Outlook for stockmarket PSE index Stocks stockXchallenge

					Fundamental
Analysis

 “Find the Strongest Stocks”
  agilles@firstmetrosec.com.ph
“First-Rate
Companies”

 “Top-Tier
companies”

Select ONE.
 Positive
 Qualities.
Total Stock Market

The Index            Medium-
                      sized
 (“Best”)           Companies

Small firms         “Speculative”

Total PHIL STOCKS Market US$185bn
                                 Pct of
Country       Markt     Cap      World

Japan          3.48   trillion   7.40

China          3.04   trillion   6.40

Hong Kong      2.94   trillion   6.20

India          1.05   trillion   2.20

Australia      1.15   trillion   2.40

South Korea    974    billion    1.60
                                               185 bn
Taiwan         755    billion    1.00

Singapore      510    billion    0.86

Malaysia       403    billion    0.85

Indonesia      400    billion    0.65
                                 47 trillion
Thailand       306    billion    0.40
USA,Canada, Brazil,Mexico      19   trillion

EUROPE, Africa, ME              7   trillion

Asia Pacific                   15   trillion

Others                         6    trillion

World                          47   trillion

                            Hong Kong 2.94 trn
  Singapore 510 bn

    Thailand 306 bn
                            Philippines 185 bn
Technical or
    Fundamental
                   Decide.
   Analyze:

            Research
Study                    Charts
Scan…             Data
          80% chance, that Price goes UP   Invest 80K

   60% chance, that Price goes UP     Invest 60K


Trade
   40% chance, that Price goes UP      Watch and Wait.
                                       No trade.
Spotter to
Sniper: “Do
you have a
shot?”


                                           Decide.
                    Analyze:
                     Fundamental

     Analyze:


Determine if
IT “MIGHT” go up …                               Five
Or                                        Next   ??
                                                 Years

IT “WILL DEFINITELY” go up                ??
                                          Year
                                   Now
                                          ??
                                                 ??

                                         Profits
Analyze:       Technical


                           Determine if
                           IT “MIGHT” go up?

                     ?     Or
                           IT “WILL
                           DEFINITELY” go up

           ?
                     ?
  Price history
 Look at past? Or Forecast?


                ?
                            Profits
Mr. Technical       Mr. Fundamental
  Analysis              Analysis
Earnings
  Risk
Valuation
  Liquidity
 Sentiment
 Earnings per Share,
 in Pesos = “EPS”




                  7
  5      “EPS of 5 pesos”


Year 1          Year 2
                      70
             50
 Valuation            7
Earnings
               5
             Year 1   Year 2
              RISK
                      70
             50
 Valuation            7
Earnings
               5
             Year 1   Year 2
        Earnings
• Positives that "raise the price".
  economy --> growth
  opportunities / breakthroughs / good news.
• Growth in Earnings per Share. (EPS)
• Net profits or Cash flows.
“Earnings” push up
   stock prices
                       In response to the
                     profits & cash flows of
Share                 underlying company
Price
                       Moving up?
Cash
Flows                          Moving up?
                     Break
                     Even
  Net
income
                          Over Time
IF profits & cash flows
 INCREASE, then the
stock price moves up.     CHALLENGE for
                           “INVESTMENT
Share                       RESEARCH”
Price
                             Forecast
Cash
Flows                              Forecast
                          Break
                          Even
  Net
income
                             Over Time
Which has highest
EPS, for year 2?
                Korea
                                 EPS growth%
                                 EPSGROWTH %
             Thailand

             Malaysia                    EPS2009
                                       EPS Year 1
              Taiwan

            Singapore
                                       EPS Year 2
                                         EPS2008

           Philippines

           Hong Kong

                China

            Indonesia

                India

-10   -5                 0   5   10   15   20   25
Which has Lowest PER,
& highest EPS?
                                  Valuation
                                 EPS GROWTH %
      Telecoms

     Consumer
                                       EPS Year 1
                                      2009 EPS Growth
      Property                        2008 PER
                                       PER Year 1
 Conglomerates                            Earnings are
                                          affected by the
       Market                             Economy

       Utilities

         Banks


                   0   5   10   15   20        25           30
Econ. Growth Cycle
     Earnings are
     DRIVEN by
7%   the Economy
3%


 2000               2011 2012
                R i s k
Negatives that “pull down stock prices".
  Political problems --> hindrance
  Bad news / gridlock / stalemate.
Higher cost of doing business
  Commodity prices: Cost of Goods, raw materials
  Interest Rates: cost of borrowing
 CPI Inflation        Rice, Fuel

        Philippines
8%

3%

     2003                2013
 Interest Rates       More
        Philippines   Peaceful
11%

3%
     2000             2012
             Valuation
Is the market overpriced / underpriced.
  Price-Earnings Ratio 17x. (Fair..)
  Compared to historical: Not TOO high.
  Compared to rest of Asia: Same level.
This screen shows the Earnings per share of Philippine stocks,
growing 13% for 2013 and 12% for 2014, meaning that the estimates
for earnings are positive for the next two years, altho 2012 will be
down 28% over 2011.
A market is expensive,
when the stocks are near         Earnings in 2013
the UPPER LINE


                   Earnings in 2012



                                 A market is cheap,
   Earnings in 2011              when the stocks
                                 are near the
                                 LOWER LINE.


