Insider Trading Calata

A few months back, I posted what I thought about Calata and how I do not like the people who owns and run it. The majority holders are speculators and politicians who I do not trust.

In its complaint affidavit filed with the Department of Justice on Tuesday, the SEC, through its Enforcement and Prosecution Department, identified the respondents as Zandro Jose Zulueta, Michael Ilustre Angeles, Carmelo Dela Cruz Bunag, Arnold Ryan Daquiz Dellosa, Richie Ramille Isip, Arnold Daquiz Martin, Gary Lincoln Calixtro Taboso, Dennis Philippe Valencia Vistan, Juvy Ocampo, Glaizel Eco, King Bryan Sulit, Alvin Morfe and Sheryl Sia.

source: http://www.interaksyon.com/business/49157/sec-sues-ceo-of-calatas-financial-advisor-12-other-insiders-for-stock-price-manipulation

If you were one of those IPO investors, you did made a lot of money. But because the insider traders did that to make themselves rich, the same amount of money was lost by other people. Its a zero sum game. They managed to pocket P216,054,949.65. And the sad thing is the fine can only amount to P5million at max. I trust the PSE to do appropriate action on this. But I really doubt if the inside traders would be jailed. There are a lot of rich and powerful people behind this and people who have position in politics. This is a test if we could really trust our stock market.

Invest in Companies with Management You Trust

This post is exactly why I wouldn't buy stocks with managers in which I don't trust.

Its exactly the reason why I sold all my shares of Puregold and Tanduay.

I sold my Puregold shares because I don't like the managers raining themselves with lucrative options and bonuses. I sold all my Tanduay shares when Lucio Tan bought it because, honestly, I can't find myself to trust his decisions for minority shareholders.

Another same situation was with Metro Pacific who were delisted. The only one profiting from that delisting is the owner and the majority holders. They delisted it in time before the dividend payouts so the majority of the profits will go to the majority holders. What can you do?

No one is going to handle your money and think of it more than you. People have motives and their own personal goal. Tycoons may be rich and you want to have a piece of their success, but their success doesn't necessarily equate to yours. There are still a lot of companies in the Philippines that I admire. Where managers think of the minority investors as if they are also an owner. And those companies, even though but a few, are worth the investments for a lifetime.

Ayala Corp Bonds FAILED

Well, my banker called me and said that the Ayala Corporate bonds are already fully availed. Well that sucks, they are still advertising it on banks but the allocation are already full.

How to Invest in Stocks

How do I invest in stocks? How do you make money in the stock market?

This is probably the first question asked when someone in your inner circle knew that you're into investing. As if its surrounded with an aura of amazement when they realized that you're making most of your income from it. Investing in the stock market have its reputation to be risky, only for the intelligent and lucrative endeavor.

This is also what I thought when I first learned about the stock market. Its risky and I don't want to "gamble" my money in the stock market. Many people killed themselves because they lost their hard earned savings in the stock market. But like anything in this world, anything you thought of at first could be wrong once you make the effort to get to know it better.

I realized that investing in the stock market is fun and exciting. Looking thru the balance sheet of companies is like treasure hunting. Very different from what I used to think during college accounting subjects. Today, looking thru the balance sheet gives me excitement. Because you don't know if this is the company that would make you rich in the future.

To invest in the stock market is very easy. You just need to find a broker. A broker is a company or a person who is licensed to buy and sell shares of companies on your behalf in the stock market. They must be licensed because you don't know how many people gets scammed in this industry. There's a list of licensed brokers on the PSE website.

Once you found a broker, any decision you want to make, buy or sell shares, you have to tell this broker. Before, it used to be a person to person transaction and you have to phone your broker to buy or sell shares for you. But today, most brokers offer the ability to buy and sell shares on their own using an online platform. Which is very convenient indeed.

So, how do you make money in the stock market?

You make money when the share of the company you bought appreciates in value. As an example, DMCI, a publicly listed company in the Philippines, used to trade at P0.50, ten years ago. Today, they trade at around P50.00. If you have P100,000 invested in DMCI 10 years ago, today, your money is now worth P10,000,000. Yes. That is P10 million pesos. A worthy amount to retire.

Dividend Income P21,915.00

Just received a dividend income. Net Amount (Php) : 21,915.00

Cashflow UP +P1,271.00 from Ayala Corporate Bonds

Potentially... Just this day, I reserved a slot to avail the 7 year corporate bonds offered by Ayala. If I will get the slot, I will have an additional P1,271.00 cashflow (net). That would ramp up my current passive cashflow to P16,486.00. I'll get a confirmation by tomorrow. Let's see.

Remember the Things That Inspires You

In life, you will encounter road blocks, confidence shattering obstacles, bone crunching pain and sleep depreciating humiliation. But it is in our power and our responsibility to protect our confidence. Investing may be hard and sometimes you will have to sacrifice some things to meet your goal. But remember that you are doing it for a reason not for anyone but for yourself.

Religion will tell us to be self less. To think of others always. That is good if you are abundant that you can give out things without being detrimental to your health, financial health. But I think, a man who can not swim will also die saving someone drowning. No matter how much will power, kindness or bravery you have, you'll die without doing anything.

Think of your purpose. Make every action you do have a purpose. So you make a good use of your only limited and most precious resource -- time.

And during those times, you will encounter people that will bring you down. And you will have to leave behind some friends that are not anymore in line with your goal. It is time to move on. And maybe, you'll find that it is a lonely path because you are walking alone on the road less travelled.

Remember the things that inspires you. The things that makes your heart burn. A feeling of both love and anger. A feeling of passion.

Resume of an Investor

In a corporate world and for people who would want to climb the corporate ladder, we need resume to impress our bosses. I remember my first time writing my resume, that I struggle to write anything relevant just to fill in the space of the paper. Aside from educational background, that's about it for a new grad.

As you may have realized that during your college years that you are doomed to find a job if you graduated still trying hard to write your resume. You may have realized to have a part time job or do an internship just to fill in the void in the paper. This is a good thing and will ultimately give you an easier time than those students who just party their way to college.

Now that the corporate world is just a past for me. I realized that there are also things that I'm trying hard to write about. A resume of an investor is hard. In actuality, its writing your portfolio.

If you would draw a square in a piece of paper. This square will signify where you keep your money. It may be a bank, a safe, a piggy bank or a wallet. Then on the right side, draw or list down your expenses and all the things you want in life, car, house, a boat, travel.

Now, draw an arrow from the square to the expenses and other things you want in life. This signifies money coming out of your keep.

Seems easy right?

Now to sustain those expenses and things you want, you will need to have an income source. On the left of the square, draw your income sources. Draw your face or list your job title, for others, it could be a business and any side businesses you have..

Now draw an arrow from the income source to your square. This signifies money coming in to your keep and then out to be spent on expenses and luxuries.

As you might have imagine, the left side is where you want to focus on. And that is where I had a hard time drawing. A few years ago, I only have myself listed there as an income source. The money that I earn from my salary will sustain my expenses. But if I became sick. I'm not only sick, I'll also starve to death. Which is not good. This made me realize that I should build an income source that would sustain my expenses and all the luxuries I desire.

When starting out, this is the kind of diagram we will see:

But what we want to achieve is to be able to do the things we want without having to work. In that regard, I think focusing all our energy to build our assets should be our main priority. This is the kind of diagram that we must aim to strive.

I don't want to work my life thru retirement. I want to retire young, travel, enjoy life, experience joy with loved ones. I'm sure you also want the same. So if you are reading this blog post, you have to realize that every peso you earn should go to income generating investments that will help you retire early and sustain any lifestyle that you desire.

The Name's Bond

There are only 2 way to riches... Owning and Loaning... We have been discussing stocks for quite some time now, stocks are owning businesses. We now go to bonds which is loaning to businesses and in the most safest part to the government.

I've been contemplating the idea of buying more bonds than stocks. Right now, bonds are available for 6% - 7%. From Treasury to Corporate bonds. And I think that bonds are one of the best way to invest if you focus more on income.

Why bonds rock?

They are safe. The money you invested in bonds are safe whether the economy tanks or not. They provide income thru the interest payments.

Why bonds suck?

Because bonds are loans to corporation and government, your principal investment don't appreciate in value. You'll receive your money back in full once the bond matures.

Why I would buy bonds?

Because they provide income. I'm not interested much on capital gains (though it is good), I much prefer income. And since bonds provide good yields than stocks, I might buy more of these in the future to hit my goal.

Shady MVP

There's something shady about how MVP does business in the Philippines. I can't quite point it out. But there's really something fishy about where his business is going.

Desire to be Rich

Most of us desire to be rich. And we are constantly reminded of that fact when you open the television, talking to other people and even the youth preparing for his college. But contrary to what most people believe, desiring to be rich is but a wish. I think desiring to be rich is weak.

Desires should be strong and definite. General desires are but weak longings. For a man to wish to be rich is of little purpose. For a man to desire P1,000 pesos per month is a tangible desire which he can press to fulfillment. After he has backed his desire for P1,000 per month with strength of purpose to secure it, next, he can find similar ways to obtain P2,000 per month and then P4,000 and then later P100,000 per month and behold! He has become rich.

In learning to secure his one definite desire of P1,000 per month, he has trained himself to secure a much larger one. This is the process by which wealth is accumulated. First in small sums. Then in larger sums as the man becomes capable.

Desires must be simple and definite. They defeat their own purpose should they be too many, too confusing or beyond men's training to accomplish. Keep it simple and definite.

Warren Buffett's Rules to Investing

Puto!

Warren Buffett is arguably the world's greatest stock investor. He's also a bit of a philosopher. He pares down his investment ideas into simple, memorable sound bites. Do you know what his homespun sayings really mean? Does his philosophy hold up in today's difficult environment? Find out below.

"Rule No. 1: Never Lose Money. Rule No. 2: Never Forget Rule No. 1."

Buffett personally lost about $23 billion in the financial crisis of 2008, and his company, Berkshire Hathaway, lost its revered AAA ratings. So how can he tell us to never lose money?

He's referring to the mindset of a sensible investor. Don't be frivolous. Don't gamble. Don't go into an investment with a cavalier attitude that it's OK to lose. Be informed. Do your homework. Buffett invests only in companies he thoroughly researches and understands. He doesn't go into an investment prepared to lose, and neither should you.
Buffett believes the most important quality for an investor is temperament, not intellect. A successful investor doesn't focus on being with or against the crowd.

The stock market will swing up and down. But in good times and bad, Buffett stays focused on his goals. So should we. (This esteemed investor rarely changes his long-term investing strategy no matter what the market does.

"If The Business Does Well, the Stock Eventually Follows"

The Intelligent Investor by Benjamin Graham convinced Buffett that investing in a stock equates to owning a piece of the business. So when he searches for a stock to invest in, Buffett seeks out businesses that exhibit favorable long-term prospects. Does the company have a consistent operating history? Does it have a dominant business franchise? Is the business generating high and sustainable profit margins? If the company's share price is trading below expectations for its future growth, then it's a stock Buffett may want to own.

Buffett never buys anything unless he can write down his reasons why he'll pay a specific price per share for a particular company. Do you do the same?

"It's Far Better to Buy a Wonderful Company at a Fair Price Than a Fair Company at a Wonderful Price"

Buffett is a value investor who likes to buy quality stocks at rock-bottom prices. His real goal is to build more and more operating power for Berkshire Hathaway by owning stocks that will generate solid profits and capital appreciation for years to come. When the markets reeled during the recent financial crisis, Buffett was stockpiling great long-term investments by investing billions in names like General Electric and Goldman Sachs.

To pick stocks well, investors must set down criteria for uncovering good businesses, and stick to their discipline. You might, for example, seek companies that offer a durable product or service and also have solid operating earnings and the germ for future profits. You might establish a minimum market capitalization you're willing to accept, and a maximum P/E ratio or debt level. Finding the right company at the right price -- with a margin for safety against unknown market risk -- is the ultimate goal.

Remember, the price you pay for a stock isn't the same as the value you get. Successful investors know the difference.

"Our Favorite Holding Period Is Forever"

How long should you hold a stock? Buffett says if you don't feel comfortable owning a stock for 10 years, you shouldn't own it for 10 minutes. Even during the period he called the "Financial Pearl Harbor," Buffett loyally held on to the bulk of his portfolio.

Unless a company has suffered a sea change in prospects, such as impossible labor problems or product obsolescence, a long holding period will keep an investor from acting too human. That is, being too fearful or too greedy can cause investors to sell stocks at the bottom or buy at the peak -- and destroy portfolio appreciation for the long run.

You may think the recent financial meltdown changed things, but don't be fooled: those unfussy sayings from the Oracle of Omaha still RULE!

http://finance.yahoo.com/news/pf_article_108903.html

Cashflow - Income Generating Investments

Wealth like a tree, grows from a tiny seed. The first penny you save, is the seed from which your tree of wealth shall grow. The sooner you plant that seed, the sooner shall the tree grow. And the more faithfully you nourish and water that tree with consistent savings, the sooner may you bask in contentment beneath its shade.

Investing in cashflow could be boring at first. You don't quite feel its effect and its returns are not that exciting during the first years. Probably the next 10 years. Needless to say, the seedling is dependent on you. But if you take care that investment, like a tree, it will take care of you during your old age.

The 10% Rule on Everything

I would like to try the 10% Rule on a whole new level. Everytime I pass money around to use for savings and investments, I'll take 10% of it and keep it for myself.

For example, I have an imaginary P200,000 revenue from business and other income. I'll take 10% right off the bat before using the money to pay for expenses and investments.

200,000
- 20,000 <-- 10% goes to savings
-------------
P180,000

Now I'll pay my expenses and investments.

P180,000
-  36,000 - expenses
-  50,000 - investment on capital gains
-  50,000 - investment on cash flow
---------------
P 44,000

Wow. I still have P44,000 left to spare. I can use this money to anything I like, either to spend it on clothes, travel or re-invest it to make another cashflow. I'd rather spend it to enjoy life. Or I can put it on the savings and maybe build myself a sizable savings to buy myself a land. I look forward to buying my own property soon.

On Stocks

Here's I think the 10% rule would show its versatility. Once my stock declared a dividends and then paid me. I'll save 10% of the dividends (also after expense like tax), on cash position so I can build a fund of cash to either withdraw for my personal use or to take advantage of opportunities when it happens.

For example, right now I have P15,000 per month income on dividends, Thats around P180,000 a year. Let's use the annual dividends for computation as dividends are not really on schedule with per month, its usually on an annual basis.

P180,000
-  18,000 <-- 10% goes to cash position.
------------
P162,000 - reinvested to current holdings

I think by this way, I can still reinvest the money, but have a budget to spend on personal wants, enjoy life and not to over-save. Just remember the rule, keep 10% of everything that comes from earnings.

Goal Achieved! - P15,216 a month

As I type this with a growling stomach, I feel excited as I am now a step closer in building wealth. The book, richest man in babylon has always fascinated me. It is a way in which to get rich slowly and surely and being rich is inevitable once you follow the rules of Arkad.

That was my goal in the first place. To plant a humble "wealth tree" and become rich later in life. My wealth tree as of now is earning P15,216 a month. Right on spot on my goal for this year. Its not something to be excited about. But looking back a few years, I used to live on a salary of P9,000. This kind of passive income should make me financially free years ago.

Goal Update - P13,736.41 per month

I'm almost at my goal. The goal of achieving P15,000 per month passive income from stocks is almost at hand. Right now, my per month income from dividends is at P13,736.41. Almost there!

