EQUITY

TRADING
MELVIN JASON DE VERA
 MELVIN JASON S. DE VERA, MBA, CIS, AFA, CFMP
Certified Investment Solicitor, First Metro Asset Management Inc. (FAMI)
Trading Coach, Land-FX and Introducing Broker for XM Forex Brokers
Accredited Financial Analyst (AFA®) by American Academy of Financial Management
Mentor, Oakbridge Stock Trading Institute
President, Finance Educators Association of the Philippines (Fin.Ed)
Deloitte-FINEX 2015-2016 Outstanding Finance Educator for the National Capital Region
Bloomberg Coach for the Certified Financial Market Professional (CFMP) program
 BEST
Outline STOCK BROKERAGE FIRM
of Presentation
BEST ONLINE TRADING PLATFORM
MELVIN JASON DE VERA

Certified Investment
Solicitor
THE ORACLE’S WISDOM

“The most important

investment you can make
is in yourself.”

- Warren Buffett
Outline of Presentation

Investing is a Deeply Personal Journey

 “Your
Outline EXPENSE
of Presentationis another
man’s INCOME.”

Income Expenses Savings

PAY YOURSELF FIRST

Income Savings Expenses

 KNOW YOUR GOALS
I. Capital Protection

Stay relatively liquid while matching

inflation

II. Retirement

Build a nest egg over time that will

support twilight years
 KNOW YOUR GOALS
III. Income Supplement

Additional income to support current or

desired lifestyle

IV. Income Replacement

Transition to full-time trader and generate

income solely from trading
 KNOW YOUR GOALS

V. Hobby

Engage in active trading for the

excitement and thrill of it
WHICH ARE YOU?

Trader?

o r ?
v e st
In
 A. Stock Investor
Holds stocks for an extended period of time, from months to years.

Usually relies on Fundamental Analysis and completely understands the concept

of being a shareholder.
 B. Stock Trader
Purchases stocks with a focus on the market, with the intent of profiting from
short to medium-term price fluctuations.
EACH IS FINE...

WHY NOT COMBINE BOTH?

DISASTER PREVENTION
2014: P3,450.00/sh

7 0%
L o ss
in Va
lue!

2019: P1,100.00/sh
 ALWAYS KEEP
YOUR ULTIMATE GOAL
IN MIND
Legitimate Asset Classes:
Outline of Presentation
RETURN

BONDS

TIME HORIZON
RISK
WHAT IS THE P.S.E.?
Buyers Sellers
Shares of
ownership
in a
Corporation

Sellers Buyers
PARTICIPATING IN THE ECONOMY
As they grow...

We grow!
 9:30 AM
Outline of Presentation

3:30 PM

←STOCK SYMBOL
←Price
←Number of Shares
Made up of 250+ listed corporations

INDEX
Collective Name of the
30 BLUE CHIP stocks in the country
PSEi COMPOSITION

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THE MOVERS & SHAKERS

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 HOW TO BE PART OF THE INDEX?
The selection of these companies is based on a specific set of criteria.
Under the revised policy on index management, companies should meet
three (3) criteria to qualify under the PSEi:

1. The company’s free float level must be at least 12%.

2. The company must rank among the top 25% in terms of median
Wetwelve-month
daily value in nine out of the grow!!! period in review.
3. Ranking of TOP 30 qualified companies based on full market
capitalization.
RECENT CHANGES IN THE PSEi

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RECENT CHANGES IN THE PSEi

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PSE INDEX AT A GLANCE
Compounded Annual
Growth Rate

12.00%
Per Year

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 MARKET LISTING

LISTING is the admission of securities

for trading and the inclusion in the
certified registry of the Philippine Stock
Exchange.

It transforms a private closed company

to a publicly-held and traded company
either by offering shares to the public
We grow!!!
for the first time or by having shares
listed on the trading boards without
public offering.

