Download - Fundamental and technical analysis
Basic Fundamental and Technical Analysis (Philippines Setting)
Presented by:Gerry O. Gatawa
INVESTMENT MANAGEMENT5:30-8:30
What investment is right for you?
What type of investor are you?
Some investors listen to RUMORS/ GOSSIPS
Price To Earnings
RatiosBook Value
Earnings Per Share
Balance Sheet
Cash Flows
Solvency Ratio
FUNDAMENTAL ANALYSIS
TECHNICAL ANALYSIS
INVESTMENT ANALYSIS
Fundamental Analysis Technical Analysis
Traditional economic + Business concepts = value of investment
Study of past market data such as prices + volume = predict future price movements (I.e. stocks/markets)
Examination of the above variables is called Valuation process
Proponents believe that the market’s judgment of an issue’s fundamentals are determined by supply and demand variables that are already reflected in prices.
Method of forecasting future price movements of a security based on political, environmental & other factors
View from financial statements View from charts
Best employed for long term investing Best employed for short term trading
Data utilized come out periodicallyTends to focus on a specific sector
Data utilized come out daily
INVESTMENT ANALYSIS
Fundamental Analysis Technical Analysis
Focused on what “must” happen Focused on what happens
Top Down Approach Bottom-up Approach
Considers condition affecting Economy Financial Markets Industry
Company
VALUATION PROCESS
Fundamental Analysis Technical Analysis
Works best in determining market sentiment and factor it in the creation of investment or trading decisions
Works best if all investors are logical and could separate emotions from investment decision
Will succeed if the analyst finds overlooked data in identifying undervalued securities
VALUATION PROCESS
Fundamental Analysis Technical Analysis
Technical analysis is the answer!?
Technical Analysis will improve investing?
Make sensible investment decisions
NO!
EXPECTATIONS
Should I buy today? What will the prices be tomorrow, next week or next year?
YES!AIM TO REDUCE RISKS &
IMPROVE PROFITS
DON’T AIM TO PREDICT PRICES CONSISTENTLY & ACCURATELY
A chart is a picture A picture is worth a thousand words…
or probably a thousand dollars
Technical analysts do not attempt to
measure a security's intrinsic value, but instead
use charts to identify patterns that can suggest
future activity.
Technical analysts believe that the historical performance of stocks and markets are indications of future performance.
Equally applicable on any security or tradable financial instrument (stocks, bonds, commodities,
futures, indices, mutual fund, options)
Why Do Prices Fluctuate?
MARKET PSYCHOLOGY
Each investors would have his or her own opinion about a certain security.
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Philippine Market Outlook According to Bloomberg Philippines PSEi to
reach 10,000 in 5-7years.
Moving Average is Uptrend for the
past 5 yearshttp://www.bloomberg.com/quote/PCOMP:IND
Comparisons with Major Stock Markets
Technical Analysis of PSEi for 1 Year (August 2015-June 2016)
Resistance
Support If the support crosses over the resistance it is a “GOOD BUY” or
favorable market outlook (PSEi)
PSEi Day Range(June 28, 2016)
Minus
Philippine Market Outlook
Capital FLOWS
Europe’s Economy is
DOWN
US Economy is DOWN
Japan’s Economy is
DOWN
ASEAN Economy is UP. (will receive)
Corporations Listed in the PSEi
• Ayala Corp. (AC)• Aboitiz Equity Ventures, Inc. (AEV)• Alliance Global Group, Inc. (AGI)• Ayala Land, Inc. (ALI)• Aboitiz Power Corp. (AP)• BDO Unibank, Inc. (BDO)• Bloomberry Resorts Corp. (BLOOM)• Bank of the Philippine Islands (BPI)• DMCI Holdings, Inc. (DMC)• Energy Development Corp. (EDC)• Emperador Inc. (EMP)• First Gen Corp. (FGEN)• Globe Telecom, Inc. (GLO)• GT Capital Holdings, Inc. (GTCAP)• International container Terminal Services, Inc. (ICT)
• Jollibee Foods Corp. (JFC)• JG Summit Holdings, Inc. (JGS)• LT Group, Inc. (LTG)• Metropolitan Bank & Trust Company (MBT)• Megaworld Corp. (MEG)• Manila Electric Company (MER)• Metro Pacific Investments Corp. (MPI)• Petron Corp. (PCOR)• Robinsons Land Corp. (RLC)• Semirara Mining and Power Corp. (SCC)• SM Investments Corp. (SM)• San Miguel Corp. (SMC)• SM Prime Holdings, Inc. (SMPH)• PLDT (TEL)• Universal Robina Corp. (URC)
The Philippine Stock Exchange carefully selects top 30 companies for the PSEi following strict and expert criteria.
