Monday, September 29, 2008

PSE Stocks tumble

700B Bailout Plan Collapse, what do you think it does to my portfolio??

My Current Portfolio:
(64% of portfolio) MEG -2.76%
(28% of portfolio) SMDC +1.86%
(08% of portfolio) DGTL -19.85%

Check yesterday's stock position and you'll now. Asian and the Philippines stock market just tumbled.

All my watched stocks are in RED. Now what do I do?

I'm trying to buy more stock. Currently I have a bid on FLI and DGTL. Call me crazy, but I really believe that now is the best time to buy. It is like a mall midnight madness sale. Buy if you have money to burn!

We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.
-Warren Buffet

Now maybe you are curious on what is my fixation on property stocks. Hmm... let us see. Aside from property stocks, there's Financial, Holdings, Industrial, Mining and Oil and Services.

Let me discuss what I think of these types of stocks.

Banking Stocks - If you have not watched the Money Masters DVD yet, banks has the so called fractional reserved banking. What does this mean? For every bank, it only keeps a fraction of the depositor's cash liquid. This means if there are 10 depositors with 1,000 pesos each, only approx. 1,000 pesos is kept in the bank vault. This is done due to the so called GOS (Grade of Service). The probability of the 10 depositor's withdrawing all their money on the same day is only 10%. Now why would a bank keep 100% of the money, when they can keep 10% and load 90% for a 10% profit per annum. That is how banks actually make money. That's how Lehman Brothers Investment Bank, AIG and WAMU went belly up. The money they lend for a 10% interest, did not get paid. Thus, the bank's cash flow was trapped. They may have a lot of Accounts Receivables and other assets, but their Cash is tied to bad loans. Further, banks are in danger of bank runs (mass withdrawals). Notice metrobank is advertising in their ATM machines that they are not affected by the downfall of Lehman Brother's. A bank run is a bank's death.

Holdings - I don't really know how holding firms work in detail. But from my understanding, these are investment firms that buy shares of a company, real estate and other investments. Thus, holding firms are just investors. Correct me if I'm wrong, but basically buying in an investment firms just seems like getting a financial consultant that does the buying decisions for you. So the bottomline is that I don't put my money on stuff I don't fully understand.

Mining and Oil - Betting on mining companies is like betting on a toss coin. Mining companies (not all), tend to do a press release telling that they have a prospected drilling on some mountain that has reserves of some precious metal. Thus, mining and oil tend's to fluctuate violently and could make you tons of gains or losses.
Oil on the other hand is dificult to predict. Notice recently that when the prices of crude reaches $120+ per barrel, the prices of gasoline and diesel rose 3-5 pesos in a day. And when, the crude prices went down to less than $105 per barrel, the price of gasoline was the same or went down by just 1-2 pesos. So, it is hard to analyze!

Services - I don't know other stocks in these category aside from Globe, PLDT and Digitel. A telco is always a good buy. PLDT only reached its peak after 10-20 years. Globe on the other hand is on it's way. Digitel, is relatively a very new company. Sun Cellular just started operation on the year 2000 (approx.). Thus, since PLDT is expensive currently at 2,640. You need 26,400 just to buy 10 shares. GLO is at 1,005. So you'll need 10,005 to get in the game. Now why DGTL? Well DGTL is a long shot currently trading at 1.32. So this is my low risk high gain speculation pick. I'm planning to buy just 10,000 shares of this company hoping that someday in the near DECADE, it will rise to at least 500 per share. Now imagine buying 13,200 will make you 5,000,000. So this is a BUY and HOLD stock.

Property Stocks - Ahh my favorite. Why property stock and why MEG, SMDC and FLI. Ok property companies are those companies that you do not need to see their Financial Statements to know that they are doing well. How much does it cost to build a Condo, or a subdivision? Maybe they loaned from a bank, but you all know that banks does not easily loan you money if they know you are unable to pay. So the more building's I see developed by a certian company, the more I am confident that they are making money. Ok now why MEG, SMDC, FLI?

MEG - MEG is the next ALI. Ali is too expensive and they are only catering to the top 5% of the population. Only rich idiots buy Condo's in Serendra for 4M for a 2 bedroom unit. Well, only stupid people or people working in office in the FORT buy's condo there. ALI is way overpriced and MEG is targeting the upper middle class. Although there are some complaints about the finishing of MEG units (i.e. leaks etc), but majority are happy with what they have. Thus, MEG since it's the next ALI. ALI actually sold some of their Condo Buildings to MEG. Just to liquidate some of their assets. Further, like their condo units or their housing, ALI is actually overpriced too, currently selling 9.20 at 14 P/E ratio. Compared to MEG's 1.36 at 8.94 P/E ratio. So buy MEG its a frickin bargain! One more thing. Currently BDO just bought majority of MEG's receivables making MEG liquid. So watch out for that.

FLI - From my perspective, most of Condo buyer's are either yuppies with money, Filipino-Americans, Rich people from the province or DOM's love nest. That's the trend now, but sooner or sooner, most of these type of people want to settle down and buy a house with a backyard. Where their kids can run around chased by their dog. Or in the case of DOMs when their wife die, that's where his mistress' kids run around chasing their dog, turtle or cat. So again, FLI is a mid-priced real estated (mostly town homes and house and lots), and I am speculating that after people get tired of their condo, they are going to buy a house from FLI. ALI is still way overpriced. FLI currently at 0.62

SMDC - Well SMDC is like MEG. Except its run by Henry Sy (that everything he touches turns to gold), this maybe even better managed than MEG. SMDC, is also targeted for Lower-Middle market. A friend of mine who is a broker for SMDC told me that there's a plan to build a condo at the back of SM North Edsa that would just cost 7,000 pesos a month for a studio type. However, it will be constructed on 2014. So you see that its targeted to the Lower-Middle class.

So that's it! Maybe I'll talk about Financial Statements, Balance Sheet and the most important item Price / Earnings ratio on my next journal entry.

I just got FLI at 0.62.
I cancelled my DGTL order, instead placed a bid on SMB for 10.75.

Sunday, September 28, 2008

First Pick

I just started trading stocks on PSE a couple of months ago. A lot of my friends discouraged me from investing (betting) in the stock market as I will have more chances of winning if I play poker or play black jack.

Well from my point of view, it is actually like poker, it is still gambling but you have a chance of winning once you get to know the game and the players.

Like poker, betting in the stock market requires risk taking, reading the players (other traders), some basic analysis and luck.

Here are the stuff I read and watched to give me at least a background on how to play.

A Random Walk down Wallstreet

Investing for Dummies

The Money Masters

Boiler Room

I know, I know you might say, "what? but those are references that are based in the US Market. And a Movie?!?!"

Well, the movie Boiler Room is about what not to do in the stock market. And the others are not about the Philippines Market, but I think that the game remains the same only different players. (Although in PSE, there's no way to short a stock or buy options. Not that I know of)

Also, whatever happens in the US Market has a direct impact in our market. Just like what happens to AIG, a lot of traders in PSE sold their shares at a loss on that single day. Of course I did not sell, I just wondered what's with those people selling stocks at a loss.

Anyways, I'll continue to share my experiences with trading in PSE, and maybe improve my writing skills on the process too.

My Current Portfolio:
(64% of portfolio) MEG +5.94%
(28% of portfolio) SMDC +1.86%
(08% of portfolio) DGTL -17.38%

My Buy List: