A Day Trading Experience

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It's Labor Day here in Guam and I had a chance again to day trade. 

source: http://www.borsereview.com

Since my location has a two hour time difference(Guam is ahead by 2 hours from Philippine time) I get to enjoy two things when day trading: One I have a two hours to place my orders and second I have up to 5:00 pm here to trade.

To day I am finally able to sell my TEL for a profit(not so much though but hey profit is profit). I was also able to sell some stocks that kinda just taking precious value in my portfolio so I just disposed some at a few gains. 

I usually do my orders the night before or if time does not permit over the weekend where I have time to analyze the stock I wanted to buy or sell. The extended trading in the Philippine Stock Exchange does help a lot specially for overseas Filipinos who do trade in the local exchange. Some use other online brokers who might be based in the location  the likes of E*TRADE and Interactive Brokers.

To all OFWs and foreigners who do invest in the Philippines thank you and kudos to us, lets keep on investing in the Philippines. 

P.S. 

To help you start in your investing check out my e-book Investing in Stocks at Learn How To Invest In The Philippine Stock Market

PSEi composition changes

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Was browsing the Philippine Stock Exchange website when I spotted this  memo.

A new 30 company composition will be effective come September 10, 2012. Memo number CN - No. 2012-0045 (click here to read full detail) listed the follwing 30 stocks to make up the PSEi. 

Base on the above memo such new list is based on the following criteria:

1. Free float level of at least 12%
2. Trading liquidity must be among the top 25% by median daily value per month for at least 9 out of 12 moths
3. Top 30 based on full market capitalization 

Of the current list Cebu Pacific(CEB) will be taken out and Petron Corporation(PCOR) will make its entry.

Are You Still Lost at the Stock Investing/Trading Craze in the Philippines? Check this Infographic

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Was searching the web for good content and it led me to this infographic by mint.com

It explains the basics of investing and even a history where did all this crazy stories I am writing about. Check it out and start learning, eventually you will surely jump in and be an investor in the Philippines by buying and selling shares in the Philippine Stock Exchange.

Weakening the weak

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source: www.money.cnn.com

If you are reading The Millionaire Next Door by Thomas Stanley and William Danko(I am in the last few pages) this phrase might be familiar to you.

http://www.fotosearch.com

The chapter that brought out this phrase is about outpatient care of adult children of the affluent. Back in the Philippines if one is born rich or with a silver spoon we say they are lucky. The fact is there are a few lucky born rich kids who are able to stand on their own. Most would likely be under the roof of their parents even after they finish graduate school. 

Weakening the weak means instead of strengthening somebody by helping out by way of shouldering their first rental by the time they live on their own or continually giving money even if they already have their own family they instead grow dependent on that support which they expect to come. It is like your mother giving you money even if you are already working thus it creates that thinking of yours that it is okay to not save up because financial help is always accessible.

For those who are still confused about the Stock Market

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source: http://thedailydigi.com

While searching the internet with the help of our friendly Google.com I came upon this slide from our very helpful guys in the PSE.com.ph.

Please check it out and you might gain a clearer understanding of the Stock Market.

PSE Lec2

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Citiseconline Platform 2: Off-hour ordering

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source: http://www.ibf.org.uk/2009/08/about-online-trading/

I have decided to show the Off-hour ordering since the usual ordering is the same as this one only that this order is placed during off hours before the pre-opening and after the run-off time as per PSE time trading hours.

Off-hour ordering allows investors who are in a different time zone to place their order in advance. Such order are queued and will be automatically placed in the system at the opening of the trading at PSE.

For our example below I have use JFC(Jollibee Food Corp.) for our Off-hour ordering:

Log in to your account and click the TRADE/PORTFOLIO tab and click OFF-HOUR ORDER

Enter the the stock you are buying or selling in the field STOCK CODE

Enter the number of shares you wanted to buy and the price you wanted to purchased the said stock. If you look at the other two boxes in the side you will noticed that quotes for the same stock is shown. On the BID ASK box you will notice that there is a size and price column. These columns indicate the number of shares being ordered or being sold with the corresponding price these investors are willing to trade.

At the same time be mindful that the bid or ask price is not limited to the listed prices in the first box. With the new trading system there could be more than three fluctuation as long as it is within the two threshold set by PSE as per the implementing rules and regulation. To know more about the Static and Dynamic threshold you can read my post here. 