Therefore when we invest, we first
consider viewing those COMPANIES LISTED IN
THE PSEi
Blue Chips of the Phillipines
• Blue chips are companies that compose the Philippine Stock Exchange Index. They have a proven track record and daily trades are in high volume (for liquidity).
$25
$5
$1
Originated: Poker Game
Best Investments for 2016 in thePhilippines
Banks – MBT, SECB, BDO
Power – FGEN, EDC, MER
Property – SMPH, MEG
Infrastructure – MPI
Board Lot of Philippine Stock Exchange
• Stock trading on the Philippine Stock Exchange is done by board lot or round lot system. The minimum number of shares you can buy or sell depends on the market price of the stock at the time you place your order.
Price Range (Pesos) Board Lot (Min # of shares)
0.0001 to 0.0099 1,000,0000.01 to 0.049 100,0000.05 to 0.249 10,0000.25 to 0.495 10,0000.5 to 4.99 1,000
5 to 9.99 10010 to 19.98 10020 to 49.95 10050 to 99.95 10
100 to 199.9 10200 to 499.8 10500 to 999.5 10
1,000 to 1,999 52,000 to 4,998 55,000 to UP 5
Open - The first price traded for the period. An important consensus as all interested parties were able to “sleep on it”.
High - The highest price traded for the period. The point where there were more buyers than sellers.
Low - The lowest price traded for the period. The point where there were more sellers than buyers.
Close – The last price traded for the period. Most often used price for analysis. The relationship of the open and close prices is considered most significant by technicians.
BASIC MARKET TERMINOLOGIES
Volume – The number of shares traded during the period.
Bid – The price a buyer is willing to pay
Ask – The price a seller is willing to accept
BASIC MARKET TERMINOLOGIES
Short Market Info: PSE has two trading floors, one in Makati City and another in its head office in
Pasig City. Despite having two floors, PSE maintains a "one-price, one-market" exchange
through its MakTrade System, a single-order-book system that tallies all orders into one computer and ensures that these orders match with the best bid/bestoffer regardless of which floor the orders were placed.
BASIC FUNDAMENTAL ANALYSIS TOOLS
Price Earnings RatioEarnings per shareIncome Statement, Balance Sheet,
Cash FlowLiquidity, Solvency, Profitability
RatiosBoard of Directors/ CEOEnvironmental Scanning
Double Dragon Properties(Fundamental Analysis—Price Earnings Ratio)
Day Performance
1 Year Range
Yesterdays Closing Price
Day Range
Double Dragon Properties (Ticker: DD)(Fundamental Analysis—Price Earnings Ratio)
Take Note: The P/E Ratio is high, which means the stock is
overpriced.
Rule: High P/E ratio means the stock is expensive. Benjamin Graham said buy stocks with
less than 20 P/E ratio
You are willing to PAY this at
Php. 60.80.Assessment: NOT HEALTHY
DD: Compared in the same industryDouble Dragon’s market capitalization is Php143.8b, already surpassing RLC’s (Robinsons Land) market cap of Php122.2b and MEG’s (Megaworld) Php143.5b. Out of the 300+ companies listed in the PSE, DD is already the 26th highest in terms of market capitalization. Against other property stocks in the PSEi, table below presents how the stock fares against its industry peers by end 2016:
Del Monte Pacific Ltd. (Ticker: DMPL)(Fundamental Analysis—Income Statement)
Higher Asia sales
Net income of $51.5m in FY ending April 30, 2016, a reversal from $43.2 loss booked the previous year.
