Basic intro to stocks 2013 11 08

transcript

You become part-owner of Corporation

OWNERS

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:

Mr. Prudent Investor

Lucky Guy

Mr. Media Man

Ms. Long-Term Investor

You can be one

of the owners…

You can be one

of the owners…

You can be one

of the owners…

Ten million

million

Shares

ONE million ONE million ONE million ONE million ONE million ONE million ONE million,

ASSUME:

Ten founders chip in:

One million each.

Start a Company…

Market

Value:

rises over

“Par Value”

Constant 1 peso

= 100 PESOS

One hundred shares:

Market

Value:

Original Cost:

One peso per square

meter Just like

real estate

“Land TITLES”

when many

Customers

Company: shareholders

Market Value rises...

Cash Dividends

become a

“Winner”

Shares of

Capital Gains

Capital GAIN:

70% a year for 5 years.

P60 in 2008

20 300 / 60 = 5x

Meralco

Cash Dividends

= Yield

Cash DIV ÷ AEV = 4%

AP = 4%

GLO = 5%

MER = 3%

RLC = 3%

Semirara = 4.5%

TEL = 8%

URC = 4.5%

Cash “incentive”

1 / 5 =

Cash Div, 1

--------------------

Share price, 5

1.00 / 5.00 = 20%

12 / 57

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

Net profit in

2008: 13bn

In 2011: 18bn Union Bank

61% a year, for the

past three years

Capital GAIN

*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

Dizon Mines

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…

P1 million of ABC 100 sh

P1 million of DEF

P1 million of GHI

Auntie’s Portfolio:

Shares

500 sh

600 sh

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. ...............

Ayala LAND Malls, Build-and-

Sell, Offices

Next: A Pwr

Aboitiz Power 37

Generate

Electricity

Next: A E V

2008 Profit 4.3bn

Aboitiz Equity Ventures

Electricity,

Banking

Next: BELLE

Belle Corp. 6.5

1.5 x 4.3

Next: ICTSI

24 x 3.9

ICTSI Next: JG

Summit

Cebu Pacific AIR

Robinson’s Land

Summit Media

JG Summit

5 x 9.4

Next: JFC

Jollibee F.C.

55 x 2.5

Next: MER

x 1.98

Meralco Next: MBT

48 x 2.8

Metrobank Next: TEL

x 1.23

PLDT Next: URC

20 x 6.5

“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

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

Why do

prices move

up, or down

Who wants to buy

Who wants to sell

Toyota CAR

Buyer Sellers

“I want to

buy that

car, for : “

I “bid”... I “ask”...

House for Sale

5 million

Buyers Seller

“I want to

sell this

house for

...” 5m

I “bid”... I “ask”...

Buyers & Sellers …fight over the price.

LATEST

TRADE:

volume

10,000

60,000

volume

15,000

100,000

Who wants to buy Who wants to sell

volume

10,000

60,000

volume

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:

LATEST

TRADE:

volume

10,000

60,000

29,000

30,000

volume

200,000

15,000

100,000

Seller can PLACE 5 orders, to capture all the BIDS

LATEST

volume

315,000

10,000

60,000

15,000

100,000

volume

BUYER can place 4

separate orders, to

capture all the ‘ASK’

LATEST

Buyers

Today:

Sellers

Today:

You can SEE

All the BUYERS & SELLERS

Buyers Today:

which Brokers

Sellers Today:

which Brokers

When can you execute trades?

When can you ENTER an online ORDER?

TIME It gets

implemented

by 930am

AFTER HOURS !

NEXT DAY

Yesterday:

What’s the

mood of the

market,

today?

Computer: matches

“buy” orders with“sell” orders

What IF:

Sellers

Buyers

What IF:

There are

BUYERS

Sellers

Investing in Equities

Investing

versus

Trading

Over TIME In Three Years…

Money +/- 1

Amount

at the start

Stocks

In Three Years… Over TIME

KEEP COOL

54 Buy NOW Buy Now

You get the

“average”

Disciplined, Patient

Decide to invest, then...

Make a plan. Stick to it.

1. Persistent, Disciplined

“Investing”

“Way, Better” Years

2. “Patient,

Long-term”

“Investing”

3. How to buy stocks, like an expert: style of impatient short-term “maximization”

BUY BUY

“Trading”

Check the sales, profits, of the listed company

Do research, before buying.