You can refer to the other box for other information you need to determine at what price and quantity you can order or sell. But again such decisions entails other factors which will be discussed on other topics.

After entering desired price and quantity you can preview your order details. In the preview below you can see the details of charges and total purchased cost or proceed before continuing your order. Be sure to check the total purchased or proceed before confirming your order. Sometimes you may not have enough funds to support the purchased or your proceeds might be below your cost thus leading you to loss. 

Type in your password and click PLACE BUY ORDER(or SELL if selling) to confirm your order or CANCEL ORDER to cancel which will bring you back to the order section and make revision.

After approving your order the window below will pop out as a confirmation of your order.

To view your orders and still make changes you can go to the OFF-HOURS VIEW/CANCEL(for regular ordering you can go to the VIEW/MODIFY ORDER)

Analyzing two companies of the same industry

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source:http://getyourbizsavvy.com/

 

The best way to determine whether one company is better than the other is by comparing one to another company of the same industry.

For illustration purposes lets look at ABS and GMA7, Philippines top channels.

ABS   GMA7  Closing Price 08/06/2010             45.30           5.95 EPS               2.23           0.58 P/E %             20.36         10.26 52 week range  25.50-45.30   5.60-8.80  Par               1.00           1.00 2009 Income  1.7B   2.8B  Board Lot           100.00       100.00

Based on the data above one can make decision which stock to buy.

If you look at the two there is a huge difference in the price. Higher EPS indicates two things, one is that the other company has a bigger net income and the other company may have a smaller number of shares outstanding. As you compare GMA7 has a higher net income than ABS but ABS has higher EPS meaning ABS has a smaller number of shareholders...meaning the income is shared by a smaller number of people. P/E % of ABS is higher than GMA7 which might indicate that more people have confidence in ABS but it also means because of this confidence level ABS might be overpriced as compared to GMA7.  With these bits of info one can decide which to invest in. One pointer is that both companies are doing well... both has a high P/E %, Price range is wide meaning catching either stock at its lowest could possible go up again to that high level giving you profit when the timing is right. The only decision point now will be how much free money can you put in. If you have a limited fund GMA7 might be a better stock to buy but if funds are handy go for ABS. Again the above simple analysis are just sample analysis. Every person has his own way of looking at the data. Others rely on Technical Analysis which is a price change based analysis which is studying the price trend and looking at the buy and sell indicators.

What is P/E ratio?

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 source: http://www.tradingcritic.com/

Here is another important Fundamental analysis that one can use in gauging a stock.

Price earnings ratio or commonly known as P/E ratio is a valuation ratio. A simple computation is dividing the market price per share by EPS per share or dividing market capitalization by net income. P/E ratio is an indicative of how the market or investors value the stock. A higher P/E ratio means the investing market is willing to pay for such stock that number of times for its earnings. It indicates that the perceived expectation of the market is that the company will perform well thus they are willing to pay more for it.

Knowing the P/E ratio gives you two information when you use it to compare stock buys. Stocks with higher P/E ratio are stocks that are probably believed by the market as profitable in the long run and the second is if comparing stocks with the same level it indicates which stock is overpriced.

For example Company A has a P/E ratio of 18 while Company B has 6, this indicates that Company A is perceived by the market as having more profit generating capability than Company B. But upon looking closely when such two companies have the same EPS it only means that Company A is over priced as compared to company B.

PSE website: Company Stock Information Part 3

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Let's go back to China Bank's Stock information page.

Click on the Corporate Information link to learn more about the company you are interested. The link gives you a page full of information regarding the company like when did this company incorporated, contact information, the company's website, latest disclosures and reports submitted to SEC and PSE and much more.

Click the links inside this page. Use right click and chose open in new tab so that you can always go back to the same page that contains the Corporate information.

Some terminologies worth noting: Par Value, Book Value, Market Value

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I know nobody likes the technical stuff specially in investing but one has to familiarize oneself to understand the business lingo, remember one must increase their financial I.Q. because information gives one an edge when it comes to investing. So First lets define these terms(some I will barrow from somewhere else to be clear).

Par Value: The nominal monetary amount assigned to a security by the issuer.

Simply put it is the peso amount that is setup by the company for their shares of stock. For example Company X is incorporated and that the shares of stock are assigned a par value of Php 1.00 per stock. Some companies has a no-par value stock. Having a par value helps the company have an exact measure of their capitalization because such things must be recorded. In some instances when the stock is first issued by the company a stockholder may invest more than the setup par value which results into a over-payment. In practice this is not recorded as gain but rather it is an additional capital recorded as additional paid in capital.

Ok ok I know it's to technical. The question now is that why do you as an investor need to know what is PAR Value. Well as I said it is a measure. It will be a good reference when buying stock. Probably you will notice the importance of this term when you compare Par Value and Market Value for example take PLDT Stock(listed as TEL, go to www.pse.com.ph and type TEL in the Right top search named Symbol Lookup). When PLDT Stocks were first issued it was at Php 5.00 only but as of last Friday the Market value is at Php 2, 445.00. Now do you see what I mean.

Book Value: It is the current value of a stock as per company's books.

Ok let me put it this way, it is the net worth of the company per stock. Well what's the use of this value anyways you may ask. As I have discussed in my previous post it is important to note what a company's net worth is. Net worth implies that the company is either a company in good financial position or not. A negative net worth is called a deficit and when we say deficit it means the business owes more than owns more. The likelihood of that company going bankrupt is high thus one has to be on the look out. It also helps investors to determine if such stock is undervalued as compared to its current market price. For example stock of Company X has a market value of Php 25.00 but its book value is at Php 45.00. What does this mean? It simply means that the market sees a different value for the company and it is a indication for an investor to further analyze why such is happening given the strong standing of the stock.

Market Value: price as determined dynamically by buyers and sellers in an open market.

Simply said it is how anyone will buy the stock based on their perceived value of the stock. Let me give you an example. Back in my province some businessmen goes around the neighborhood and check the mango trees in our backyard. If they see that it has a lot of buds they predict that this tree will bear many mangoes in the near future and will ask the owner if they can "pakyaw" (not Manny Pacquiao) our tree. Price negotiations will run and soon an agreed price will be settled. The basis of such price is the current price of mango any sane person would ask or buy such product. Nobody will buy a mango for Php 20,000.00 per kilo but rather it would be in a range of Php 40-120 per kilo range depending on the demand and supply level. 

Market price is the price at which stocks are bought and sold. In the case of the Market price indicated in the PSE it is the last traded price which is called closing price. This is important because as I said it will be the basis of any sane investor. In the stock market, brokers will have their bid and ask values. As the course of trading happens this value changes depending who is willing to sell or buy at a certain price.

Who are Stockbrokers?

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First things first. One cannot directly invest in the stock market. One has to have a stockbroker accredited by SEC and PSE. The stockbroker's role is more like a middle man between the seller and buyer of a stock or other debt or equity investment. These persons or corporations need to be accredited by regulatory bodies like SEC and PSE to ensure that the trading of stocks are not fraudulent and in accordance to the rules set by laws.

Stock broking is a matter of trust and financial responsibility. The qualities and credentials of the broker needs to be investigated properly due to the fact that you, the investor, would be handing over hard earned money at the hands of the stockbroker. An ideal stockbroker should provide a clear schedule of investment and the know-how to the investor to build an investment portfolio gradually.

A good stockbroker has a definite plan and does research carefully. To take appropriate decisions about stock market investing is not for the chicken- hearted.(odd phrase) An ideal trader does not feel nervous about the losses. He is the master in money-management techniques. As they say you can be a millionaire in a second and a poor man as well. A good stockbroker do two analysis of stocks, Fundamental and Technical Analysis. The first is an analysis of the company's financial standing and performance based on financial statements and reports. This includes various ratio analysis and turnover analysis that measures the company's stability and profitability in the long run.

Technical analysis on the other hand deals more on the trend analysis of the stock. The market changes due to changing forces and also based on demand and supply. A company might have a good financial standing but the buying market has different feel about it thus the trend on this particular company's stock might be on the upside or the downside. Stock values changes rapidly depending on how many are interested to buy or how many are selling. Knowing the trend gives a stockbroker knowledge when to buy and when to sell stocks to get the best out of it.