Better Sales and cost optimization
BUY:
Ayala Corporation (Ticker: AC)(Fundamental Analysis—Solvency Analysis)
Ayala (AC) to issue Php10b bonds next week
• AC plans to issue next week the first tranche of bonds totaling P20b under its recently approved shelf registration program. The bonds will have an interest rate of 3.92% per annum and mature in seven years
DEBT-TO-ASSET = = 0.5964
DEBT-TO-EQUITY = = 1.4778
(465,530,740,000+ 20,000,000,000)
(794,074,723,000+ 20,000,000,000)
(465,530,740,000+ 20,000,000,000)
(328,543,359,000)
There is a greater claim (>50%) of creditor over the assets and a greater
provided capital by creditors than
stockholders (owners). There is RISK of INSOLVENCY
Integrated Micro-Electronics Inc. (Ticker: IMI)(Fundamental Analysis—Management Analysis)
Ayala-owned Integrated Micro-Electronics Inc., is appointing of Gilles Bernard as its new president. He will replace Arthur Tan as president but Tan remains as the CEO and was recently appointed vice chairman of Ayala Automotive. Bernard, on the other hand, will be more involved in the day-to-day operations as IMI grows its international business.
Global Stock Indices(Fundamental Analysis—Environmental Analysis)
Meanwhile, here in the Philippines, most investment analyst assessed that the impact of a ‘Brexit’ may be minimal for us, since we’re a consumption-driven economy, and our exposure to the UK is insignificant. External trade accounts for only a small portion of the economy and the Philippines is not too prone to external headwinds that such an event would bring.
No direct Brexit impact on Philippine credit rating – Fitch (July 1, 2016)
Global Stock Indices(Fundamental Analysis—Environmental Analysis)
President-elect Rodrigo Duterte has appointed Regina “Gina” Lopez to head the Department of environment and Natural Resources (DENR), which oversees the country’s mining industry. Mining and oil shares tumbled, following the announcement that Lopez accepted the post. Lopez is known to be an anti-mining advocate, a trustee of the Lopez Group Foundation, Inc., and chairman of the ABS-CBN Lingkod Kapamilya Foundation, Inc.
ABIDE WITH THE LAW
BASIC TECHNICAL ANALYSIS TOOLS
BetaMoving AverageResistance and SupportReversal PatternsHistorical Trends
MegaworldBeta: 1.71
CHART TRENDS CHANNELS & LINESPlotting Support & Resistance
CHART TRENDS CHANNELS & LINESEstablishing Trends (channels & range)
CHART TRENDS CHANNELS & LINESEstablishing Trends (channels & range)
The more times a trend line is tested, the more significant it becomes
CHART TRENDS CHANNELS & LINESTrend Acceleration or Deceleration
Angle of trends:
WeakHealthyOverheated
CHART TRENDS CHANNELS & LINESWhen resistance is broken, it becomes the new supportAnalysis: BUY SIGNAL
CHART TRENDS CHANNELS & LINESWhen support is broken, it becomes the new resistanceAnalysis: SELL SIGNAL
CHART TRENDS CHANNELS & LINESIdentifying trends, breakouts & breakdowns
Trend Plotting Exercise
Double Dragon Chart
Megaworld Chart
SMPH Chart
ALI Stock Chart
RLC Stock Chart
Globe Stock Chart
CHART PATTERNS & FORMATIONSReversal Patterns
Rounding Bottom
Saucer Top
CHART PATTERNS & FORMATIONSReversal Patterns
Double Bottom
Double Top
CHART PATTERNS & FORMATIONSCandlestick Continuation Patterns
Three White Soldiers Three Black Crows
CHART PATTERNS & FORMATIONSCandlestick Reversal Patterns
Bullish Engulfing Bearish Engulfing
CHART PATTERNS & FORMATIONSCandlestick Reversal Patterns
Bullish Harami Bearish Harami
MBT: Metropolitan Trust BankTechnical Analysis
Please observe the 5-year moving
average.UPTREND
BUY SIGNAL: The SUPPORT crosses over RESISTANCE
SECB: Security BankTechnical Analysis
Please observe the 5-year moving
average.UPTREND
BUY SIGNAL: The SUPPORT crosses over RESISTANCE
BDO: BDO Unibank, Inc.Technical Analysis
Please observe the 5-year moving
average.UPTREND
Obviously:
GOOD BUY for long-term but maybe
slow growth in the short-term
FGEN: First Gen CorporationTechnical Analysis
Observe the HISTORICAL REPITITION.
