investing in the stock market new
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www.citiseconline.com
Presented by:
Juan G. Barredo
Vice President
CitisecOnline.com Inc.
Investing in the Stock Market Today
CitisecOnlinePresents
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CitisecOnline: Who we are?
Building of Wealth
How to Pick Stocks
Timing your Investments
Powering up with Online Trading
Outline
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Who We Are
CitisecOnline is the leading innovator inonline stock trading in the Philippines
Established in 1999, actively trading onlinesince 2001
Managed by professionals in the financialand information technology industries
Capitalized at over Php400 Million:
-Listed in the PSE in July 2006
Also a member of the HK Exchanges (HKEx)
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PART ONE
Building of Wealth
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How to double your money?
To figure out how much you need to earneach year compounded annually to makeyour money double, divide 72 by thenumber of years you plan to double it at:
3 years = 24.0%
4 years = 18.0%
5 years = 14.4%
6 years = 12.0%
The Rule of 72!
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Interest Rates
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
18.00
20.00
22.00
1993199419951996199719981999200020012002200320042005200620072008
Interest Rates (91-day T-Bill)
Rates have come from 20 Year Lows!
%
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Capital Market
Investment
Jobs =
Income
Savings
Natural Resources
Processing
Manufacturing
Economic Expansion
Pension
Funds
Real
Estate
Insurance
Policies
Savings
Accounts
Bonds
Stocks
Capital
Market
Various Instruments
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Like any market, it is a place where peopleconverge to buy and sell.
Instead of actual goods, shares of public
corporations (or Stocks) are what you buy andsell.
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 firsttime a company sells its shares to the public toraise cash
High demand for shares is what makes pricesmove up; low or no demand makes it subside.
The Stock MarketMarket Dynamics
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What is a Share of Stock?
Part ownership of a company
Shareholders make money through:
*Capital AppreciationThe increase in market price of
a stock driven by investordemand for a companys
shares
*Dividends(Cash & Stock)
A distribution of a portion of acompanys earnings handed
in cash or shares
The Stock Market
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Earning Dividends
Profit sharing with shareholders made either in Cash,Stock or a combination of both.
Cash DividendMoney givenback to theinvestor as hisshare of distributedprofits.
Ex. Cash div of20/share: if I had1000 shares, Iwould get P200.
Stock DividendAdditional sharesgiven to theshareholder.
Ex. Stock div of
20%: if I had 1000shares, I would get200 additional shares;share price will adjustdown by: price / 1.2
The Stock Market
Dividend DatesEx-Date the cut off pointfor dividend entitlement is aday before this date (youmust be a shareholder as of
the day previous to this date) Date Payable the daywhen the dividend is given toshareholder (usually amonth after the Ex-date)
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Investing your money into solid growing companies potentiallyoffer better returns over savings instruments and inflation
The Stock Market
History has proventhat investing instocks, provides
greater returns thanmost investors can
earn through
guaranteed savings;plus gives a good
run over inflation
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PART TWO
How to Pick Stocks
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What is Price?
PRICE
That determined by Actual Value or the real value towhich a stock can be said to be worth.
That determined by Market Value or that valuedetermined by market forces (demand and supply),also known as the market price.
The study of these two prices craft the two major sciencesin market analysis:
Fundamental Analysis (studies Actual Value) Technical Analysis (studies Market Value or Price)
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Fundamental Analysis Study of Actual (Fair) Value:
Fundamental Analysisis a technique thatattempts to determine a companys value by
focusing on underlying factors that affect itsbusiness, earnings and prospects.
Look for companies that show:
1)Value = Look for cheaply priced stocks
2)Earnings Growth = Look for companies whoseprofitability is increasing or accelerating if not adequatelymaintained
Remember: What you dont know you dont touch!
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Economic Analysis Look into the Macro View; examine
your economic surroundings. Industry Analysis
Break it up into industry sectors,then look for the norm and evaluateoutperformers.