The PSE Revised Listing Rules, effective

June 24, 2004, are designed to attract
more companies to list in the Exchange.
 WHY LIST IN THE PSE?
I. RAISE MONEY
II. Spread business risk over larger group

III. Market exposure to Big Funds

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IV. Brand equity & indirect advertising

V. Compensation flexibility via Stock Options

 METHODS OF LISTING

INITIAL PUBLIC OFFERING

It is the first sale or distribution of
tradable securities to the public
through the stock exchange.

The shares will be given a market

value reflecting expectations of
future growth.

The company is mandated by law

to list in the Exchange.
 METHODS OF LISTING

INITIAL PUBLIC OFFERING

 METHODS OF LISTING
BY WAY OF INTRODUCTION

LISTING BY WAY OF INTRODUCTION

Application for listing of securities that are already
issued or securities that will be issued upon listing
where no public offering will be undertaken.

Non listed company’s shares We grow!!!

are distributed through a
property dividend, which will be issued by a listed
company to its shareholders.

Delist one or more subsidiaries in favor of a holding

company.
 METHODS OF LISTING
BACKDOOR LISTING
Per PSE, “when a listed company acquires or merges or combines with an unlisted
company, or vice versa, resulting in a substantial change in the business,
membership or the BOD, or the voting structure of the company.”

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 USES OF CAPITAL
The PROSPECTUS provides details on the uses
of the capital raised:

a. Expansion of business operations

b. Development of new markets

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c. Acquisition of other companies

d. Purchase and/or repair of equipment & other assets

e. Debt refinancing

f. General corporate purposes

 ADDITIONAL METHODS
FOLLOW-ON & STOCK RIGHTS OFFER

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SRO: a group of rights offered to existing

FOO: issuance of stock shareholders to purchase additional stock
shares in proportion to their existing holdings. 
shares following a company's
initial public offering (IPO) Gives a company's stockholders the right, but
not the obligation, to purchase additional shares
in the company.
 F.O.O. PERFORMANCE

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“… to finance strategic acquisitions, capital expenditures, settle

financial obligations and working capital requirements.”
PSE BOARD LOT TABLE
Price Min. Shares

< ₱0.0099 1,000,000

₱0.01 - ₱0.049 100,000

₱0.05 - ₱0.495 10,000

₱0.5 - ₱4.99 1,000

₱5 - ₱49.95 100

₱50 - ₱999.5 10

> ₱1,000 5
 VALUE OF THE STOCK MARKET
MORE THAN WHAT IT IS...

We grow!!!

APPRECIATE WHAT IT DOES!

TRUE POWER OF THE MARKET
1,000+
stores globally

Franchising: P50
Million

Stock Market:
10 shares = P2,500
 JFC OVER THE YEARS
No Operating!
Just PASSIVE
Investing!

Oct. 2019:
P230.00 per
share

Jan. 2009:
P40 per
share 10-Year Growth
500+%
Outline of Presentation
MUTUAL FUNDS

HOW TO INVEST THE EASY WAY?

MUTUAL FUNDS 101
Money from various investors are pooled together to make up
"baskets" of cash, bonds, stocks, or a combination of all.

Buying and selling of securities are done by an expert fund manager.

As an investor, your ownership is represented by the number of shares
you hold in the fund.

As share prices (NAVPS) increases, so does your investment's value.

Mutual Funds

Pool Their
Invest in Securities
Money

Fund Manager
Many Investors
Portfolio

Passed Onto Generate

Returns
TYPES OF MUTUAL FUNDS
MONEY MARKET
Safest Investment with the lowest return. 
Composition: Time deposits, treasury bills, other short-term bonds
Risk level: Low

BOND
Provides stability and moderate income. 
Composition: Debt instruments with fixed interest rates issued by the government or
private corporations
Risk level: Low

BALANCED
Combines the stability of bonds and the growth of potential stocks
Composition: Government securities, corporate bonds, stocks
Risk level: Medium

EQUITY
Highest risk with the highest potential over the long term
Composition: PSE index, dividend yielding and/or growth stocks
Risk level: High
FUNDSMART 101
FUNDSMART 101
 STOCKS VS. EQUITY FUNDS
Stocks Equity Mutual Fund