SPECULATIVE
Observe the REVERSAL PATTERN
EDC: Energy Development CorporationTechnical Analysis
The stock give a very volatile performance. VERY SPECULATIVE
Observe the REVERSAL PATTERN
EDC: Energy Development Corporation 6 Months Technical Analysis
From RED to BLUE
Creating a REVERSAL PATTERN
MER: Manila Electric CompanyTechnical AnalysisObviously:
GOOD BUY for long-term and fast
growing in the short-term
MER: Manila Electric Company1 Month Technical Analysis
SMPH: SM Prime HoldingsTechnical Analysis
Continuous UPTREND but maybe slow
growth.
MEG: MegaworldTechnical Analysis
Continuous UPTREND and fast
growth in the short-term.
MEG: MegaworldFundamental Analysis SPG
New Forecast: Megaworld Stock Price to Hit P9 Per Share
Prior Forecast:
MPI: Metro Pacific Investments CorpTechnical Analysis
Continuous UPTREND and fast
growth in the short-term.
Video
MPI: Metro Pacific Investments Corp1 Day Technical Analysis
Rank three (3) (from first to last) of the following that you love/like most. If none on the list you may include others.
Money
Family
Spiritual Beliefs
Children
Pursuing studies/
education
Material Wealth
Work/ Job
Country
Traveling
Husband/ Wife
Boyfriend/Girlfriend
Business
Comfortable life
Friends
Time
Profession
Movies
Health
Colleagues/Workmates
Physical appearance
Places
Reputation
Neighbors
Food
Cellphone
Music
Freedom
Vice
Personal things
Play
• Contribution to the economy, to society and to national development
• Contribute to national development
(Bridges, roads, railroads, airports, seaports, mass-transport systems, communication systems etc.)
• Contribute to entrepreneurial development(Micro-finance programs, livelihood projects, cottage industries, etc.)
National Benefits of Investment
Only 25 percent of Filipino adults are financially literate by Standard & Poor’s (S&P) Ratings.
Only 640,665 is investing in the stock market. That number came from the Stock Market Investor Profile report of the PSE. It’s not even 1% of the country’s population
Source: http://www.manilatimes.net/only-25-of-filipinos-financially-literate-sp/232428/
If you love your country, YOU MUST INVEST.
Philippine Corporate News• MER’s energy sales may grow 6-7% this year• AP’s SN Aboitiz planning for up to 500 MW in additional capacity
within 7 years• GTCAP selling P12-b perpetual preferred shares• COSCO boosts capital spending this year• CAL investing P650 M on data-driven farming practices• MBT raising P20b from LTNCD issue• BLOOM sells casino venture in Korea• MEG subsidiary GERI to spend additional P5b on hotels• CHIB ventures into stock brokerage• FNI sees 20% more nickel output• Cemex pegs record IPO price at P10.75/share
Helpful Online Referenceshttp://www.bloomberg.comedge.pse.com.ph
Thank you and enjoy the
rewards of investing!