www.citiseconline.

com
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
Understanding Price
A Fundamental View
The Technical View
The Market Today
Tune in & Take Charge of your
Financial Future
 Who We Are

• CitisecOnline is the leading innovator in

online stock trading
• 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
PART ONE
ONE

Building of Wealth
 The Rule of 72!
•Want to double your money?
•To figure out how much you need to
earn each compounded annually year to
make your money double, decide on the
number of years you plan to double it,
then divide 72 by that number.
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 actually fallen to near all-time Lows!
0.00
93

94

95

96

97

98

99

00

01

02

03

04

05

06

07
19

19

19

19

19

19

19

20

20

20

20

20

20

20
20
 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
corporations (or Stocks) is what you
buy and sell.
•A share of stock represents partial
ownership of a company.
•A company lists its shares in the PSE
to raise money to fund its growth.
 The Stock Market What is a Share of Stock?

• Part ownership of a company

• Shareholders may make money
0
through: 1,00
*Capital Appreciation
Where the value of stocks climb
*Dividends (Cash & Stock)
When a Company shares its profits
• Historically, investing in stocks has
been the best way to significantly build
your wealth over a long period of time.
 My Options
Comparative Yields for Different Investment Instruments
2003 – 2006
45
40
35
30
25 PHISIX
20 Top Mutual Funds
15 91 Day T-Bill
10 Time Deposit
5 Savings Account
0
2003 2004 2005 2006
PART
PART TWO
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
“The Market is a
be worth.
voting machine,
whereon
• That determined by Market Value – or that
countless value determined by market forces or
individuals
register choices opinion.
which are the
product partly of • It boils down to Demand and Supply.
reason and partly
of emotion.” • Shifts in Demand and Supply create Price
Graham & Dodd movement.
 Fundamental
Fundamental Analysis
Analysis Study of Actual Value:

• Look for the Best overall value

“Buy a stock the • Make sure the company is solid and
way you would
buy a house. its profitability is strong.
Understand and
like it - such that • Is a Stock cheap or Expensive.
you’d be content
to own it in the
absence of any
• If looked upon as Cheap = BUY
market.”
Warren Buffet
• If looked upon as Expensive = SELL
• If things look questionable, forget it.
• If you speculate, don’t buy a lemon!
 Fundamental
Fundamental Analysis
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
Fundamental Analysis
Analysis The Economy

Selected Economic Indicators

2002 2003 2004 2005 2006F*

GDP Growth (%) 4.40 4.50 6.00 5.10 5.60
Ave 91-day T-Bill Rate (%) 5.40 6.00 7.30 6.40 5.3
Inflation (%) 3.0 3.5 6.0 6.9% 6.9%
Real interest Rate (%) 2.40 2.50 1.30 (0.50) (1.6)
Average Forex (Php/$) 51.60 54.20 56.00 55.10 52.10
Budget Deficit (US$ Bil) (210.70) (199.40) (187.10) (146.50) (125)
Source: NSO, BSP
*For the 1st Half ‘06
 Fundamental
Fundamental Analysis
Analysis The Economy
Philippines: Macro Outlook
• Government is expected to achieve a balanced budget by 2008,
largely through an improvement in tax take (Note: This will be
achieved through implementation of EVAT and improvement in the
government’s collection effort..)
• Positive outlook for economic growth, driven by rising OFW
remittances and increasing government spending (Rising OFW
remittances will fuel consumption while government, which historically did not
have enough money to spend on important infrastructure, will now increase
spending, given the improvement in its fiscal position)
• Interest rates to remain low due to the continuous improvement
in the government’s fiscal position and highly liquid financial
system
• Peso is expected to stabilize or even appreciate, driven by
strong remittances and portfolio inflows
 Fundamental
Fundamental Analysis
Analysis Industry View

Growth Stage of Philippine Industries

Turnaround Growth Maturing Consolidation

Telcos Basic
BPOs Industries
Consumer Banks Utilities
Media
Property
Mining
Infrastructure
Power
Fundamental
Fundamental Analysis
Analysis Industrial View
Makati (Manila) CBD Commercial Lot Prices
Pesos / Square Meter
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
20

20

20
Fundamental
Fundamental Analysis
Analysis Industrial View
Bank’s Non Performing Loans (%)
18
16
14
12
10
8
6
4
2
0
91 92 93 94 95 96 97 98 99 '01 '02 '03 '04 '05 '06
Fundamental
Fundamental Analysis
Analysis A Company’s Tale

• Look at a company’s ability to GROW!