Joel Greenblatt - Modern Value Investor

Everybody knows Warren Buffett. Pffft! The old man that calls himself the Wizard of Omaha because of his uncanny ability to pick stocks and land himself on top of the richest man in the world list for years. But the thing is, value investing is not only for the wizard. Anyone who dedicate their life to this arcane magic will find themselves rich.

If it does work, why not everybody is doing it? But it does work! The good thing about it is that, it doesn't work all the time. You'll get 1 - 3 down years and then your portfolio will then skyrocket afterwards. Not many people can withstand that kind of drawdown. That is why not all people do it.

The main reason that it work is that, it doesn't work all the time.

Joel Greenblatt is the author of the book, "The Little Book That Beats the Market". He have a skill in explaining complex things like investing in companies to ordinary people. His book is actually made for his son in pre-school and was made sort of like a letter or guide for his son so when he grows up, he'll know what daddy does for a living.

I wish I had a dad that knows how to invest. I could have been traveling the world by now. But I'm not hating. I think its the journey to that million dollars is what makes it great.

Things You Should Know Before Investing in Mutual Funds

The Management Fees

Mutual fund companies (if you have read the prospectus) will charge in between 1.5% - 5% per annum for the management fee. With the current inflation rate of 3.8%, that means your money losses its value by 5.3% - 8.8% every year. So you will need to beat the benchmark by a lot in order for your money to fully work. 1.5% - 5% might not look like a lot. But if you plan to invest in the long term and saved up to P1M, that means you're giving away P80,000 per year to those managers. Who might not be even working (more on this to 2nd point)...  I personally, think that 5% is very expensive.. And to think that I have no control of my own money.

95% of Mutual Fund Managers Can't Beat The Index

The index, is the benchmark, the Philippine Composite Index. This is where all funds are compared on, to know if they did well or not. And most fund managers can't beat the index. 95% of them. So what's the reason for investing in mutual funds then? If I can buy the index itself and beat 95% of all the mutual fund managers. Best of all, I don't charge myself with 5.5% management fee every year.

So you might be thinking, "5% is good enough compensation for people who does all the work, researching companies and managing the money." Well, yeah... That is true. 5% is in fact very modest if it involves a lot of work. However, on to #3...

Copying the Index is FREE

So you want to beat 95% of all mutual fund managers. But then you don't have the knowledge like they have in choosing stocks, so you went ahead and gave them your money. The thing is, most managers are aware of the fact that they can't beat the index. So, they buy the index. But still, you get mediocre returns because you will never beat the index once the management fees took effect.

Now, you say that is a lot of work to create a portfolio that would mimic the index? How hard is googling "Philippine Composite Index"? You'll get a list of companies that's included in the index for free. All you need to to is buy all these companies and you have yourself an index fund. Without the hassle, without the management fees.

So if you think you can pick stocks better than an index, you should invest for full time. Until then, I would prefer to stay away from mutual funds. Especially if the reason to learning investing is to earn money, you only beat the purpose of the exercise, making other people handle your money.

Why You Should Think Before Listening to Experts

A friend of mine was recently introduced to finance. Me being experienced (if I may say so myself) and been investing for a couple of years. Tried to contain my excitement and laughter as he blabbers around the reason why the stock market will crash or will why it will sky rocket.

After the long monologue, I asked him. "Says who?". Who told you all this stuff? Why are you so confident on your prediction with the stock market? He said that the financial advisor in his company said so.

I don't want to speak bad words to people so I kept my mouth shut. In my point of view, if the market will crash or if it will sky rocket is irrelevant in finding great companies. Great companies will earn money whether the stock market will go down or up. Do not be tempted to think that you could make a lot of money in predicting the market. If there is one super power I would like to achieve in helping me investing, is that to have a lot of patience and sit still. Its a lot more difficult.

Dow Jones All Time High Since 2007

Its a great news. And that goes for our economy. The US and Philippine market seems to be correlated. And today, the market went up.

All Good News in the Philippine Stock Market

The news that the Philippines is going strong economically is great news. The bad news is, its late by 2 years. This kind of news should have hit mainstream media 2 years sooner. Right now, the market is just in a sideways motion.

I personally think that it will continue to go further up. Its just that, things need to go stall for a while. Especially if its going up for 2 years straight.

Are you making money in this market? You should. Its a bull market after all.

Tanduay Bought by Lucio Tan

I will have to say wow. I was invested in Tanduay because of its strong dividend payouts and consistency. But good news came and Lucio Tan bought majority of the shares, making Tanduay one of the biggest beverage conglomerate in the Philippines. My holdings went up by 400%.

But this week, they added additional shares. Which I do not like. So I went out to search for a better investment. But 400% is good for me.

Investing for Cash Flow vs Capital Gains

As I venture into stock investing in the Philippines, I realized a few things.

1. You can invest for cash flow for slow and steady returns or capital gains for fast & quick returns.
2. There's a lof of greedy businessmen and managers in the Philippines

I thought about it for a long time and though capital gain is very tempting and its what fuels liquidity and traders in the market, I realized that its better to invest in cash flow.

I like the steady stream of income from dividends instead of varying gains and losses each month. For one thing, its stressful and second, it takes a lot of my time. I like to never worry about if my holdings went up or down, but only concerned and happy about the checks that comes in every month.

I think, in the longer term, stock investing mainly for cash flow is more secure and fun. Because you get paid after you buy a stock for a lifetime.

Why Puregold Will Never Be Like Walmart

At first IPO of this great business model, I was excited. Finally, a Walmart - like business in the Philippines. Affordable retail and it might conquer the Philippines like that of Walmart. I bought as much as I can in this IPO and I just sold all of them a few weeks back. I made a hefty amount of profit but I am very disappointed that I have to sell. Here's the reason why...

When I bought into Puregold, the goal for me is to hold on to it forever. Judging by what Wamart accomplished, I see myself having a comfortable retirement just with this company. It did what Walmart did... Until now. Walmart is owned by a close knit family with a frugal tradition and will never do anything stupid for the business and that in turn will also translate to a positive shareholder / investor value. They will never pay themselves ridiculous amounts of bonuses. And that is where Puregold I think messed up.

I could forgive that Puregold expanded very rapidly, taking advantage of low interest rates, taking loans everywhere, building expansions, acquiring... I can forgive all that, although that alone is a red sign for me. You can not expand too fast or borrow money too fast. But the last draw was that, they decided to pay the managers large sums of money, devaluing shareholder's investments. That's the last draw. I'll take my money elsewhere. Too bad Puregold... You might go up once I sold. And that's good. I'm happy for you. But I can't trust you with your managers sucking all the money. I can't trust you now as a business partner.

Think About The Future, Are You Prepared?

While reading a book about personal finance, it came to me that I might not be as well prepared as I thought I'd be for my retirement. Come to think of it, I only think of myself when I retire and how much money I would need to live comfortably. I forgotten about my parents, they will be dependent on me as well.

As more and more Filipino parents depend on their children for financial support, I think its mandatory for each one of us to learn how to invest. And for future parents to think about the future of their kinds. Personally, I don't want to depend on my future kids to feed me on my old age. Though, I'm a little agitated because I need to support my parents, I think I have no choice.

For those of you reading this blog, don't let your future children support you financially. You will only drag them down to whatever they want to achieve in life. I know it sounds harsh but its the truth. I think its a dangerous cycle. You support your parents, then you don't have much money saved for old age, your parents die, you get old, your children becomes adult and they need to support you. Then your children will do the same thing for your grand children because they didn't saved much for retirement either because of you.

Puregold (PGOLD) and Greedy Managers

What would you feel if you went into a convenient store to buy a pack of cigarette for P100. Then after a while someone dressed in suit walked in and bought a pack for P75? What's even more insulting is that, he wants to buy your pack of cigarette for P75. And you have no choice when a gun is pointing at your head. Will you be pissed?

