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!

I Talk "Money Talks" (Part Two)

Prior to today's inauguration of the 15th President of the Philippines, the stock market hit a 2-year high at 3,374. The index had been testing the resistance of 3,365 for some time now and if you want further analysis, check out this index TA by Absolute Traders. Bright prospects remain for the local index. In fact, the local stock market has not been moving in sync with the US market and that's a good thing.

But, how our market will withstand the triple digit drop of the DOW (below 10,000) the other night remains to be seen. With the weak June jobs data in the US, I'm doubtful the US markets will recover from Tuesday's fall. The resilience of the Philippine market will surely be tested tomorrow.

The new President's speech was laden with the usual big promises like fighting poverty, tackling corruption, and us becoming an investor friendly nation. While I hope the President can deliver on all three, the last one is something I hope he can really achieve. The Philippines has been the cellar dweller in Asia as investors poured money into China, Vietnam, and even Thailand. I'm quite optimistic that we have more to offer given our English language advantage.

Being a lover of words, I also loved the coining of the word P. Noy, a word play on the term for the Filipino everyman and President Noynoy. Amazing.

Then, there was the part on the wangwang and counterflow in the President's speech. I think that struck a chord in a lot of people and I hope he takes up that promise. I long for the day when PUV's follow simple traffic rules. If you want to see how brazen they are, just go to the corner of Recto and J Abad Santos Streets. The entire Recto acts like a jeepney terminal.

I'm making all these Presidential talk because in the Money Talks forum, it was said that the local stock market rose in each of the first year of a new Administration. Against this backdrop are healthy profits from local corporations. This should continue to provide impetus for the market.

Apart from this, it was also mentioned that local money is the one leading the rally in the local market. I've been harboring that idea and I think I blogged about it in one of my older posts (I will have to look through them though). This means Filipinos are looking beyond savings deposits, time deposits, and real estate as means to realize their financial dreams.

And, that to me is a very good thing.

P.S. Stock picks from Money Talks to be featured in my next post. See you there!

I Talk "Money Talks" (Part One)

As promised in my last blog post, I'll share some of the insights and even some stock picks from the Money Talks seminar I attended recently. The seminar was held last June 11 at the PSBank Tower along Paseo in Makati.

Overall, it was a good session.

I understand that First Metro Asset has a partnership with UA&P and that's why Dr Vic Abola was present to discuss the Philippine economy as well as the adverse impact (if any) of the Greek/European debt crisis. There was then a presentation of the outlook of the Philippine Stock Market, stock picks, mutual fund investing 101, and how to trade stocks online via First Metro.

In a nutshell, it's good to be in Asia.

On a personal note though, that's the great paradox for the Philippines. The West seems to be on the decline mounting huge debts while Asia is rising. Yet locally, a lot of Filipinos still yearn to Go West. Oh well. That's a challenge for the new Philippine President.

The Philippine economy is expected to weather the external problems. Low interest rates are favorable for business expansion. Low inflation rate will mean that the BSP maintains the low interest rates. Construction is still picking up both in the public and private sector.

SMDC is supposed to build 100,000 UNITS per year. Before SMDC, the entire real estate industry generates about 250,000 a year.

Imagine the glut in the coming years assuming the buyers of these units are looking forward to rent units out rather to live in it. Location and project development will be key to long term appreciation of property prices. This is my personal opinion of course.

Consumer spending is also alive in the country. Proof positive is that (if memory serves me right), car sales and ad spend are up. The almost weekly sale in SM is probably another key driver.

Another interesting data I got was that East Asia accounts for 42% of Philippine exports. Europe? Just 18%. The US continues to be our #1 export destination.

One more trivia - China is going bananas over Philippine bananas as we supply 60% of their requirements.

A side effect of the debt crisis and US recession was that gas prices did not go up since the demand for it slacked. This bodes well for the Phils. since we import our requirements. Low gas prices mean lower inflation. Projected inflation for this year (vs the previous year) is 4.5%

Challenges for the Philippine economy remain to be the power crisis (yes we have one) in the South, the growing government deficit, the peso appreciation (OFW remittances lose value), among others.

That's it for now. That's probably info overload already for you. More in the next post!

Preneed in Need of Capital

I wanted to go back to the Waves of Philippine Business but the recent wave of bad news convinced me otherwise. Preneed firms under water, export manufacturing companies shedding labor, and a cement plant temporarily shutting down. I fear that the effects of the global recession are yet to be fully felt in the Philippines.

The response of the Philippine government is to pass its responsibility to other countries. Note this sad fact -

"Job creation is tough in the Philippines, where some 27 million people live on a US dollar a day or less and where one in three adults are unemployed or underemployed, according to official data.

Jennifer Manalili, head of the labour department's Philippine Overseas Employment Administration, said that as a last resort Manila could export more of its work force."

That's been the solution of the Philippine Government for many administrations already. Instead of thinking of creative solutions to spur local small businesses to prosper, politicians are busy eating away at their pork barrel and praising OFW's as heroes to cover up for their own shortcomings. There has got to be a more concerted effort to spur small business lending.

There are plenty of reasons why there are more sari-sari stores than supermarkets or groceries in the country. There are also plenty reasons why carinderias stay carinderias for eternity here. I am sure that one reason is poor lending practices or just common place ignorance about what is available out there. This deserves a post by itself at a future date.

I attended the "Meeting of Major Business Organizations on the 2009 Economic Roadmap" (Yes, that is the title verbatim) held two weeks back. The takeaway there was that the government would set up a support fund for returning OFWs. We just don't know when this will be in place or how this will be distributed. Maybe they will provide information soon.

Apart from that, the government is banking on the BPO sector to absorb the expected job cuts coming from the manufacturing/export industries. The BPO sector is expected to continue to grow this year. I wonder if President Obama will push through with his "bring jobs back to America" call.

What was not indicated (nor expected I believe) was the recent closure of three preneed companies - Legacy Consolidated Plans, Scholarship Plan Philippines, and All Asia Plans Corp. Before that, Pacific Plans of the Yuchengco group (now owned by Noel Oñate) also faced similar problems. There is something wrong with the business model of preneed firms, particularly those dealing with education pension plans.

(To know Noel Oñate's background check this.)

I wonder if schools in the country ever experienced recession? If I remember my corporation law right, I know for a fact that schools are not charged any income tax. So if they are not paying higher taxes, what merits their annual hike in tuition fees? Hmmm...

While it may sound like an excuse to some, Mr. Oñate's assessment is equally true - "He cites that while tuition has gone up by 30-40%, purchased educational plans earn only 10%."

In fact, just ask yourself, where do you invest money your money? Savings, mutual funds, the stock market, bonds, property, insurance. Now, assess all of these -

Those that give guaranteed returns are at the low single digits.

Those like mutual funds and the stock market are volatile and market dependent.

Bonds are below inflation rate (especially vs. last year), and most of them do not give you compound interest benefits.

Properties on the other hand are cyclical and depend very much on location (don't listen to your real estate broker about property as the best investment) and pretty much the rest of what happens to the value of your property rests on the FUTURE. Something you don't have any hold over.

Insurance on the other hand has a big return on your premiums invested. However, it requires that the planholder die first. So who enjoys the benefit? Definitely not the planholder.

So you see, where can you invest your money in the Philippines? These are probably the same questions the management team of preneed companies ask themselves.

While much of the anger and fury has been directed at preneed firms, there should be even more levied on schools. Private education is one of the major expenses in a family's budget. If tuition rate hikes are in the double digit areas, do you think that on wages alone, you'll be able to send your children to school? I don't want to wake up one day and see my tuition bill rise to 500,000 per semester. You should wonder about that too.