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%

Happy Chinese New Year! Growth Stocks?

I have been contemplating in the idea of mixing some growth stocks in my freedom fund portfolio. Right now, its really safe to say that I can pretty much live with its current dividend returns. I just passed P9,000 per month (approximately) from its dividends and I am now considering buying some low cap stocks to have more risk that could make us more money.

There are some particular low cap stocks that I've been looking into. That fits in the criteria of:

#1 - Boring Industry
#2 - Manageable or No Debt
#3 - Great Management
#4 - As if No Growth Industry
#5 - Copy cat / Rehashed product

That's about it. I have 3 in mind and contemplating on how should I invest in these. Of course, If I add more of these stocks, I could spread myself too thin. So I'm asking for opinions.

Up Day Today as the Property Sector Took the Lead

The property, mining and oil sector have been all the rage this week. As the rumor of aggressive expanding of real estate businesses in the Philippines and the hype around the Mining and Oil industry for potential partnership with foreign companies spread across the trading community. I for one, don't want to invest (for now) with stocks that are hot in the traders eyes. I prefer to be on the look out for sleeping giants.

If there's a gold rush, not only does the people who mine for gold got rich, but also the ones selling the shovels.

We will look for more opportunities once the tension and hype settles down.

Freedom Fund fund was up today for +0.35% compared to the index +1.01%. I'm all excited to get my money from my job so I can reinvest. Its a very great time to invest right now as we broke into a new high in 5 months.


Year to date:
Annual Cash Flow: P107,870.33
Freedom Fund 7.38% vs PSE Index 7.51%

Invest in Telecom - The Texting Capital of the World

The texting capital of the world, the Philippines. If you are an investor in the Philippines, you probably know that one of the best stock to own is in telecom. There are 3 major players in the Telecom industry, PLDT, Globe and Digitel. But Since PLDT bought DIGITEL, its a head to head match with the 2 biggest players in the Philippines.

In my opinion, owning both these stocks is a sure win. Mainly because, these stocks have more than 5% yield, a blue chip and both are the biggest players in their industry. Timing the market right, you can have at most 8% yield for the dividends and most of all, PLDT's policy is to provide consistent dividends which they never fail so far.

Annual Cash Flow: P107,870.33
Freedom Fund: 7.03%

Stock Market Tax Philippines

Do you need to file an income tax return when you are investing / trading in the Philippine stock market? The answer is No.


Sec. 127 (D) of the National Internal Revenue Code

“(D) Common Provisions. – Any gain derived from the sale, barter, exchange or other disposition of shares of stock under this Section shall be exempt from the tax imposed in Sections 24(C), 27(D)(2), 28(A)(8)(c), and 28(B)(5)(c) of this Code and from the regular individual or corporate income tax. Tax paid under this Section shall not be deductible for income tax purposes.”

You do not need to declare your income thru trading stocks. This does not mean that the stock market is the haven for task reduction. There is still tax in doing business in the stock market, that is called the stock transaction tax, which is around 1/2 % of the total stock transaction. Also, dividends paid out to investors are under a 10% withholding tax. If there is withholding tax, you do not need to declare it in your income tax just like money earned thru interest on banks, they are subjected to withholding tax, so you do not need to declare them.

PSE Going Strong

Its a surprise that PSE went strong today. I thought that TEL won't be going up further so I deposited more funds to my account, wanting to take advantage of the opportunity to add more shares. I thought the stock would go down today to retrace. But what happened today surprised me. The slow and big TEL went up 4.45% today.

Because of that, I looked for more opportunities elsewhere and see if we can take advantage of other stocks that are down.

After realizing that stocks are far better than real estate in liquidity and hassle free business, I'm more determined to put my money on stocks. I plan to make more money in stocks to invest in real estate. Rather than investing in real estate to put money on stocks. Real estate is a very slow moving industry so I could probably use the time spent in real estate to do stocks and my other business.

Actually, all companies in the PSE went up today. Its a very good economy we have now.

Freedom Fund: 6.63%

Stocks vs Real Estate

Just got back from the real estate business seminar. I must admit that real estate industry is not what I thought it was. More than anything, its all hard work. And for me to start a new business for part time in real estate is something that will not be possible. This kind of business needs and deserves your full attention because of the underlying processes that needs to be accomplished.

When I got back home, I started to compare Stocks vs Real Estate. The main points and probably the decision maker for me is the capitalization. In stocks, your capital can be any amount of money that you are willing to invest. In real estate, you need almost always around P1M to risk the money in this venture. And P1M is not little in our country. Stocks win.

Second point, that I probably like in favor of stocks is that, stocks don't need a lot of people to do business. You just need a broker and you can transact easily. In real estate, there are a lot of people involved. Engineers, contractors, lawyers, accountants, brokers and most especially, the government, bribes for government employees are there to take part in your profits. I don't want to talk to a lot of people when doing business. And don't have much patience in managing tenants for rental properties as well. So I think that stocks win (for me) in this category for a lot less hassle in doing business.

Third, Stocks are liquid. Real estates are not. It takes you an instant to sell a stock of a company and takes your 3 - 6 months to sell a real estate. Stocks win.

Fourth, stocks are almost always valued at the right price. There are some companies that are under valued and will adjust accordingly overtime. But since it is public, there not that many opportunities to spot undervalued stocks to gain more than 200% in profit for a particular stock. But this depends entirely on the investor's skill to spot these opportunities.. Most of the time, prices will adjust accordingly. In real estate, pricing can be lucrative. In a way, it is a good thing because you can get away even with a 200% profit, but this is also less frequent. Real estate's gain can be lucrative and depends entirely on its marketing. Both win.

I think there is an obvious winner here for me. In starting a new business part time, I think real estate won't be that viable. And in terms of investing. I think stocks wins over real estate in my personal objective. But! I still think I will use the things that I learned in the seminar. To invest in real estate. Its just that, the capitalization is too much for the returns that is comparable to stock. And I believe that I'll be buying lots only real estate until I know more about building and developing the land.