Of course... I'll totally be pissed. I bought the product at a regular price and someone dressed in a suit just walked in an bought at 25% discount? And he also wants to get what I bought, making me lose 25%.

This is what happens to PGOLD. I love this company... Used to... I think the business model is great. But the managers are sooooo greedy. I unloaded all my shares. I did plan to hold on it forever but I don't want to do business with greedy bastards like that.

When managers are awarded with stocks at discounted price. That price is shouldered by the common shareholders. When they bought the stocks you can see their portfolio already up by 25%. They can sell at anytime. 25% profit is already huge. But at the cost of diminishing the value of the shares kept by the common holders.

Puregold, I think you have a great business. But you're not a good business partner. Why make my investment less valuable just to pay your managers?

MVP to Buy GMA... Again?

GMA network, the home of showbiz personalities has been one of the few companies being eyed by the business tycoon Manny Pangilinan. As showbiz as its business, GMA have been denying the rumors that MVP is offering to buy the said company. Eventhough, MVP admits long before that he has been interested in doing so. You just can't get the showbiz out of showbiz people can you?

Now the question is, should I buy the company? I would love to buy GMA and I think its one of those companies that will be around for a few more years. Given that the Philippines is the lowest of all countries that have cable television, most people will resort to mass media / free tv. And this kind of company may flourish. But I would like to take the contradictory position on this. Internet TV and cable television is indeed better than mass tv. And I think it will be successful in the future, just give it a few more efforts to advertise.

Look at the status of tv today. You won't see anyone advertising cable tv not even on the newspaper. At this point, I would buy GMA, if I have extra money. But for me, I think that money is better placed on other companies. You may capitalize on the news though. When MVP buys a company, stock prices soars.

Henry Sy Up Stake on Atlas Consolidated Mining

Henry Sy upped his stake on top copper mining company in Asia, Atlas Consolidated Mining. Expressing confidence that the turnaround of the company is within its reach.

I think, the company is fundamentally sound. Except the past years when it almost got bankrupt. I think copper is more useful than gold. Another competitive advantage is that they have their own ports which minimizes the expenses in transportation. Third largest copper mining in the world. Tycoons are in its board.

Stocks Falling Down, Profit Taking, Buying Opportunity

Ha! This is the time I've been waiting for, stocks falling down. There are a lot of overvalued companies during the bull run and I just can't hide my happiness when the correction is finally happening. Traders can go lift their ego up by saying they are courageous, but I think, being courageous in a game that's almost a no-brainer is a little irrational. I think, risking to buy in and out of a stocks where the fundamentals are good but the price is falling is a good enough sign that you can make money.

Of course, I would prefer a recession over this time. But this is good enough to hand pick a few bargains or add to some positions. Dividend yields also increases due to a lot of stocks falling down. Its a good time for investors to do a search for a few stocks we could hold for a lifetime.

Rockwell Stock Introduction Thru Meralco Dividend

The hell is going on? I thought its a "profit taking" season. Well, it may very well be. But its a surprise to see a 3,300% increase in my portfolio because of Rockwell stocks soared after the introduction. I might hold this stock for a long time, not because it has flown to record highs, but because I love Ateneo, but because I think having a green 3,300% on a gain/loss field in my portfolio is a good enough reason for me to hold on to my other stocks. Thinking "Heck! I don't care if you went down -30% I have a 3,300% gain on Rockwell!

A Closer Look At Competitive Advantage

Let's take a closer look at the criteria of competitive advantage. As I often find myself investing in companies that I thought have a competitive advantage but don't.

Warren Buffett explains competitive advantage as something like a castle in which many people would like to take over. You want a wide mat and an able baron in that castle to avoid take over. Basing from that analogy we could conclude that competitive advantage is:

#1 - Having Able Managers

Great managers that thinks of the good of the company and its shareholders, major or minor. And does not indulge themselves with glamorous incentives and bonuses. Managers with great track record and with integrity and talent.

#2 - A Solid Product Brand

People will continue to buy a product that they love and care about. A brand that makes them think of quality like Hersheys chocolate rather than chocobot. Jollibee instead of a regular fried chicken and they will continue to pay for the premium just for that brand. Nike, Louis Vuiton  these are just shoes and bags, but people are willing to pay for the premium.

#3 - A Product that's Hard to Imitate

A product or service that is hard to copy. Examples are patents. Coca Cola, even with its competition Pepsi, still can't beat coke because it has a patent. And only coke can use that formula. That's why coke tastes different from pepsi and pop.

#4 - Advantage of Territory and Location

Example of such are businesses that rely on transporting their products. Cement factories, mining minerals etc. Most of their expenses are from logistics / delivery so no people would want to compete with a cement factory from Luzon that is based in Mindanao. Its just not a viable business as the expense from delivering the cement from Mindanao to Luzon will leave them bankrupt. Another example are ports.

#5 - Government Contract

Though with limited time, government contracts are great competitive advantage because its law that gives them the advantage and a limited time monopoly. Example for today are PPP. Though not for the long term, they are great investments for as long as the contract lasts.

#6 - Barriers of Entry

Industry that have big established players and needs a large capital are in this category. Telecom for example.

#7 - There's Something Depressing or Disgusting About the Industry

Example are funeral parlors, waste management and products that caters at human weakness like addiction and vices. Example are gambling, smoking, drinking and gaming. Not necessarily the most respected industry, but are the most profitable.

#8 - People will Need to Buy The Product / Service Consistently

Products that are engraved in each person's lives. Example are bathroom tissue, toothpaste, soap, razor shave, shaving cream etc.

Well, I hope I have listed them all. And I hope I could remember them before I buy another stock. Nobody wants to jump from one company to another. Keeping a tight portfolio, spread to just a few eggs that gives you consistent returns is the way to riches.

Calata IPO My Thoughts

There will be a new IPO coming soon. Its Calata. The distributor of many agricultural products and animal feeds. I personally know this company. Since I grew up in the same town where this company is based. And I also read the prospectus. And I didn't like what I see.

Let me tell you something though. Calata is partly owned by the Mayor of the town. A town in which he owns all the large businesses and franchises. He owns all the Jollibees, Chowking and other fastfood restaurants in town as soon as he took seat. Sounds familiar? He also rejects all business competition that would like to be established on his town. Since owning Jollibee, he rejected any business permit that would allow McDonalds to be built. You know what I mean? He's a kind of a dictator in some way and only cares about the money for himself. He monopolizes it.

Now let me tell you another thing, if you own a share of this company Calata, with majority stake by this government official. I hope and pray that you won't get the shorter end of the stick. Because the people owning the company is after only 1 thing. That is to make money for themselves and not for you, the shareholder. Though I love the company. I just don't trust the people running it.

The Great Extended Bull Market of The Philippines

So, how is the bull market treating you thus far? If you're still in the red with this great time for opportunity, maybe you should rethink your strategy. It is a great time to be investing, not jumping around from one stock to another. Great companies will continue to thrive and make money in this bull market. Don't make it hard for yourself. Let me ask you one thing:

If you're not making money in a bull market, what makes you think you can make money on a bear market?

Value Investing with Bill Ackman

Like a quality woman. You only want 1 that you can keep forever.

I am a trying hard to be full time stock investor with a lot of free time last night and started browsing. I thought I could read some more materials about stock investing and to get to know the gurus of today aside from Warren Buffett that invest for the long term.

And while I was surfing the net, I came across a floating university and enrolled myself to the eSeminar series on value investing for only $50. The teacher in that class is Bill Ackman.

By far, the best explanation I have experienced for value investing. He makes value investing so much easy. And I think I have a man crush on the guy. I did a search on him and he's the real deal. For 7 years, his fund returned 22% annually. Beating Buffett and anyone at the moment.