Company Analysis Filter out the Best options by
comparing company performances.
Top-Down ApproachFundamental Analysis
Quality is neveran accident; it isalways the resultof high intention,
genuine effort,intelligent
direction, andskillful
execution.
William A. Foster
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The EconomyFundamental Analysis
2004 2005 2006 2007
GDP Growth (%) 6.00 5.10 5.50 7.10
Ave 91-day T-Bill Rate (%) 7.30 6.40 4.89 3.4
Inflation (%) 6.0 6.9% 5.0% 2.8
Real interest Rate (%) 1.30 (0.50) (0.11) 0.60
EOY Forex (Php/$) 56.26 53.06 49.13 41.401
Budget Deficit (US$ Bil) (187.10) (146.50) (62.2) (9.4)
Source: NSO, BSP
2008
5.56.3
12.2
(5.90)
44(51.6)
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Fundamental Analysis
Growth Stage of Philippine Industries
Industry View
Consumer
Media
Mining
Power
Utilities
BPOs
Banks
Telcos
Manufacturing
Property
Infrastructure
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Industrial ViewMakati (Manila) CBD Commercial Lot Prices
Pesos / Square Meter (2007 projection)
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
450,000
500,000
85 87 89 91 93 95 97 99
2001
2003
2005
2007
Fundamental Analysis
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Banks Non Performing Loans (%)
0
2
4
6
8
10
12
14
16
18
91 92 93 94 95 96 97 98 99 '01 '02 '03 '04 '05 '06 '07 '08
Industrial ViewFundamental Analysis
*as of mid 2008
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Look at a companys ability to GROW!Monitor Earnings Growth (Increase in Net Incomeor its Earningsper 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
Fundamental Analysis A Companys Tale
Energy
Water
Construction
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Fundamental Analysis The Tale of the Tape
Stock ABC P6.10 Stock XYZ P0.86
2005 2006 2007 2005 2006 2007
RecurringEarnings (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%
Which would you invest in?
Fair Market Value P16.50 (170.5%) P2.10 (144.2%)
* Sold new shares (dilution)
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Fundamental Analysis ALI vs MEG: Winner is?
A
BC
XYZ
9.90(+62.3%)
1.20
(+39.5%)
13.75(+38.8%)
1.56(+30%)
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Looking for Value What creates / destroys value
Positive impact to price:
1. Growth in Income/Value
2. Prospective Story forbusiness expansion
3. Buyouts
4. Worthy Dividends
Negative impact to price:
1. Deterioration in Growth ofIncome/Value or a loss
2. No Story, no dividends, nonothing
3. Uncontrollable debts
4. Inefficiency / poorperformance
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PART THREE
Timing your Investments
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Two Investor Styles Choose your fancy
Cost Averaging Make steady
investments throughtimePassive
Technical Analysis Time market swingsto provide entry andexit strategies
Active
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Passive Investor Passive: The easy way through
Utilizes the methodologyof cost averaging
Keeps investors gearedfor the long haul
No need to worry abouttiming the market
We help in choosinggreat stock picks
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Cost Averaging Passive: The easy way through
Cost averagingis a technique designed to reducemarket risk through the systematic purchase ofsecurities at predetermined intervals and set amounts
Month 1
Buy P5,000 worthof stock ABC atmarket price
Month 2
Buy P5,000 worth
of stock ABC atmarket price
Month 3
Buy P5,000 worthof stock ABC atmarket price
Buy fewer shares when prices are higher
Buy more shares when prices are lower
6
5
4
3
P5,000 willonly buy lessshares here
P5,000 canbuy more
shares here
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Cost Averaging Does it work? Well let history tell
Top of aBull Market
of Bull
Basket:
AC,BPI,
MBT,
SMC
TEL
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Cost Averaging Does it work? Well let history tell
Beginningof a BullMarket Basket:
AC,BPI,
MBT,
SMC
TEL
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Cost Averaging Passive: The easy way through
Our Premium Growth Stock GEMSS:G- Growing industryE - Earnings visibilityM - Management credibilityS - Superior productsS - Strong balance sheet
0.0%
200.0%
400.0%
600.0%
800.0%
1000.0%
1200.0%
1400.0%
