It’s all over the news yesterday: the Philippines government exceeding its own targets and hitting a growth of 6.6% in 2012, probably one of the highest GDP growth rates in the post-Marcos era. The government-set target was between 4% and 5% in the beginning of the year, and was later revised upwards to between 5% and 6%. The final outcome still beat the revised expectations.
The Philippine stock exchange has also broken so many record new highs (38 new highs in 2012) that it has become the new normal, with new highs coming within days of each other. Just this month, the PSE index breached the 6,000-, 6,100-, 6,200, and 6,300-marks. Can you imagine that just a little over 10 years ago, during the late-Erap and post-Erap period, the index couldn’t even breach 1,000 points?
So this is great news for our country’s economy and for public companies and those who invest in the stock market. But is it good news for you? How did YOU perform in 2012, financially. Did your income also grow 6.6%? Did you savings go up 33% like the stock market? Were also able to protect yourself from financial losses due to injury, disease, or calamity? If you weren’t able to do this, then maybe you were doing something wrong… Or maybe there was something that you weren’t doing.
Maybe this year in 2013, it’s time for you to start investing and be part of the Philippine economy’s and the stock market’s growth. If you’re interested on getting started, send me an email at firstname.lastname@example.org.
In this Inquirer article, BSP governor Amando Tetangco, Jr. urges the PSE to install the necessary technological infrastructure that will allow Filipinos outside of Metro Manila to participate in the capital markets: http://business.inquirer.net/56647/bourse-urged-to-go-nationwide
I agree with Governor Tetangco wholeheartedly. I think this move will be beneficial, not only for the investing public but also to companies seeking capital for their entrepreneurial venture. I have read in some analysis that Philippine stocks are deemed “expensive” relative to other stocks in the Asian region. I take this to mean that the investing public has an appetite for equities and this should encourage more companies to go public. Imagine how much more capital will be available if the PSE will be able to successfully rollout a mechanism that will allow Filipinos outside Metro Manila to directly participate in the local bourse. The article cites a survey that says that less than one percent of Metro Manileños invest in the capital markets while the number for people surveyed outside Metro Manila is almost zero.
Aside from this increased participation from the investing public, such technological infrastructure will also bring public equity closer to companies in the provinces, making them more productive. I would even go as far as suggesting that a second independent stock exchange be opened in Cebu to cater to the equity financing needs of Visayas-Mindanao businesses. Of course, this goes against the grain of the trend of consolidation among exchanges all over the world. PSE needs to do a better job at promoting investment into equities and using the equity market to raise capital.
The last item on my wish list would probably be an alternative exchange for emerging companies/small caps. This will be a great way to support our small- and medium-sized enterprises/small- and medium-sized industries who might find it hard to comply with the requirements of the PSE’s main board but are in need of capital that bank loans will not be able to provide. Once we bridge that crucial funding gap, I am optimistic that we will see a lot of our industries succeed.
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.