What I also like about this investor is he is an activist and like any other value investors, invests in at most 10 companies at a time. He's an activist investor, he takes over a flailing company to influence it like a corporate raider. But the difference is, the corporate raider sells what's left. Ackman on the other hand, tries to turn the business around to profit. And gets out of the company when it can stand on its own. You've gotta love this person's work.

He suggests 9 investment criteria in looking for a stock. They are:


1. Invest in public companies.

2. Understand how the company makes money.

3. Invest at a reasonable price.

4. Invest in a company that could last forever.

5. Find a company with limited debt.

6. Look for high barriers to entry.

7. Invest in a company immune to extrinsic factors.

8. Invest in a company with low reinvestment costs.

9. Avoid businesses with controlling shareholders.

One particular criteria that stood out for was #4 Invest in a company that could last forever. I remember Warren Buffett also said the same thing. "Invest in a company in which even if the stock market is to be closed for 20 years, you'll be happy owning the stock". Its investing in companies that you can hold for the long term or even forever.

Much like a quality woman.

PXP, PX and Manny Pangilinan's Other Businesses

Isn't it amazing that only one good news about the discovery of a "possible" natural gas deposit by a company can make the stock soar to 30% - 50% in just 1 day. I don't know about you, but if you're still buying into this company, just basing by that news, you're on your way to the rag house.

People who buy and sell because of news like this are the impatient ones only after the big bucks. Just take a good look at it on the newspaper... They haven't even started drilling yet. Heck, they're not even 100% sure that there are resources there. There's a high probability, but no one started drilling yet, processed the resources yet, transported it yet and sold it yet. And yet, the stock price soared, making an increase of 30% in its market cap. Its ridiculous. Its funny. And entertaining to say the least.

PXP and PX are great companies no doubt. But the price of its share today with regards with its balanced sheet is absurd considering the increase. You need to have a huge growth rate to accommodate that rise in share price.

Rumor has it, that MVP is trying to buy GMA7 but it seems like the current shareholders of GMA7 won't want to sell it without a premium of around 49% to MVP. If MVP manages to buy the said network, that would add another "basic need" that we need from his vast empire. How long before I became a Manny Pangilinan is still left unknown.

Also, MVP's flagship company MPI together with Ayala Corp will develop the new light rail. Since all businessmen in our country are busy building this and such, I'll proceed with my work so I can earn more to invest in the stock market.

IPO East West Bank GT Capital Holdings

What I don't like about IPOs is that a few people setting the price of a business in which most people do not know the true value is. Given that logic, if you're a stock market investor, buying on IPO means you are betting not investing. You can't possibly set a price on a particular company before it made public and before it actually perform. That alone should tell you to be wary.

Although there are times (only a few times out of thousands) of companies that are golden gems wherein IPOS are very good price at the start. Google and Apple are 2 that I know of. But how many companies will actually be the next google and apple? Quite a few. Just by that numbers, the odds are not in your favor.

I did bought in the IPO of puregold and still holding into it. That is because I find the idea of selling to poor communities discounted retail products an amazing idea. For one, they tend to be strong during recession as many people would be buying discounted products during those times.

The current IPO east west bank and gt capital are in the industry that are easily affected by recession. And as an investor, you don't want to lose money. Finance and Real Estate are as volatile as the stock market. We may be seeing a real estate boom in the Philippines, but I would still prefer to bet my money on things that are sure and boring and people will always use recession or not.

PSE Very Strong - Investing in Yourself

It is said that the average bull market run lasts for about 3.8 years. Since 2009, we have been in a very strong bull market. And it has been almost 3 years. Although we are enjoying the benefits of the bull market. What happens tomorrow is not something that we can control. What we can do is accumulate more funds in cash and wait for the right time to take advantage of a correction or another recession.

It is also a good time to invest in yourself. Buy books or get yourself back to school to get that masters degree or learn new skills that you always wanted. Buy yourself a good set of books that can help you develop more good habits and more good ways to invest. Also, don't forget your appearance and health, enroll yourself in a gym and keep yourself groomed. Buy yourself a new pair of shoes and a watch.

In a bull market, anybody can be a winner. All the stocks go up. You can always be right most of the time. But remember to not be greedy. Stocks go up and they also go down. This kind of volatility makes investors wary and forget the true goal what each one of us once have before investing. It is to be financially free. Taking profit is good and it can never hurt. But taking profits also means giving up your position for an instant gratification. Always remember that you are here for the long term and the more you stay in that position, after a couple of years, will reward you of financial freedom you'll always dreamed of.

Investing for Money & Women

It always comes out in every drinking session with close friends. They ask why am I still single after having been well off in the financial sector of my life. And most of the time, I answer with a joke or an evasion to the question. Quite frankly, its hard for me to explain in the most simple terms why I'm still single. But in this blog, I would explain since you don't know me, and I don't know you. I think my secrets are safe.

First of all, I view all things as investing. Though being a playboy and having a new girlfriend every few weeks is a temptation to some. For me its shallow. Its fun, but its never happiness. I take great care in knowing about the person before I commit. But if I do commit, I make sure I go all out. Just like stocks.

Second, relationship eats a lot of time and money. Resources that I'm not willing to sacrifice just to get the approval of a person who doesn't know my true value. Most of the ex girlfriends I have in the past are girls that knew what I'm made of and I didn't tried to get their approval thru courtship. Courtship is a relationship based on lies and masks. You put your best front for the other person to get her/his approval. Its not a good way to start a relationship in my opinion.

I let the girls choose. I make the first move if it so happens I like them as well.

Third, mother nature are more generous to men when they age. Men age like wine. The more they age, the more they improve, the more valuable they become thru assets and knowledge and experience and the more they become irresistible. I only laugh at my friends that marry early because they thought its too late or the world is about to end. I'd rather take my time and let the pieces fall where they may.

Fourth, investing is my top priority as of now. Women are a great creature. You just don't know what they are thinking and while some of us spend time analyzing them. I'd rather spend that time investing. Time is the most valuable resources we have. It is the resources that we all have at the same amount and its up to you on where you spend it.

The Lower Class, Middle Class and Upper Class

Truth be told, in movies (especially in the Philippines) its the poor class (masa) that gets the spot light. In politics, they are the heroes and the one you should court if you want to win. They are uneducated, easily manipulated yet people seems to want to get their side because its politically correct. The poor class seems to be the oppressed one and the heroes of any true to life story.

I beg to differ. The real oppressed ones are the middle class. Let's take a closer look.

The Lower Class

They don't have a job. If they don't have a job, they are not contributing to society. Which means, all their time are spent on loitering around, squatting private properties and probably adding to more problems like over population and petty crimes to support themselves and their families. Human resources put to waste and instead of being part of the solution to make the country progress, they add to the problem.

They don't pay taxes. Since they don't have a job or have a low paying job that make them tax exempt. They don't pay taxes. Which means, all the infrastructure, health care, relief operations and any other expenses by the government comes from the taxes paid by middle class and upper class.

They are majority. What happens when the majority are uneducated and easily manipulated? Leaders that get seated are shit. Since the lower class vote based on emotions, they tend to vote people that looks good on the outside and makes them feel good vs the intelligent, competent leaders that make them realize that they are shit. This is the reason why actors are easily seated in the government. The same reason why charismatic idiots are in the government in any country.

So what do we have? The lower class, don't pay taxes. They use up resources of the country without anything in return. Being part of the problem and elects shitty leaders.

The Middle Class

They have a job. They are the ones who went to school and works a grueling 9 hours a day for (most of them) the rest of their lives. They power industries. Make businesses run and they have kids that they can sustain to go to college and are a great contribution to human resources in the future.

They are consumers. They move money around (a good thing). They buy things in which businesses can use the money to support the needs of more people. Businesses thrive because of them.

They pay full taxes. Income tax from middle class are full. No cuts. They are the one that finances government spending.

