I Talk "Money Talks" (Part Three)

It's been a week since the proclamation of P. Noy and the market is now... well it's moving sideways with no clear direction yet as to whether it continue its flight... or your fright. Last Friday, the US market fell triple digit (if I remember right) just before their July 4 celebrations.

For quite some time now, the Philippine stock market has actually lived up to the decoupling theory. No, decoupling is not related to making babies.

My humble layman interpretation is that it means that the Philippine market is somewhat insulated from whatever happens to the US market. That is, if the US market goes down, we won't. If we do, it's not going to be as bad.

That's been the case, but perhaps because the proclamation was over and the market touched a 2-year high, it was reason for it to correct and "build a base" or support. If I read analysts correctly (in the news or forums), the Philippine market is still in an uptrend channel and it's just taking a breather now.

Time to go in? I don't know. Even Nostradamus cannot tell you if he were alive today. If you are investing, then anytime is a good time since you're investing your money and not touching it until you hit retirement or when your emergency fund is depleted.

With that said, let me list down for your benefit the stocks recommended in the previously concluded Money Talks.

Investor's caveat: Investment entails risks and you should be aware that returns and your capital are not guaranteed.

The stocks were selected by First Asset Metro based on their PE Ratio. An elaborate definition on PE Ratio can be found here. But for your benefit, it's one possible tool for an investor to use prior to investing in a particular company. However, it should not be your only basis for investing in one.

As Investopedia states, "it would not be useful for investors using the P/E ratio as a basis for their investment to compare the P/E of a technology company (high P/E) to a utility company (low P/E) as each industry has much different growth prospects."

Now, having said that, please also note that the P/E ratio is a mathematical formula which translates as -


The market value per share is the current stock price while earnings per share is computed


More or less, EPS is static depending on your time frame. The market value though is what's erratic.

So what's the relevance Mr. Guerilla Investing Blog? Well, my dear investor, if the stock price has increased, then simple math tells us that the PE ratio will increase. When a stock has a high PE ratio, it may mean that the stock has become "expensive" relatively to other stocks in the same industry.

At the time of the presentation, the stocks may have been trading at a particular PE Ratio. So since the market prices of the stocks indicated have changed already, then I don't see the point of having to list down the respective PE ratios of the stocks listed.

Confused about the multitude of terms? Anyways, I was also confused when I started reading up all the terms available in Finance 101. I learned the hard way - through reading and personal experience. But it's an investment in time that's well worth it.

So here goes the list (Based on ticker symbols) -

MBT
DMCI
AP
AEV
FGEN
PNB
EDC
SCC
AGI

Please note that just because the above are stock picks, it means that if you buy today, you gain tomorrow. The gains can happen in a matter of days, weeks, months, or even years. Further, since stock prices have fluctuations, then there can be instances where the market price will fall below your purchase price.

But it's specifically that sort of caveat given that makes you sleep soundly at night. If somebody is presenting a "financial" product to you with guaranteed returns higher than banks, then be wary. It could be a scam.

Whew, that was a lengthy post! I hope you learned something. Happy investing!