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Learnings from BPI Trade’s 2014 Year-End Conference Part 1

Learnings from BPI Trade’s 2014 Year-End Conference Part 1

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This article is about what I learned from BPI Trade’s Push Mo Yan Year-End Conference last November 2014.  It’s not a summary of everything that the speakers said, just those things which had an impression on me.  It was my first trade conference and I’m glad I signed up for it even if it meant shelling out Php 750 for a VIP seat.  It was still a bargain given that it included morning snacks, lunch, a free book (Stock Smarts by Marvin Germo),and a better seat compared to the Php500 seat at the back which didn’t come with a free book.  I allocated this expense to my education fund, since I  had a number of takeaways from it.  When it was over, my husband and I agreed that the Php750 charge was probably just to cover the expense, which is why I like BPI Trade.:)

To do each speaker justice, I’ll break this article in two parts.  The first part will include my learnings from  best-selling author Marvin Germo and BPI Securities’ very own Mike Oyson, while the second part will be from TAP (Traders Apprentice Pilipinas) Maestro Tony Herbosa and ANC’s On the Money host Salve Duplito.

With its lineup of speakers, the conference provided a wholistic and balanced perspective since each of them covered different topics.  Marvin provided a background of the stock market in general and gave advice on what do when deciding whether to buy or sell a stock.  Mike talked about stock market investing while Tony discussed stock market trading.  Lastly, Salve talked about the purpose of wealth and social responsibility.

Stock Market Trading vs Stock Market Investing

Before I begin, I’d like to differentiate a stock market trader and investor, as I have made this distinction above.  A trader is one who buys and sells, hoping to gain from price volatility.  He’s the one who’s constantly monitoring the market, looking at his computer all day, doing technical analysis.  To him, it’s about timing so he can buy low and sell high.  An investor buys and holds the stocks for a longer period of time, hoping to gain from price appreciation and dividends.  He’s in the market for the long haul and looks at the market and company fundamentals.  To him, it’s about time and compounding.

A few words of caution: please do your research (read, read, read if you don’t have a background on the stock market) if you want to get started.  Don’t be swayed by greed and what others say, because more often than not, newcomers who lose their money get burned, leave the money and never come back.  It would be foolhardy to think that stock prices will always go up.  Know your risk appetite.  Define your goals and time horizon. There are online trading platforms which allow you to simulate trading, if you just want to get the hang of it.  You buy and sell stocks at their current prices real time but don’t lose or gain if the prices fall/rise. It’s just simulation, which should give you experience on how to keep your emotions in place.

What I learned from Marvin Germo

Marvin’s a Registered Financial Planner and author of several stock market related books which have become best sellers in National Book Store.   He also trades, writes, and has appeared in national television promoting financial freedom.
1. The Philippine stock exchange market is dominated by foreign funds.  Our market goes down when they pull out their money by selling stocks and it goes up when there’s a high volume of foreign buying. This is because less than 1% of the population is investing in the stock market. At around 100million Filipinos , that equates to only 1 million Filipinos trading and investing in Philippine equities. That’s why financial literacy programs are a must in our country,  because while the stock market is quite volatile with its ups and downs, it provides better returns than the usual saving instruments in the bank.  On the average, since the late 1920’s, despite the volatility, the market has provided a 15% annual return.
2. Invest methodically. You must have an entry (price at which you buy) and exit (price at which you sell) strategies when you trade or invest. You have to leave the emotions out the door whenever you do prework (aka research) when  deciding to buy or sell.  Why?  Because we are irrational decision makers in the stock market. We buy when everybody’s buying but by that time, the stock has become too expensive. That might be because we dont really know what to do and that’s why we just join the bandwagon.  Remember law of supply and demand? The greater the drmand, the greater the price.
3. How do you select stocks?
First, follow where the government is going. Where is it spending money on? Check out those companies which are involved in PPPs (public private partnerships). These are the private corporations (Ayala, San Miguel, Metro Pacific, etc) with government contracts to build infrastructure ( e.g. roads, expressways) and provide services to the public.
Second, read so you’ll know what’s in the news today.  Any mergers and acquitions?  What company is aggressively expanding in the market?
4. Do ratio analysis on the company. Check the return on equity for its profitability, debt equity ratio for its leverage, price earnings ratio to identify it it’s cheap or not, and current ratio for its liquidity.  You also need to check if the company is in a growing industry and if the government puts money in it.