They contribute to the society. OFWs mostly are middle class. They send money to the Philippines which keeps it afloat. Money used for education or spending which are all good thing for the economy.

So what do we have? We have people that break their backs to support their families for as long as they are able to work. Most of them stuck on routine jobs for the rest of their lives. The are the ones that powers our economy.

Almost no influence in politics.

The Upper Class

They provide jobs. Upper class owns different kinds of businesses that provides the middle class jobs.

They provide innovation. They finance research for innovation.

They set up charities. Upper class have so much money they create charities to give money back to the community. Helps the poor. See money goes to the poor again.

Tax Incentives. Upper class people earn more money. But they have incentives from the government and have smaller tax than the middle class. They can legally reduce their taxes by ways of investing and business.

They Provide necessities. Upper class owns large corporations that provides all the needs of the people. The phone you use, the clothes you wear, the car you drive, the computer you use are all provided by the upper class so you can have a better lifestyle.

So what do we have? You have a rich person that pays lesser tax. Which means, they get richer and richer over time.

Less voting power yet more influential in politics. This says it all.

Conclusion

If you're going to think about it more... The one that you should pity is the middle class. They are the ones working for all their lives, pay all the taxes, but the money they worked hard for goes to the poor class (by way of government spending) in which money never returns.

The lower class picks the leaders of the country, the upper class controls those leaders in one way or another while the middle class can just sit and watch as the country goes into turmoil.

If you're a middle class and you know it. You have 2 choices in order to live a more hassle free life without having to sell your soul/health working for a life time.

1. Be poor.
2. Be rich.

My Thoughts on Vacation and Investing Goals

Ahh... My facebook wall is being raped by vacation pictures of friends and acquaintances. This is the time of the year that's hard for me to resist. I love to go for a vacation, but when I think of the money I would spend in that vacation, makes me want to think about it twice. Its good to have some R & R every once in a while, but for the enterprising investor such as myself, I don't see the benefits of this in the long term. And I wouldn't feel any better even if I go to other places. I'm quite happy in life right now. The only thing that really makes me jump off my seat is the dividends that has been coming. I'm loving it.

The money spent on vacation can be very well invested so I can reach my goal faster. I want to use every bit of money as fuel to make compounding work more effectively. See this video about compounding:

Well, what a young investor to do in this kind of situation. Stuck in his chair looking at vacation pictures of friends... Well, we can use our imagination. A hot chick in white sand beach.

Helping Your Family Investing

I just realized that its hard to keep track of my freedom fund. When I add new funds to the account, its % changes. So I decided to divide it into number of shares like a mutual fund. That way, even my family members can invest with me and help them earn money.

So far, the freedom fund has performed really well, 13.76% YTD, while the market is around 16%. It is good in my opinion since I'm still learning the ropes and managed to make some mistakes.

Right now, I'm handling money for my relatives. I think its good for them to be invested and take part in this bull market. Since, they do not know how to invest in the stock market, I'll be handling the money for them. And making the freedom fund into a mutual fund - like fund is a great thing so I can add more money without recalculation of its % gain or loss.

My thought on hot stocks: Magnum Ice Cream & Petron

For the Philippine market, I think the hot stocks as of the moment are still the mining sector, the nickel - copper industry to be exact. I've been hearing a lot about PCOR (Petron) and the maker of the Magnum Ice Cream (RFM). 

I think the product is good. Everybody loves it even if it is with the same name as the condom and is overpriced, people are still willing to pay for it. A lot of people are taking pictures of them eating magnum and posting it in their facebook wall. It became a status symbol for some due to its steep price and also, since its summer. I'm just not sure if this is a long term investment or just a fad. Petron for me, is not a good investment. People who follow this blog will know that we are here for the long term and we want to have an investment that will bring the most money to us. I just think a company with its price that is being regulated by the government and a very volatile commodity is not a good investment in my opinion. There are a lot of good choices out there. Like, cement products, construction engineering services, paper plates and plastics and more. Those are the stocks that will bring in money. Boring stocks that people will puke to look at.

Thoughts on Trading

I think trading, particularly in this market is a stupid thing to do. As Mr. Bacon will say on the Reminiscent of a Stock Operator, "Why sell? It's a bull market after all!" Its easy to lose yourself within the crowd, when gurus are proclaiming what stocks to pick and sell. Do not be swayed by their opinions. You have your own mind to decide, and its your own money to risk.

Approach Everything in Life Like Investing

Me and my friend were walking down the street and suddenly asked what I look for in a girl. A few years back, I could have answered she must be gorgeous. Nevermind what she has in her head, as long as she looks beautiful, she's good to go. I was very naive that time. Growing up as a nerd and a fan of computers, I realized that everything in this world can be viewed in an investing principle.

A gorgeous girl will never be gorgeous forever. Their value goes down each year to their senior year. And the more money they need to maintain that beauty. This is not a good investment in looking for a partner. Meanwhile a nerd girl just like you might be a better pick for she likes to read and gain more knowledge. Everyone withers away, the cute face of yesterday could be the the old grandma of tomorrow. It is fleeting. Invest in something that would last for a lifetime.

Having said that, Warren Buffett told in a speech on what to look for a partner in life... Think about it... Should you search for a loving spouse that is thoughtful, intelligent, hard working, simple, religious, whatever you pick based on you investing style, Warren Buffett said that the best spouse to have is the one who has low expectations. :)

Happy april fools and happy investing.

Cash Dividend on AMC

I received the cash dividends for this year for Alaska Milk Company. I were planning to add more shares before the acquisition. But too bad, I were left out. I didn't have extra money that time. All is still good though.

My First Stock Dividend Ever

I just received my first ever stock dividend. It is from ANSCORP (ANS).

Love it!

Philippine Stock Investing on JAP Stocks

I always have doubts on every statement put out by anyone. I don't care if you are a market guru, a technical analyst or a friend with a Phd. I want to know if your statement have any proof. A lot of stocks, particularly, JAP stocks are sky rocketting. And I don't know why. It has no reason to go up. But it still goes up. And what makes it even more fishy, is that gurus are proclaiming the stocks in the name of God. LOL!

Hyping a stock is all the business here. If you can hype every people in the forum that you own and all of them are your decibels. You can rest assured, the price will go up. And add in more seasoning of God's verses will make them think that you're all for the good and benefit of others. Bull shit but its funny!

In investing in the stock market. I always believe that you need proof to be sure. And the only proof you can have and have the conviction to hold on to a stocks is by looking at their balance sheets. The market may not go on your favor for a couple of years and you may be wrong for a couple of years, but if you have the proof and the fundamentals haven't changed, you can rest assured that you will have a hefty amount of profits.

The Philippine Bull Market - Stock Investing

Ahhh... Its great to be in a bull market. No matter what stocks you pick, even the balance sheet doesn't look good, it only takes 1 small rumor and the stock will go up. Welcome to the bull market people. The Philippines is in a bull market, breaking all time highs and a lot of people are optimistic.

For investors, it is a great time to add positions or hold. This is a great time to accumulate, invest in the stock market. Though, theres not much bargain stocks, the good news is that, you can never be wrong.

For traders, I don't know. I don't trade stocks. LOL

Bluechip stocks became premium priced now since we are in a bull market. Hunting for cheap, obscure and ugly companies has never been more of a pleasure. I'm not talking about mining and oil stocks. I personally think mining has been on a hype. Gold for me, is not a good investment. It is the greatest bubble as Mr. Warren Buffett and George Soros has said.

I also don't like stocks that gets easily affected by commodity prices. Oil companies, mining are just one example. Gold may be good for a lot of people to invest in. But there are no real practical applications of gold in real life.