1600.0%
1800.0%
2000.0%
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
Inflation JFC TEL ALI BPI MWC
Selected Premium Growth Stocks versusInflation 1990-2008
TOP 5
1) Jollibee -JFC
2) PLT - TEL
3) Ayala Land - ALI
4) Bank of Phil Islands - BPI
5) Manila Water - MWC
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Active Investor
Technical Analysisis the study of market action(market price), primarily through the use of chartsfor the purpose of forecasting future price trends
-- John J. Murphy Technical Analysis of Financial Markets
Active: Lets do some work
PriceAction
StudyCharts
SpotTrends
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The Graphic AdvantageTechnical Analysis
Stock: A B
The Firsttraded pricefor the day
The Lowestprice of theday
The Highestprice of the
day
The Final orLast traded
price for theday
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0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
450,000
500,000
91 92 93 94 95 96 97 98 99
2000
2001
2002
2003
2004
2005
Land prices andAyala Land
Technical Analysis TOP
BOTTOM
Who toppedout first?
Why?
Market moves aheadas people act inanticipation of change.
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TRENDS
UP TREND
Higher Highs andHigher Lows
Trendlines drawn byconnecting lows.
DOWN TREND
Lower Highs andLower Lows
Trendlines drawn byconnecting highs.
NO TREND
Sideways shift/Consolidation
Prices mustbreakout to re-trend
Trends & ConsolidationsTechnical Analysis
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Our Roadmap
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The Market TodayOur Map
PSEi
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PART FOUR
Powering up withOnline Trading
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Online Needs
CitisecOnline Provides:
Direct execution and Off Hours OrderPlacement
Live quotes and market statistics Live portfolio monitoring
Research studies and Seminars
Charting tools
24/7 online service
Customer Service
Best commission rates
All at the Palm of your hands
Get started?
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Stock Browsing Do your Homework
*Target Price = Estimated Fair Market Value BUY (Upside) SELL (Downside)
1 >16% 1 >16%
2 9%-16% 2 9%-16%
3 < 9% 3 < 9%
COL Rating:
BUY Good and solid fundamentals
SELL Unexciting or poor fundamentals
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Stock Browsing Get a Quote!
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Stock Browsing Examine its Trend!
Try our JAVA CHARTS!
What is the current trend?
Bullish or Bearish?
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Stock Browsing Assess your Risk vs Reward
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!
(Try to maintain a 1:3+ ratio)
Risk
Reward
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Buy / Sell How to Execute an Order
Term:
ATO at the opening
GTC- good till cancelled
ATC- at the close
EIP Easy Investment ProgMEG
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
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Buy / Sell Monitor your Portfolio
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Stock Browsing Reassess your Risk vs Reward
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!
BUY-2MEG
2.90
2.60
11.53%
Risk
Reward
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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 RewardTrade active stocks; avoid thinly traded issuesDo not overdiversify, concentrate on a few well
selected stocks (3-5 issues) Remember: Plan your trade and trade the plan(discipline = success)
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1. The building of Wealth
2. The Stock Market Option
3. Understanding Price
4. Choosing Fundamentally GoodStocks
5. Passive or Active Investor
6. Plan your trade trade the plan(discipline = success)
Summary
Knowledge born from actual
experience is the answer to whyone profits; lack of it is the reason
one loses
- Gerald M. Loeb
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www.citiseconline.com
Thank you and havegreat day!
To learn more about COLs Easy InvestmentProgram or know more about our services and
seminars please visit our website atwww.citiseconline.com or call our customer hotline
at 6-333-777
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