What I learned from Mike Oyson
Mike Oyson is the Chief Executive Officer of BPI Securities.
1. Push vs pull. This analogy is similar to the first point discussed by Marvin. Push relates to foreign funds, money from the outside going inside. Pull is the opposite, which is local money being put into the market.
2. Buy when people are scared and sell when people are confident. Really like this advice from Mike,especially since I still consider myself a newbie in the market even though I’ve had a BPI trade account since 2009, because it was only in 2014 when I started focusing and building my stock portfolio. I still don’t know how to do fundamental and technical analysis, so I read and choose my stocks based on BPI Trade’s reports and Bo Sanchez’s Truly Rich Club stock updates which is from COL’s research.

3. If you want to know how expensive a stock is, look at its price earnings ratio.  That’s the ratio of the price share to its earnings per share.  The higher the PE ratio is, the more expensive the stock is.  It is also your payback period in years, which is the time it will take for you to earn what you invested.  Jollibee with a PE ratio of +40 is one of the most expensive stocks in the market.
4. “The party is not yet over. It’s still 11pm”.   When I first heard that, I said huh?  I didn’t know he was talking about the bull run and how we can still ride the waves.  Til the clock strikes at 12am, we can still profit from the market.  When is 12am?  In our case, it’s the next presidential election.  So what are you waiting for?  There’s still more than 12 months left.

5. This is where it gets interesting.  His stock picks are backed by data gathered by BPI Trade’s analysts. For the bull run, the sectors which are said to outperform the market are consumer, power, and gaming, while banks, property, and telco are said to be bearish. Not saying that the other sectors are bad, just that not all stocks are created equal.  If you want to benefit from the current bull run, go for those sectors. Why?  Our economy’s growing and its mostly consumption-driven. Power companies have been increasing their capacity with the numerous power plants being built.  Gaming resorts (Solaire, City of Dreams, etc) will also benefit from integration and the new roadways being built to connect them with NAIA.  On the other hand,  the bearish outlook for banks is due to tighter BSP regulation, for telcos it’s the stiff competition (hurray for us consumers!), and for real estate, it’s the saturation of the condominium developments, albeit those which have horizonal projects (not high rise condominiums) are said to benefit from the bull run, especially MEG (Megaworld).

Apart from what has been said above, he also gave out stock recommendations, placing them in different categories.

a. Long term – these are blue chips which you can buy and hold, or better yet do peso cost averaging. These are the “pamana” stocks which you can leave for your family. Examples are TEL, ALI, GLO, AC, JFC, SM, URC, DMC.

b. Rising – these are stocks which have a huge potential due to their aggressive business strategies.  URC for one has been forging partnerships with international food companies. Megaworld has a huge landbank and is developing several townships to cater to the growing BPO industry. DNL is the oil supplier of Krispy Kreme, Max’s fried chicken etc (didn’t really know that at all). Examples are URC, MEG, RRHI, ICT, DNL, PGOLD, VLL.
c.Value – these are stocks which are priced lower than their historical levels or just lower than their peers in the same segment, but are fundamentally sound . Examples are VLL, MEG, TA, MERB.
d. Cameo – analogous to cameo appearances which are quick in nature, cameo stocks are companies which are seen to be profitable in the short run.  Good example is BLOOM & MCP. These can move to rising category depending on their performance.
e. Mainstay – these are your dividend or income stocks. Examples are GLO, TEL,AP, AEV, SCC,DMC, so if you’re the person who wants to constantly receive passive/ fixed income, these are your stocks.

Mike also briefly discussed the Minsky Model and Theory of Reflexivity, which are theories on the financial markets.  I googled them and found them quite technical so I won’t discuss them in detail here.

Presently, I’m more of an investor than a trader and that’s why I really liked Mike Oyson’s input.  I’d also like to have a mix of “play” money someday, when I already have a strong base to do technical analysis, but till then I’ll continue to buy stocks that are fundamentally sound, those which allow me to sleep well at night as Marvin Germo put it.