www.citiseconline.

com

CitisecOnline
Presents
“Investing in the Stock Market Today”
Presented by:
Juan G. Barredo
Vice President
CitisecOnline.com Inc.
Outline

CitisecOnline: Who we are?

Building of Wealth

How to Pick Stocks

Timing your Investments

Powering up with Online Trading

 Who We Are

•CitisecOnline is the leading innovator in

online stock trading in the Philippines
•Established in 1999, actively trading online
since 2001
•Managed by professionals in the financial
and information technology industries
•Capitalized at over Php400 Million:
-Listed in the PSE in July 2006
•Also a member of the HK Exchanges (HKEx)
PART ONE

Building of Wealth
 The Rule of 72!
•How to double your money?
•To figure out how much you need to earn
each year compounded annually to make
your money double, divide 72 by the
number of years you plan to double it at:
3 years = 24.0%
4 years = 18.0%
5 years = 14.4%
6 years = 12.0%
 Interest Rates
Interest Rates (91-day T-Bill)
%
22.00
20.00
18.00
16.00
14.00
12.00
10.00
8.00
6.00
4.00
2.00 Rates have come from 20 Year Lows!
0.00
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
 Capital Market
Various Instruments

Stocks
Savings Investment
Pension
Bonds
Funds
Capital
Economic Expansion
Market
Real Savings
Estate Accounts
Insurance Natural Resources
Jobs =
Processing
Policies
Income Manufacturing
 Market Dynamics The Stock Market
•Like any market, it is a place where people
converge to buy and sell.
•Instead of actual goods, shares of public
corporations (or Stocks) are what you buy and
sell.
•A company ‘lists’ (or sells) its shares in the
PSE to raise money to fund its growth.
•An Initial Public Offering (or IPO) is the first
time a company sells its shares to the public to
raise cash
•High demand for shares is what makes prices
move up; low or no demand makes it subside.
 The Stock Market What is a Share of Stock?

• Part ownership of a company

• Shareholders make money through:
*Capital Appreciation
The increase in market price of
a stock driven by investor
demand for a company’s
shares
*Dividends (Cash & Stock)
A distribution of a portion of a
company’s earnings handed
in cash or shares
 The Stock Market Earning Dividends
Profit sharing with shareholders made either in Cash,
Stock or a combination of both.
Cash Dividend Stock Dividend Dividend Dates
Money given Additional shares •Ex-Date – the cut off point
back to the given to the for dividend entitlement is a
investor as his shareholder. day before this date (you
share of distributed must be a shareholder as of
Ex. Stock div of
profits. the day previous to this date)
20%: if I had 1000
 Ex. Cash div of shares, I would get • Date Payable – the day
20¢/share: if I had 200 additional shares; when the dividend is given to
1000 shares, I share price will adjust shareholder (usually a
would get P200. down by: price / 1.2 month after the Ex-date)
 The Stock Market

Investing your money into solid growing companies potentially

offer better returns over savings instruments and inflation

History has proven

that investing in
stocks, provides
greater returns than
most investors can
earn through
guaranteed savings;
plus gives a good
run over inflation…
PART TWO

How to Pick Stocks

What is Price?

• PRICE
• That determined by Actual Value or the real value to
which a stock can be said to be worth.
• That determined by Market Value or that value
determined by market forces (demand and supply),
also known as the market price.
• The study of these two prices craft the two major sciences
in market analysis:
• Fundamental Analysis (studies Actual Value)
• Technical Analysis (studies Market Value or Price)
Fundamental Analysis Study of Actual (Fair) Value:

Fundamental Analysis is a technique that

attempts to determine a company’s value by
focusing on underlying factors that affect its
business, earnings and prospects.