Looking at some bluechips that I would like to buy, but are sincerely overpriced right now:

1. Jollibee Food Corp (JFC). I love this company, its a good company, I like their chicken and other food franchises. Its well established, well run and has a simple business model. Branding too. But its just overpriced and very generous in giving compensation for their managers. I don't like the combination.

2. Universal Robina Corp (URC). Junk foods. Everybody loves them. No matter how hard people try to hide or how politically correct your co workers may say, they will eat junk foods. Especially in recessions. But this company is overpriced at the moment. But I'll be watching this stock.

"NoyNoying", Stock Market Investing and the Philippine Economy

Seriously, some people tend to associate their financial standings with the Philippine economy. Most of the time, when I hear people whine about being broke, they will instantly blame the government. People, wake up, you being broke is not a sign that the Philippine economy is tanking. Its just plain stupid. In fact, we are in a bull market.

This is the best time to be stock market investing. Almost all stocks go up. You can't go wrong. There's a lot of money just floating around, exchanging hands in billions of pesos, a lot of foreign investors investing in the Philippines, a lot of real estate construction going on, a lot of infrastructure, a lot of money  in excess.

People who protest with "Noynoying" saying that the government is doing nothing needs to work and make something happen in their lives. The time spent rallying is the same amount of time foreign investors have already transfered billions of pesos in the Philippines. What were you doing during those times? Whining.

This is a great time to be invested and make money. This is not, of all things to be done, the time for rallying and whining. This is the best time to be invested, to be working so you can earn money for investing.

Why I'm Still Not Buying Jollibee (JFC)

No doubt, Jollibee is a great company and I would like to own it. But there is one thing that keeps me from buying this wonderful company. I think the present management has been pampering themselves with lucrative stock options, and it does not give any value to the shareholders. Also, the net profit from last year is also not that impressive while the stock jumps aggressively.

For me, I would wait for this company to be undervalued or perhaps wait until the management gets rid of the stock option plans or perhaps we go into another recession. But until that happens, I'll take my money elsewhere.

Or use the money to buy the franchise and actually own a store.

Mistakes and Learning Curve in Stock Investing Philippines

Its been a few months now since I started investing. The more I stay and read about the stock market, the more I begin to fall in love with it. Its the easiest way to make money. You don't have to have a business degree to make money out of it and you surely don't have to be stressed out. What its important is hard work and an iron stomach.

There are stocks that I have missed, stocks that I thought will do well bailed out out of frustration, desperation, anxiety and boredom, and suffered the inevitable emotional punishment that if I just hold on, I might have made a killing.

I did learn something from those experiences. Thinking for yourself is one, not being swayed by the crowed and the list of top gainers for the day. The feeling of being left out because you are the only one that's not in that stock and being able to control yourself of not entering out of desperation is one of the most powerful trait you can help to be successful... Self control.

Ayala Corporation Value Trap

The most risky investment out there is an institution with a lot of following. Ayala Corporation has been there since the beginning of the time in the Philippines. It is one of the oldest corporation in the country. But I think, of the recent events, shareholders of the company had been well played by the Ayalas.

Here's my thoughts on it. The Ayalas began a sell off of their shares cashing out P630 million total. This is after a share buy back of their own company share. A share buyback is a good way to increase share value, ramping up its price before a major sell off. The Ayalas did give a good value to the shareholders, from 300+ per share to 450+ per share after the share buyback. Then this is where it gets good, they sold all of those overvalued shares. Making P630 million in the process. With hype still on, the share price still moved upward some more.

If you're thinking, if the Ayalas sold all or most of their shares, then they don't own the company anymore? Wrong, they added tons more shares as a stock option. Diluting the share and undervaluing it.


Security Name : Ayala Corporation
Date : 02/07/2012
Headline : LA #0054: Ayala Corp. additional listing
Content : The Exchange approved on April 25, 2001, the application submitted by AYALA CORPORATION (the “Company”) to list additional 127,479,000 common shares, with a par value of P1.00 per share, divided into (a) 60,000,000 shares to cover the ESOP; (b) 60,000,000 shares to cover the ESOWN, (c) 7,309,000 shares to cover the 40% stock dividend for 1995 ESOP and ESOWN shares; and (d) 170,000 shares to cover the 50% stock dividend for 1996 ESOP shares. Further, with reference to Circular for Brokers No. 2515-2005 dated May 25, 2005, the change in the par value of the Company from P1.00 to P50.00 took effect and was reflected on the Exchange computer system on May 30, 2005. Correspondingly, this brings the number of common shares approved for listing from the aforementioned 127,479,000 shares, with a par value of P1.00 per share, to 2,549,580 shares, with a par value of P50.00 per share, divided into (a) 1,200,000 shares to cover the ESOP; (b) 1,200,000 shares to cover the ESOWN; (c) 146,180 shares to cover the 40% stock dividend for 1995 ESOP and ESOWN shares; and (d) 3,400 shares to cover the 50% stock dividend for 1996 ESOP shares. Finally, the Exchange approved on December 13, 2006, the application submitted by the Company to list additional 8,864,000 common shares, with a par value of P50.00 per share, to cover the Company’s ESOWN. In this connection, please be advised that an additional 484,918 common shares have been availed of and fully paid by the optionee/s under the Company’s ESOP/ESOWN. In view thereof, the listing of the additional 484,918 common shares is set for Wednesday, February 8, 2012. This brings the number of common shares listed under the Company’s ESOP/ESOWN to a total of 3,065,255 common shares.

Its like printing money. Lesson of the day: Not all share buybacks are equal.

Missed Opportunity on UBP (Union Bank of the Philippines)

I must admit that I have missed this one. The surge of UBP stock price is probably one that I would remember the most. It hits all of our stock picking criteria. A financial stock that has been ignored, a bank that I use for the past year because of its "moat" of the only bank which can activate your Paypal account using its debit card EON. With the rising industry of work at home jobs, these are wide moats that separates UBP from the rest.

The the bad thing is, I missed it. Rather, I forgot about the things that I use everyday. It never came into my mind. And most people ignored it too. Until its earnings was released and it was off the charts. Its parent company was buying back its shares before the earnings release which is also a good indication. And ramping up millions of shares for months. I missed it again.

Its share price was the lowest among its competition P40+ compared to its competition BPI and BDO and other banks which trades at P60. Its damn undervalued and we missed it.

Management is great, its a great company. Union Bank is a company owned by the Aboitiz's. And they are aggressively buying back the shares of their own company prior to the earnings release. That should have been a great hint to go in and accumulate its shares.

Overall, this stock hits all of our criteria and we missed it. I'm not worried though. I know there will be stocks like these. As long as traders trade stocks. As long as people follow the herd, there will always be one that would earn the most money. The mistake I made was that I never looked harder enough to miss this great opportunity.

A Review of First Philippine Holdings FPH

My FIRST ever review for First Philippine Holdings. There are only a few criteria for us to find the right company and one of them having been unpopular is one. But FPH is not unpopular. They are a Lopez company and is included in the Philippine index. They own the largest power producing and power distribution company in the Philippines, Meralco. But was later sold to MVP's company Beacon and Metro Pacific Investments.

FPH has been out of favor because of the sellout of Meralco. But the company have a return on invested capital of 56.38%. That means they have great management and great business. Being the Lopezes. The only bad thing that made traders shy away from this company is its sellout of Meralco. "Predicting" that they may reduce the earnings because of that. But great management and people behind the business will always produce great returns. The price of the stock is selling at P60.05 and is now underpriced by 56.28%. This is a great discount in my opinion.

Disclaimer: I am long FPH.

The Story of the 3 Value Investors

Value investing is one of the most popular  investing strategy that made Warren Buffett, the 2nd richest man in the world. He owes it to his teacher, Ben Graham. I'm making this post to differentiate the evolution of the value investing and how it can help you in your portfolio.