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

RetaiL Investor:

is in the cozy bedroom.

www.firstmetrosec.com.ph

If PLDT goes up 1 dollar, then + P41

Monitor

BUY ! Amateur, beginner.

Indecisive: Afraid to Make a Move.

WAIT “Afraid”

Amateur client :

PARALYZED

WITH SHOCK

Forecast

FROZEN WITH FEAR

Indecisive,

always Late.

Over TIME

Amateur, beginner.

Buy, when i’m excited. Sell, when i’m depressed

BUY BUY

WAIT SELL

“Emotional”

Investor

Broker

Walk - In

Internet

Phone in: Several minutes, per order

INTERNET…

MANY ORDERS

per second.

160 Stocks

40 Stock FUNDS

Next Month

Or, Next Week

You buy at …

should you

do, this

this case?

OK! …

Now, when

do i sell?

CASE ONE: recovery

Yes, you can

BUY, and BUY,

and WIN

Vista Land. Brittany, Crown Asia, etc. Housing

Down from 1998 to 2012

2012 1997 2003

BYE BYE

CASE TWO:

this happens

BYE BYE

CASE TWO:

this happens

How to set

“take Profit”

&“CUT Loss”

Trading:

Monitor !

Always

What to DO?

Something Wrong …

You buy at …

300 FOR

Trading:

Monitor !

Always

What to DO?

You buy at …

Let profits

Trading:

1 Monitor !

Always Something Wrong …

You buy at …

Emergency

CUT loss.

“What

iF…”

Stocks

8 Stock FUNDS

You buy at …

“Sell,

na nga...”

“Bui-set”

The ‘execution’ REQUIRES

superhuman

strength. 74

Buy NOW Buy LOW

Sell HIGH

The ‘principle’

is easy.

The Objective

75 Buy LOW

The rational

approach

SELL HIGH

WAIT…

1 …know

the future

2 … execute trades

Forecast,

then Invest

PRICE TARGET

1 …know

the future

2 … execute trades

Forecast,

but WAIT (?)

PRICE TARGET

1 …know

the future

2 … Hesitate WAIT

CONFIRMED?

SELL !

CONFIRMED?

BUY ! TOO

LATE The Amateur

Beginner

Regular Intervals

Fixed amount

BUY PLDT, Meralco, GT

Capital…

Consistent,

disciplined

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

BUY Stock "B"

So on 12x

Buy P30,000 of

Stock B, per month,

for one year

Meralco, for

Year 2

BUY Stock "C"

So on 12x

Buy P30,000 of

Stock C, per month,

for one year

___?, for

Year 3

Month Stock Price

CONSISTENT, REGULAR

“Accumulate”

₱ ₱

• stocks to choose from . PPT

TARGET

Emergency EXIT

Standing Order,

“Good Till Month”

ENTRY PRICE

Emergency EXIT !

In case “something

wrong went”….

TARGET ? Might not

reach ?

Evacuate !

Active trading requires expert control over Emotions. Buy, when “stocks are down” Sell, when “stocks are UP.”

“Trading”

The Amateur

Beginner

Falls, from the sky.

Amateur, beginner: Buy, and then.. Bahala na. DO nothing, even if “FAIL.”

Regular Intervals

Fixed amount

BUY PLDT, Meralco, GT

Capital…

Until you

plenty of

of stocks

in your

account.

For investing

Mistake of the

Beginner

Focuses

on the

Thinks only

of the

PRESENT

“Ang

Taas na,

Market”

“Ayoko

Bumili”

Mistake of the

Beginner

Focuses

on the

Thinks only

of the

PRESENT

“Ay,

Market”

“Ayoko

Bumili”

Excuses,

not to BUY

Sayang, I

missed

Wait for the

stock to

come down!

“Sobrang

mahal na,

lahat ng

stocks”

“mag-

research

ako”

If the price

comes down…

must be

a lousy

Because the

price is

dropping!

“Masama

Panahon”

“mag-

ako”

By FACING YOUR FEARS…

Not by reading books

Not by watching other drivers

How do

learn to

drive?

How do you …

learn to Swim?

By diving into

the water.

When you

are about

to drown..

Mistake of the

Beginner

Focuses

on the

Thinks only

of the

PRESENT

What is

mark of

profes-

sional

Mark of a

professional

Focuses

on the

FUTURE

Thinks only of the

STRATEGY, to get from

HERE to THERE.