Look for companies that show:

1)Value = Look for cheaply priced stocks
2)Earnings Growth = Look for companies whose
profitability is increasing or accelerating if not adequately
maintained
Remember: What you don’t know you don’t touch!
 Fundamental Analysis Top-Down Approach

• Economic Analysis
• Look into the Macro View; examine
your economic surroundings.
“Quality is never
an accident; it is • Industry Analysis
always the result
of high intention, • Break it up into industry sectors,
genuine effort,
intelligent
then look for the norm and evaluate
direction, and outperformers.
skillful
execution.” • Company Analysis
William A. Foster
• Filter out the Best options by
comparing company performances.
 Fundamental Analysis The Economy

2004 2005 2006 2007 2008

GDP Growth (%) 6.00 5.10 5.50 7.10 5.5
Ave 91-day T-Bill Rate (%) 7.30 6.40 4.89 3.4 6.3
Inflation (%) 6.0 6.9% 5.0% 2.8 12.2
Real interest Rate (%) 1.30 (0.50) (0.11) 0.60 (5.90)
EOY Forex (Php/$) 56.26 53.06 49.13 41.401 44
Budget Deficit (US$ Bil) (187.10) (146.50) (62.2) (9.4) (51.6)
Source: NSO, BSP
 Fundamental Analysis Industry View

Growth Stage of Philippine Industries

Telcos
Consumer
BPOs
Media
Banks Manufacturing
Mining
Property
Power
Infrastructure
Utilities
Fundamental Analysis Industrial View
Makati (Manila) CBD Commercial Lot Prices
Pesos / Square Meter (2007 projection)
500,000
450,000
400,000
350,000
300,000
250,000
200,000
150,000
100,000
50,000
0
85

87

89

91

93

95

97

99

01

03

05

07
20

20

20

20
Fundamental Analysis Industrial View
Bank’s Non Performing Loans (%)
18
16

14

12

10

0
91 92 93 94 95 96 97 98 99 '01 '02 '03 '04 '05 '06 '07 '08
*as of mid 2008
 Fundamental Analysis A Company’s Tale
• Look at a company’s ability to GRO W!
Monitor Earnings Growth (Increase in Net Income or its Earnings
per Share (EPS) = Net Income / total number of shares)
• Look out for Cheap Stocks (actual or fair value targets)
• Look for a New Story, Product or Emerging Trends

Energy

Water

Construction
 Fundamental Analysis The Tale of the Tape

Which would you invest in?

Stock “ABC” P6.10 Stock “XYZ” P0.86

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%

Fair Market Value P16.50 (170.5%) P2.10 (144.2%)

* Sold new shares (dilution)

 Fundamental Analysis ALI vs MEG: Winner is…?
13.75
9.90 (+38.8%)
(+62.3%)
A
B
C

1.20
(+39.5%) 1.56
X (+30%)
Y
Z
 Looking for Value What creates / destroys value
Positive impact to price:
1. Growth in Income/Value
2. Prospective Story for
business expansion
3. Buyouts
4. Worthy Dividends
Negative impact to price:
1. Deterioration in Growth of
Income/Value or a loss
2. No Story, no dividends, no
nothing…
3. Uncontrollable debts
4. Inefficiency / poor
performance
PART THREE

Timing your Investments

Two Investor Styles Choose your fancy…

• Cost Averaging
• Make steady
Passive investments through
time

• Technical Analysis
• Time market swings
Active to provide entry and
exit strategies
Passive Investor Passive: The easy way through…

• Utilizes the methodology

of cost averaging
• Keeps investors geared
for the long haul
• No need to worry about
timing the market
• We help in choosing
great stock picks
 Cost Averaging Passive: The easy way through…

Cost averaging is a technique designed to reduce

market risk through the systematic purchase of
securities at predetermined intervals and set amounts
Buy fewer shares when prices are higher
6 Month 1
P5,000 will
only buy less Month
Buy 2 worth
P5,000
shares here 5 of stock ABC at
Month
Buy 3… worth
P5,000
market price
P5,000 can of stock ABC at
4 Buy P5,000 worth
buy more market price
of stock ABC at
shares here
3 market price
Buy more shares when prices are lower
Cost Averaging Does it work? Well let history tell…

Top of a
Bull Market
of Bull

Basket:
AC,
BPI,
MBT,
SMC
TEL
Cost Averaging Does it work? Well let history tell…

Beginning
of a Bull
Market Basket:
AC,
BPI,
MBT,
SMC
TEL
 Cost Averaging
Our Premium Growth Stock GEMSS:
G- Growing industry
E - Earnings visibility
Passive: The easy way through…
2000.0%
Selected Premium Growth Stocks versus
Inflation 1990-2008
1800.0%