        2011               2012 2013
A market is expensive,
when the stocks are near         Earnings in 2013
the UPPER LINE
                            Expensive

                   Earnings in 2012
       Expensive             Cheap

                                 A market is cheap,
   Earnings in 2011              when the stocks
      Cheap                      are near the
                                 LOWER LINE.


        2011               2012 2013
                                  At the Current level of
 At high levels of PER,
 the market would be              PER, which is 17x
                                  earnings, the market is
 “overpriced”
                                  not “overpriced”




              High PER


                                     Low PER




Following that line of reasoning: Philippines is near the
MIDDLE of the RANGE, not the UPPER LINE (high PER).
The price moves
from “cheap” to      SELL              BUY
“expensive,” and
  cheap again.




                   BUY
                                Company
  BUY                         Earnings = net
                                   profits
The upper and lower lines are determined by the PROFITS
of the company, Times the range of Price-Earnings Ratio.
Lower price-earnings ratio =
   “relatively cheaper”
                                       Market’s
                                       PER



                        Stock’s PER
The stock has lower PER than the overall market.
The stock is cheaper than the overall market.
Lower price-earnings ratio =
   “relatively cheaper”
    Overall Market’s PER               Relatively
                                       Higher
                                       In the
    Energy Industry’s PER              Middle

    Energy Stock’s PER
                                       Relatively
                                       Lower

An Energy stock has lower PER than the overall
market, and lower PER than the other Energy
companies. The stock is “relatively cheaper.”
What is the High or Low “Range” of
price-earnings ratio, for this stock?

                       High of the range




                        Low of the range
Based on the
Stock’s Own History
                   GLOBE TeL        PLDT
 Price / Share       1,050          2,500
Earnings / Share      73             212
Price / Earnings
     Ratio
                    = 14x          = 12x
                               Lower “Price / Unit”


        PLDT gives you more
        “Earnings” for the “Price.”
    Which is cheaper
Can of fuel Same fuel
              Bigger Can


P50/Liter 200/5 Ltrs
 More        Cheaper,
 expensive   despite bigger
 per Liter   price tag
Earnings drive
  up share
    prices




                 Company Earnings = net profits
Price / EPS of   Price
                 Today
  this Year




                 This Next
                 year Year
                 Company Earnings = net profits
Which one is relatively cheaper?


A: Low           B: High
PER to           PER to
 2012             2012
             This
             year
Price / EPS of   Price
                 Today
 NEXT Year



                                 And
                 This       Next Next
                 Year       Year Year
                 Company Earnings = net profits
Which one is relatively cheaper?

                    B: Low
A: High             PER to
PER to               2013
 2013
             Next
             Year
                              Price
                              Today
Price / Trailing
12 Months’ EPS




                   Year 1 Year 2 Year 3
                    Company Earnings = net profits
                             Price
Price / Forward              Today
 12 Months’ EPS




                  Year 1 Year 2 Year 3
                   Company Earnings = net profits
            “Price-Earnings
 Price       Ratio to 2011”
 Today
                  Earnings
         Earnings in 2013
Earnings  in 2012
in 2011
  2011      2012      2013
             “Price-Earnings
 Price        Ratio to 2012”
 Today
                  Earnings
         Earnings in 2013
Earnings  in 2012
in 2011
  2011       2012                   2013
          *If you have forecasts available, use this
                                                “PER to
                                                 Trailing
                        Price
                                                 Twelve
                        Today                    Months”
“Trailing”
                      Earnings
             Earnings in 2013
    Earnings  in 2012
      in 2011
          2011                  2012                  2013
 *If you have ONLY DATA, NO forecasts available, use this
                                   “PER to
                                    Forward
             Price
                                    Twelve
             Today                  Months”
“Forward”
                    Earnings
           Earnings in 2013
  Earnings  in 2012
              *If you have forecasts available, use this
   in 2011
    2011         2012                   2013
Earnings
  Risk
Valuation
  Liquidity
 Sentiment
       Liquidity
Money flowing into the country
  (Weight of money. Like a wave.)
  Equity investments = factories.
  Portfolio investments = 2/3 stocks, 1/3 Tbills,
    bonds
  OFW money = consumer spending, real estate
Inflows: strong inflows peso appreciation
      Sentiment
 Are traders depressed…



or do they have a
Cheerful Outlook, and
Fighting Spirit.

				
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posted:9/27/2012
language:English
pages:48