The advent of technology has made investing simple. Online stockbrokers who are accredited by the PSE can execute one's order upon keying it online. Security wise these online brokers wont be granted license without showing their ability to secure the investors information. Click here to know some of PSE's online stock brokers.

How much do you have now?

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One question you may ask me "I don't have any money, how can I invest?"

The people today has this mentality problem. People's purchasing power is  reduced to their salary and that they have been practicing what most call "Scarcity Mentality". In simple language people believed they cannot buy or acquire things or afford things because they think they don't have anything and that they look at what they have right now as very small. There is a bad effect of Scarcity Mentality. Whenever there is a sale or there is free item that goes with the item they wanted to buy they jump on to purchase it thinking that they got a good deal. The tendency on this is that one becomes an impulsive buyer. There is nothing wrong in searching or buying specially when it is on sale only that this becomes a habit. One may think that when there is a sale he or she must buy. Wise buying is not always buying because it is on sale; in the end one ends to be broke and from there one may brand themselves as poor and thus your mind programs you that you don't have any money to invest.

Number one rule in investing is investigate. Never ever jump into something that you don't know. Today's world has many means of getting information. We have the internet and print media to learn about where to best put our money. Second is invest only your excess. Many people end up losing all they have because they have invested all they have on stocks then suddenly lost everything due to financial crisis. Always only invest your excess.

So the question still stands, how much do you have right now? Many people think that you need a lot of money to invest in stocks but that is not correct. If you look around and check the newspapers or the investment news channels like CNBC you will notice that stocks are in the range of less than a dollar or peso to hundreds or thousands. With this in mind one can buy stocks base on how that particular market's rules. Some are sold in board lot just like in the Philippine Stock exchange where board lots ranges from 10 - 1000 depending on the trading value. So for example a stock trading at Php 50.00 may have a board lot of 100 making the total required investment to be around Php 5,000.00 only. Off course you have to open an account with a broker which requires a deposit of around Php 25,000.00 and up depending on what acount you are opening.

With that in mind you can see how much you are saving. I know you will say I don't even have left after I pay my bills. The problem with us is that we contend ourselves with whatever is left on our salary, we our satisfy first bills rather than satisfying pocket. I suggest you do the reverse. It seems impossible but when there is a will there is a way. 

In order to do this one must first look at his spending habits. One must segregate what are needs and wants. By doing this one can identify which should be given priority. Do this on a daily basis. Everytime you pull your wallet to make a purchase think if it is a need or want. In the process you will be able to control how you spend on the need or want. Master this until it comes to the point that you will not spend for wants anymore and from there you can start building your savings. Make a note on your savings. Writing your savings entices you to save more. Then after making a considerable savings ask yourself again if how much do you have now. Remember the amounts a I gave you  that is Php 25,000.00 and the stock value ranges of Php 1.00 - 50.00. From here you can visualize how near you are and that you have a money to invest in stocks or any other investment

Why invest?

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That is the question one must ask herself or himself. Why invest?

The world is still in middle of the crisis brought about by the financial downturn in the US and the current debt problem of Greece. Bailouts and measures to ensure that economy keeps on rolling are being made in all parts of our world so that economies will have a sound standing to keep the money running. So why invest still amidst this terrifying news we hear day in day out?

As Bob Proctor said in his book "You were Born Rich" money must keep on rolling and as Robert Kiyosaki has re-iterated in his book "Increase your Financial I.Q." even though the value of money is going down we must not be stump and hoard all our money and keep it under our beds. Money itself loses its value and when we don't let it roll and grow by means of investing in 5 to 10 years your hard earned buck might be not be able to buy that gum you use to buy in the convenient store. 

Time has this magic that either makes things better or worse. So how will we combat this value losing mechanism? That is where investing goes. Many people think investing is investing in stock, but in reality there are so many ways to invest. You can invest in business or some others term it cashflow, in rental property, or in paper assets which are commonly in the form of stocks or bonds. 

Yes it is scary when we put our hard earned in the stock without you knowing how much will you get back in return. But that is only when you invest in stock for the short term. The stock market goes up or down depending on economic forces. It seems that you have a limited control over it; the thing is investing in stock is better down on long term. Most great investors call this dollar/peso averaging. It means that we don't look at the changes on a day to day basis but rather on a longer range let say 5 to 10 years. 

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