The first value investor is good 'ol Ben Graham. He is the father of value investing and wrote 2 popular books "The Intelligent Investor" and "Securities Analysis". They have been the bible of value investors eversince. The idea of Ben Graham is to buy companies that are selling for a really cheap price relative to their intrinsic values. Ben Graham often called it "cigar butts" because you are hunting bargain stocks that have a little bit of value inside them, but if were sold, you can make a decent profit. Later in his life, Ben Graham released a simple formula for picking stocks. Saying that he wants to make investing more simple that ever rather than scrutinizing each annual reports of each companies, he based his criteria more on the P/E. The lesser the P/E the better. But this formula did not made it to the limelight because its as if he was ignoring the first 2 previous books about valuing a company. He made it so simple that the first 2 books became almost obsolete. The formula was then added to the later revised edition of his books. In which our third value investor took, implement, tested, optimized, gave it a new twist and called it his own.

Warren Buffett, upon reading Ben Graham's books decided to become his student and worked for Mr. Ben Graham. He became one of his successful students as proof of what he is today. But his style changed when he realized that it takes too much effort to find bargain prices and sell them to make a profit and he becomes infamous to the people working in the company that he sold. Warren Buffett's style during his early years is to hunt cheap stocks like Ben Graham and sell the companies for profit. The employees in these companies were sacked as the selling completes. So he became unpopular with the locals. Warren Buffett realized this and added a criteria in selecting his stocks. "Cheap price is good. But a good business at a cheap price is better." So he went on and search for companies that are good and stable businesses with competitive advantage. This is how he made his billions.

Comes the third value investor whose book I just read, Joel Greenblatt. I'm still not sure if he should be ranked amongst the great Ben Graham and Warren Buffett, but his value investing is simple that combined the 2 principles of Graham and Buffett plus adding his own style of using quantitative analysis to compare all the stocks into a simple formula. He says to look for stocks that are selling cheap and stocks that have good businesses behind them. He is looking for businesses that has high return on invested capital this is a criteria from Buffett, competitive advantage, but Greenblatt wants to have a mathematical description of it not qualitative as Buffett analyze it. Greenblatt wants it to be in numbers.  And then he also looks for businesses that are selling cheap buy looking at its EBIT or Earnings Before Interest and Taxes over its Enterprise Value, Graham's style. The idea behind his formula is you want to know the real value of the businesses should you really buy the business in real life. Giving you a clearer picture of the value of the business. What's good about Greenblatt is he made it into a systematic approach without any decision making involved, you can even plot its formula in an excel file and watch the computer spit out the stocks that meet his criteria. Performance wise, it holds true. Graham, Buffett and Greenblatt all beat the market or performs better than the indices over a long period of time.

If its so great why isn't everyone using it? The reason behind that is simple. Eventhough Ben Graham made his principle public years and years ago, thinking that all people will be using his approach and thus making the strategy obsolete, it is still applicable today. Its because the style of these guys do not work for short term periods. It would take 2 - 3 years before you beat the market and most people can't stomach that kind of strategy so they go on and day trade. But over the long period of time, it is the easiest and most effective way to invest your money.

Never Play By Their Game

I would understand that some people would trade foreign currency. There is just no other way to make money in the currency market because of its volatility and the uncertainty of countries that could easily effect it. But in stocks, I see no reason to trade it. It doesn't make any sense. If there's only 1 position that you can take to make money in the stock market, and that is to buy a stock, why the hell would you even bother to sell it? To lock in profits? Then what? Enter the trade again for more commissions?

Many newbies in the stock market here in the Philippines get devoured by the traders that has been long in the game. They attend seminars and they have been taught how to trade just one way, so everybody sees the same chart as they. They interpret the same chart as they. This is very dangerous. If you become predictable, you won't make money. Trading is dangerous game, especially to the one who thinks that there is only one way to trade, you'll be taken advantage and your money gone. Be smart. Invest for the long term.

There's only one way to convince or persuade someone. And that is to give him the impression of easy and fast money.

Stock Trading vs Stock Investing

There will come a time where you will think about greed. Greed is good, but only for the smart. If you want to make big money in the stock market you have to be smart. Knowing the difference between stock trading and stock investing is a must.

Stock Trading is the process of going in and out of a security for the purpose of making profit. The time horizon of a stock trader is from minutes to a few days. They do not care about the company's underlying fundamentals, they only care about its volatility and movement. Most stock traders make use of charting or technical analysis to guide their trades. They are the hares in the "turtle and the hare" children story.

Stock investing is the process of buying a share of a company for the purpose of holding it indefinitely until their reason for buying becomes invalid. Stock investors look for the long term when they buy the stock. They don't care about the volatility of the market, they only care about the company's underlying management, finances and prospects of expansion. They are in it for the long term or even for a lifetime. Unlike trading, stock investors view the stock as a part ownership of the business. They are the turtles.

There are pros and cons in being a stock trader or investor. For example, a stock trader will make money faster than a stock investor. Because they go in and out of the trade, they make profits easily and fast. While investors will only profit once they sell, and they seem to hold on to a stock at very long time, they will only realize the profits later.

In terms of expenses, stock traders incur lots of expenses. Because each trade will mean commissions and taxes, the profits seem to diminish as long as they continue to trade. While investors gets tax breaks for holding it for a long time, they also minimize the expenses because they get to receive dividends from the company.

You Don't Have to Diversify

After reading Peter Lynch's book for the nth time, I came to realize that I am doing in wrong and not playing to my strengths. Picking stocks like a fund manager where you pick 10 stocks and more so that you are diversified does not make sense to me. Managers do that all the time so their losses are minimized, also gains.

An individual investor such as ourselves could benefit from the freedom of managing our own funds and can allocate the assets on the more concentrated ones that you are sure to likely profit within the next 10 years.

This and Warren Buffet's words that "You don't have to diversify". Is the deal breaker for me. He says, "If you own 50 stocks, do you rank the first stock as well as the 50th stocks? Do you know it as well? I don't think so..."

Mr. Buffet has a point. If you own that much of a stock, is there a way you would know that one stock is underperforming? Would you know each stock as well?

Find stocks that fits your selection criteria then concentrate on those stocks. You only need a few winners to make you a millionaire. Missing a couple of 10 baggers doesn't make you bankrupt nor lose money.

With all said and done. I reduced my stock holdings from 12 to 7. Trying to get rid of the last 1 to focus on this 6 stocks that I would like to concentrate on. 3 of which are dividend paying stocks and 3 of them are growth stocks that I expect to skyrocket for the next 10 years because of their great balance sheets and businesses. Freedom Fund has made great overhaul.

Buying Back Shares and the Lucrative Stock Option Plan

There are 2 things that I've learned today, 1) Share Buy Backs and 2) Stock Option Plan. The first one, Share Buy Backs, is a good indication that a company is doing good. Both Peter Lynch and Warren Buffett indicated that a company buying back shares means that the company is investing in itself. It is also an indication that the company is doing well, but the market, with all their reasons, is not responding positively in its stocks. So they are determined to minimize the supply of common shares by buying them and so affecting its supply and demand in the long run.

In my previous post about Growth Stocks, and my desire to invest 3 in mind, having looked at their financial statement, all of them are really strong and great companies with sound management, with little to no debt at all. The deal breaker for me was that 2 of them are buying back shares since October 2011. This is insane! This is probably the undervalued stocks that we have been searching for. So to test this out, I added more funds to my account and started buying the shit out of these 2 stocks. Let's see if our judgement is correct.

Stock Options Plan

Stock options are bonuses for CEOs of the company and management staff. They are awarded with shares of the company as bonuses. The good thing is, it tells us that the company is doing good. The bad thing is, it dilutes the stock. They do not buy from the market, they add shares to the market. And when there's a lot of supply, sooner or later, stocks will go down. This is seen in my JFC (Jollibee Food Corp) stock which is down for consecutive days.

Freedom Fund: 6.12% vs PSE Index 8.6%