cost Averaging
What is Peso Cost Averaging?
•Peso Cost Averaging is a personal
wealth-building strategy that
involves investing a fixed amountof money at regular intervals over
a long period
• Buying stocks over time reduces
volatility risk in the market
• Invest what you can at your own
pace
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Method #1: Cost Averaging
How it works…
Month 1
Buy P5,000 worth of
stock ABC at market
price
Month 2
Buy P5,000 worth of
stock ABC at market
price
Month 3Buy P5,000 worth of
stock ABC at market
price
Buy fewer shares when prices are higher
Buy more shares when prices are lower
6
5
4
3
P5,000 will buy
less shares here
P5,000 will buy
more shares here
Ave Cost
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Method #1: Cost Averaging
Peso Cost Averaging… down the road…
Share price history from 1990 to 2007
Stock/
Indicator
Effective
Annual Yield
Time
Frame
TEL 18.88% 18 yrs
BPI 16.92% 18 yrs
AC 11.16% 18 yrs
JFC 10.7% 14 yrs
Inflation 5.7% 18 yrs
Retire with an Extra 10 Million!
Invest Monthly Php5,000
# Years 21
Return Rate 16.9%
Total Investment (P) 1,260,000
Will result in a…
Future Value (P) Php10M+
Investment Gain 740%
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Method #2: Market Timing
Technical Analysis
•Technical Analysis is the study of
market action (or market price) by
reviewing price charts for the
purpose of forecasting future price
trends.
• Aim: Watch and Follow market
direction
•Technique: Buy into Up Trends;
Sell into Down Trends thereby
limiting risk
PriceAction
StudyCharts
SpotTrends
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Ayala Land Inc (1990-2008)
Method #2: Market Timing
How to Read Graphs and Trends?
Stock: “A” “B”
3 Trends:
Up Trends – higher lows and higherhighs tracked by an up trendline
Down Trends – lower highs and lower
lows tracked by a down trendline
Consolidations – sideways shifts
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Method #2: Market Timing
Markets swing in Cycles: BULL and BEAR
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Part Four
Getting Started withOnline Trading
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In the Palm of your Hands
• Direct execution and Off Hours Order
Placement
• Live quotes and market statistics
• Live portfolio monitoring• Research studies and Seminars
• Charting tools
• 24/7 online service
• Customer Service
• Best commission rates
Getting Started CitisecOnline provides:
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In the Palm of your Hands
• Investing made easy
• For the Busybody, No
need to time markets
• Allow us to help pickgood stocks
• Take advantage of
technology
• ALI, TEL, SMPH, BPI, JFC, MWC
Research COL EIP
Open an
Account
• Fill up application
form
• Provide 2 copies of
valid ID• Provide copy of billing
statement
• Fund account:
• COL EIP - P5,000
• Trading - P25,000
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Summary
What have we Learned?
1. The Building of Wealth
2. The Stock Market Option
3. Understanding Price4. Choose Fundamentally Good
Stocks
5. Cost Averaging or Time Markets
through Technical Analysis6. Power up with Online Trading “Knowledge born from actual experience
is the answer to why one profits; lack of it
is the reason one loses…”
- Gerald M. Loeb