Watch its Earnings… earnings… earnings!
• Try to find its assessed value.
• Look for a New Story, Product or Captured
‘Niche’ Market.
 Fundamental
Fundamental Analysis
Analysis Looking for Value and Earnings

Look at Earnings Growth

• Look for a company’s ability to reproduce profits.
• Study its Earnings growth (or Earnings / share)
• EPS = Net Income / Total Shares outstanding
• Inspect the % change from one year to the next
Find it’s Assessed Value
• If I sell all the company’s assets how much can I raise?
• Fair Market Value
• Ex: Net Asset Value, Book Value, Discounted Cash Flow
• Value based on current market value of assets & earnings
• Look at it on a per share basis (divide it by # shares)
 Fundamental
Fundamental Analysis
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 P2.10

* Sold new shares (dilution)

 Fundamental
Fundamental Analysis
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
 Fundamental
Fundamental Analysis
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 0.15* 0.14*

(EPS Growth) 21% 14% 22% 22.2% 36% -7%

Fair Market Value P16.50 P2.20

* Based on new Sept Earnings Disclosure

PART
PART THREE
THREE

Timing your
Investments
 Technical
Technical Analysis
Analysis Study of Market Value

“Technical Analysis is the study of Market Action,

primarily through the use of Charts;
for the purpose of forecasting future price Trends.”
-- John J. Murphy ‘Technical Analysis of the Financial Markets’

Market Action

Charts

Forecasting future price Trends

 Technical
Technical Analysis
Analysis The Graphic Advantage

•Provides instant access to

much needed information.
•Clearly illustrates Trend
drifts that would otherwise be
overlooked.
•Enables the user to cover a
great deal of stock price
information.

Stock: “A” “B”

 Technical
Technical Analysis
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

out first?

00

01

02

03

04

05
91

92

93

94

95

96

97

98

99
20

20

20

20

20

20
•Why?

•Market moves ahead

as people act in
anticipation of change.
 Technical
Technical Analysis
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
Our Roadmap
Roadmap
 Our
Our Map
Map The Market Today

“PSEi”
PART
PART FOUR
FOUR

Tune in and Take

Charge of your
Financial Future
 How do I Start? What you need to invest online

Computer Internet
Service
Provider
(ISP)

Online Broker
 Online Needs All at the Palm of your hands
• Choose an Online Broker
– Direct execution and Off Hours Order
Placement
– Live quotes
– Portfolio monitoring capabilities
– Timely and useful research
– Charting tools
– 24/7 online service
– Customer Service
– Best commission rates
 Stock Browsing Task at hand

• Look for a Lead

– Scan the news and broker reports
• Do your homework
– Study the data
– Review the basics
• Get a quote and Evaluate performance
– Evaluate its demand-supply
– Evaluate its Trend
• Assess your risk-reward
– Identify your potential gains and maximum loss
• Create a watch list and Monitor your portfolio
– Monitor your stock’s progress
Stock Browsing Look for a Lead or Story

Morning Notes
Stock Browsing Look for a Lead or Story…
Stock Browsing Do your Homework
 Stock Browsing Do your Homework

*Target Price = Estimated Fair Market Value (NAV, PER, DCF…)

COL Rating: BUY (Upside) SELL (Downside)

BUY – Good and solid fundamentals 1 >16% 1 >16%
SELL – Unexciting or poor fundamentals 2 9%-16% 2 9%-16%
3 < 9% 3 < 9%
Stock Browsing Do your Homework

Sort by:

Rating:
3- Best
1- Low
0- NC
Stock Browsing Get a Quote!
Stock Browsing Examine its Trend!

What is the current trend?

Bullish or Bearish?
 Stock Browsing Assess your Risk vs Reward
(Try to maintain a 1:3 ratio)

21.95%

RISK: Support of P 7.60

PRICE TARGET: P10.00
Risk/Reward:
0.6 / 1.80 = 1:3
(1 pt risk for every 3 pts gain)
GOOD TRADE!
 Buy / Sell How to Execute an Order

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

RISK: Support of P 8.10

PRICE TARGET: P10.00
Risk/Reward:
1.10 / 0.80 = 1.373 : 1
(1.37 pt risk for every 1pt gain)
High Risk TRADE!
 Portfolio MGT Money Management
“This is the art of preserving one’s capital
and keeping whatever one can make.”

• Diversify your portfolio into 3 to 5 stocks.

• Equally distribute your capital into them.
• Do not play the ‘all or nothing game’.
• Do not use Martingale’s System of ‘Doubling
up’ after a loss!
• Never trade more that what you can
reasonably afford to lose.
• Use the Upright Pyramid Method.
Portfolio MGT How to Allocate funds
Realize this:
Money Management Styles
“While losses grow
arithmetically, profits
required to recoup them
increase geometrically!”

Lose 10% = you need to

gain 11% to recoup.
Lose 20% = 25% to
recoup!
Lose 40% = 67% to
recoup!!
Lose 50% = 100% to
recoup!!!
Scale up correctly!
 Remember the Plan Uphold Discipline = Success

Use the Checklist:

• Look for a Lead
• Do your homework
• Get a quote and track performance
• Assess your risk-reward
• Create a watch list
• Plan your trades and Trade the plan
 Summary
Summary

1. The building of Wealth

2. The Stock Market Option
3. Understanding Price
4. A Fundamental View
5. The Technical View
6. The Market Today
7. Tuning into your Financial Future
“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
www.citiseconline.com

Thank you!
Take charge of your
financial future and
Maximize your investments
online today!

Log on to www.citiseconline.com and Get your

Free 7-day Trial Password today! For more info,
call our Customer Service agents 6-333-777