M - Management credibility 1600.0%

S - Superior products 1400.0%

1200.0%
S - Strong balance sheet
1000.0%

800.0%
TOP 5 600.0%

1) Jollibee -JFC 400.0%

200.0%
2) PLT - TEL
0.0%
Jan-90
Jan-91
Jan-92
Jan-93
Jan-94
Jan-95
Jan-96
Jan-97
Jan-98
Jan-99
Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
3) Ayala Land - ALI
4) Bank of Phil Islands - BPI Inflation JFC TEL ALI BPI MWC

5) Manila Water - MWC

 Active Investor Active: Lets do some work…

Technical Analysis is the study of market action

(market price), primarily through the use of charts
for the purpose of forecasting future price trends
-- John J. Murphy ‘Technical Analysis of Financial Markets’

Price Study Spot

Action Charts Trends
 Technical Analysis The Graphic Advantage

The Highest
price of the
day
The First
traded price
for the day

The Final or
Last traded
The Lowest price for the
price of the day
day

Stock: “A” “B”

 Technical Analysis 500,000
TOP
450,000
400,000
350,000
BOTTOM
Land prices and 300,000
250,000

Ayala Land 200,000

150,000
100,000
50,000
•Who topped 0

91

92

93

94

95

96

97

98

99

00

01

02

03

04

05
out first?

20

20

20

20

20

20
•Why?

•Market moves ahead

as people act in
anticipation of change.
 Technical Analysis Trends & Consolidations
TRENDS
UP TREND
•Higher Highs and
Higher Lows
•Trendlines drawn by
connecting lows.
DOWN TREND
•Lower Highs and
Lower Lows
•Trendlines drawn by
connecting highs.

NO TREND
• Sideways shift/
Consolidation
• Prices must
breakout to re-trend
Our Roadmap
 Our Map The Market Today

“PSEi”
PART FOUR

Powering up with
Online Trading
 Online Needs All at the Palm of your hands
Get started? CitisecOnline Provides:
• 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
Research Looking for leads or stories…
 Stock Browsing Do your Homework

*Target Price = Estimated Fair Market Value BUY (Upside) SELL (Downside)
COL Rating: 1 >16% 1 >16%
BUY – Good and solid fundamentals 2 9%-16% 2 9%-16%
SELL – Unexciting or poor fundamentals
3 < 9% 3 < 9%
Stock Browsing Get a Quote!
Stock Browsing Examine its Trend!

Try our JAVA CHARTS!

What is the current trend?
Bullish or Bearish?
 Stock Browsing Assess your Risk vs Reward
(Try to maintain a 1:3+ ratio)

Reward
Risk

RISK: Support of P 2.22

REWARD: P2.90
Risk/Reward:
0.12 / 0.56 = 1 : 4.6
(1 pt risk for every 4.6 pts gain)
GOOD TRADE!
Buy / Sell How to Execute an Order

Term:
ATO – at the opening
GTC- good till cancelled
ATC- at the close
EIP – Easy Investment Prog
MEG
10,000
2.34

Note: Market trades between 9:00 AM to 12:10 PM

After 1:00 PM, you can use Off-Hours Orders
Buy / Sell Monitor your Portfolio
 Stock Browsing Reassess your Risk vs Reward

BUY-2
MEG Risk

2.90 Reward
2.60
11.53%

RISK: Support of P 2.32

REWARD: P2.90
Risk/Reward:
0.28 / 0.30 = 1 : 1.07
(1.00 pt risk for every 1.07 pts gain)
High Risk TRADE!
Tips of the Trade Key Points!

• Cut your losses short and let your profits run

• The trend is your friend
• Try not to add to losing position
• When you are not sure, stand aside
• Always look for good odds 1:3 Risk vs Reward
•Trade active stocks; avoid thinly traded issues
•Do not overdiversify, concentrate on a few well
selected stocks (3-5 issues)
• Remember: Plan your trade and trade the plan
(discipline = success)
 Summary

1. The building of Wealth

2. The Stock Market Option
3. Understanding Price
4. Choosing Fundamentally Good
Stocks
5. Passive or Active Investor
6. Plan your trade  trade the plan
(discipline = success) “Knowledge born from actual
experience is the answer to why
one profits; lack of it is the reason
one loses…”

- Gerald M. Loeb
 www.citiseconline.com

Thank you and have

great day!

To learn more about COL’s Easy Investment

Program or know more about our services and
seminars please visit our website at
www.citiseconline.com or call our customer hotline
at 6-333-777