Another all-time high; it’s time to buy!

In the days leading up to the 45th Asian Development Bank Board of Governors Meeting (Manila 2012), the Philippines was featured on CNN’s Eye On program. For one week, all eyes were on the Philippines – from governance to business, to food and culture, to traveling. It was a fitting opening to Manila 2012 and that week ended with an all-time high for the PSEi, ending at past the 5,300-point mark. When I was still trading, 3,500 was the all-time high. The stock market has come so far.

A lot of you have been asking me how I picked my stocks. I have a simple, fundamental criteria for choosing stocks on the PSE and it boils down to these two:

P/E ratio of 9x-15x

The stock price of the company should be around 9x to 15x of its earnings per share. I have based this criteria by studying the consistently performing stocks over a period of time and I’ve seen that these companies have a price to earnings ratio of 9x or 15x their earnings per share. This means that the stock is not too overvalued (unlike some mining share prices that can be as much as 50x their earnings per share) that there’s too much risk of price drop or too undervalued that it doesn’t appreciate. This is the optimal P/E ratio for me that I think will appreciate in value over time.

Share Price of P20-P100

I make it a point to invest only in shares that are priced between P20 and P100 because there is a psychological room for price appreciation. I would rarely invest in centavo stocks and I’ve always stayed away from blue-chip because, well, everyone’s buying them. They’re too liquid. Everyone wants to have an Ayala Corporation, a Globe Telecom, a Manila Water, a PLDT or a San Miguel Corporation stock. I’d rather go for hidden gems in the emerging middle-market companies.

Here’s where I will put my money in:

ICTSI, Aboitiz Equity Ventures, DMCI Holdings, Union Bank of the Philippines, Aboitiz Power, Universal Robina Corporation.

Happy investing!

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About Benedict Bernabe

Benedict Bernabe, 27. Benedict has a Master's degree in Development Studies from the University of Melbourne, Australia and a Bachelor of Arts degree in European Languages, cum laude, from the University of the Philippines Diliman. He has worked with the United Nations in the Philippines as the Community Facilitator of the Community of Practice on HIV&AIDS. He worked with Standard & Poor's Capital IQ, a financial information company, as researcher, translator and quality analyst in the investment research team. Prior to this, we worked at IBM Business Services. Benedict is a certified yoga teacher.

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