“COOL under Fire,” training.. Face your fears “I’m not afraid of

bullets.

I have my own

weapon.”

Method for

buying stocks:

ON-site / Phone /

Internet

Investor

Broker

Walk - In

Internet

Phone in: Several minutes, per order

INTERNET…

MANY ORDERS

per second.

How to open a

stockbroker account

How to buy

Mutual Funds

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

Which “bank” invests

your millions for you?

Minimum = 5 million

Charges = 4% per year

$ DOLLARS

Private Bank:

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.

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

Mutual

Investment

Trust Fund

OPERATED

BY A STOCK

BROKER

Sold by SALES

AGENTS

OPERATED

BY A BANK

Sold at bank

branches

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.

Fixed-Income and

other Stocks

Telecoms

Holding

Companies

Properties

Transport

• 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%

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

Inflation, 4%

To Choose

High returns, %

Safe (good credit) RISKY (uncertain)

CONSERVATIVE MODEST GAINS

11% / year

Moderate

CAPITAL GAINS

18% / year

Bonds,

Stocks

AGGRESSIVE CAPITAL GAIN

24% / year

Stocks

personality

determines

your approach

Inflation, 4%

Track record

High returns, %

Safe (good credit) RISKY (uncertain)

“Save & Learn”

Fixed-Income Fund,

11% / year

“Save & Learn”

Balanced Fund,

18% / year

Bonds,

Stocks

“Save & Learn”

Stocks Fund, 24% / year

Stocks

Get Forms:

at www.fami.

com.ph

www.firstmetrosec.com.ph

www.firstmetrosec.ph

FAMI “Equity Fund”

Stocks

Deposits

Others

• 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%

To consistently

make money:

invest LONG-

TERM 118

Buy NOW Buy LOW

Sell HIGH

The principle is

the same:

The Objective

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

Stocks: Mutual Funds:

You choose the

companies. They choose the

companies.

Drive your car,

yourself?

Or: hire

a driver

50,000

65,000

46,000

52,000

48,000

FAMI EQUITY FUND

Adjust the percentages.

Depends on your info. __% in Stock market

MUTUAL FUND

__% in Stocks that you

will personally select and

monitor

B.... (BLUE) is

leading

Which fund:

best track

record

Depends on

the TIME of

Measurement

ALL are

“number

ONE”

A.... (RED) is

leading

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

Earnings in 2013

Earnings in 2012

Earnings in 2011

2011 2012 2013

Expensive

What drives the market upwards: earnings growth

2008 2009 2010 2011 2012 2013 2014

14% 12% 11%

Earnings grow

+12% in 2013

Earnings grow +14 % in 2012

Earnings -6% in 2011

2011 2012 2013

Expensive

Know when to BUY, know when to SELL.

The price moves from “cheap” to “expensive,” and

cheap again.

Company

Earnings = net

profits

SELL BUY

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

Cash Dividend

Share price

= 8% - 11%

Earnings per

Share x 10%

Common Shares PLDT

Preferred Shares

Therefore:

Cash Dividend:

10% / share

Earnings per

Share x 10% Share Price

...varies

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

12,000

Outlook for PHILIPPINE

stock market index

2013 2017

Normal Trend:

zig zag

1990– 2000: 2.5%

Yes, stocks have overshot

their Long-Term Average. 6,400

1987 – 2012: 10%

2002– 2012: 20%

2000 -2010: 4.5%

2010 - 2020: 6.5%

6,000 ECONOMI

GROWTH

13,200

Participate for the

LONG TERM !

Stocks have overshot their

Long-Term Average

1987 – 2012: 10%

2002– 2012: 20%

2012: 33%

Next 5

years:

+ 15%/yr

Annual

growth of

INDEX %

The value that investors attach,

to Philippine stocks

PER: 16x

PER: 12x

1980 1990 2000

“Moderate Value”

PER: 12x

PLDT .... “Telephone”

Forms a CUP and HANDLE

2012 2013 ‘14

P166 bn market value of these stocks

Alexander Gilles

• Lecturer on “MARKET EDUCATION” for

First Metro Securities (stockbroker)

• Financial analyst. Educator.

To introduce:

agilles@firstmetrosec.com.ph

www.SLIDESHARE.COM/SANDYGILLES

8590600 / customerservice

@firstmetrosec.com.ph

Invite me, to conduct seminars;

to give lectures

Basic intro to stocks 2013 11 08

Economy & Finance