 
Per NAVPS, a consolidated
Pricing Per share price valuation of all company shares in
the fund

Exposure Single company Multiple companies

Buying/Selling of Subject to board lots and Subject to minimum amount but
Shares available shares no maximum limit

Done by professional research

Research Done by the investor
teams

Brokers’ fees and taxes to be None. All fees and taxes already
Friction cost
deducted from proceeds incorporated in the NAVPS

PSE-listed but subject to willing Can be bought or redeemed

Liquidity
buyers and sellers anytime based on prevailing price
 DRIVER ANALOGY

STOCKS
D
 

• You are the Driver

NC E
ER IE
• Full control over route & destination
X P
• Requires more attention & focus
E
MUTUAL FUNDS
E R S
• You have a Driver
• Driver chooses theG I N
Nto the destination
B E route
• Requires less attention & focus
 COST AVERAGING STRATEGY
Strategy of investing a fixed amount at regular intervals regardless
of the current market trend.
 

Buy
Buy
Buy
Buy

Buy
Buy
Buy
Buy
Buy
Buy
Buy
Buy
Buy
Buy

Buy
Buy Buy
Buy Buy
Buy
Buy
Buy
Buy
Buy
MAKING MONEY IN STOCKS

DIVIDENDS

CAPITAL
GAINS
A dividend is payment made by a corporation to its shareholders in the form of cash
(called cash dividends) or stock (stock dividends).

If you're a shareholder, you can think of a dividend as your share of the company's
profits.

Ex-Dividend Date:

BUY BEFORE & HOLD UNTIL in order to receive the

specified Dividends
Dividends - declared out of the unrestricted retained
earnings (accumulated profits)
- declared by the Board of Directors

• Three types of dividends

- Cash Dividends
- Stock Dividends
- Property Dividends
• Adjusted Market Price after a stock dividend

Adjusted Price = Market price before the stock div

1 + Stock Div Rate

Ex. If XYZ Company declares a 25% stock dividend, the

market price of its shares is expected to drop to
P16/share from the current P20/share
P20.00/1.25 = P16.00
Four dates to remember when dividends are
declared:
1. declaration date - the date when the Board of Directors
declared the dividend.

2. ex-dividend date - usually two- four days before record

date
3. record date - date when the dividends are to be paid to
shareholders of record.
4. payment date - the date when the checks are mailed out.
WHERE TO FIND THE INFO?
The PSE Electronic Disclosure Generation Technology or PSE
EDGE is a state-of-the-art, fully automated system that facilitates
 
the efficient processing, validation, submission, distribution, and
analysis of time-sensitive disclosure reports submitted to the
Exchange
Outline of Presentation
 HOW DIVS AFFECT PRICES
a. Regular Dividend payouts signal a financially stable
company  

b. Buy-and-Hold investors generally favor consistent

dividend payers

c. Companies in growth stage are unlikely to provide high

and/or any dividends at all

d. Higher-than-normal dividends may cause upside spikes

e. Stock prices usually increase in lead-up to ex-date

 DIVS ON COMMON SHARES
• Board’s discretion over the amount

• No fixed amount per year

• Dependent on the Company’s earnings

• Junior to the Dividends of Preferred shareholders

4.40% 10.71%

8.62%
4.81%
9.89%
* Trailing 12-Month Dividend Yield
 DIVS ON PREFERRED SHARES
• Acts like both a Stock & Bond

• Fixed and Guaranteed Dividends per year, including payment schedule

• Not dependent on the Company’s earnings

• Senior to the Dividends of Common shareholders

CAPITAL
CAPITALGAINS
GAINS

25%

P80.00 P100.00 P20.00

Per Share Per Share Per Share
 Capital Appreciation
Jan. 14,
Stock 22-Jun-03 22-Jun-07 22-Jun-10 2020

PRICES 2003
795
AC 139.26 471.69 317.00
43.90
ALI 4.48 18.25 13.5
86.80
BPI 25.80 58.62 45.5
154.70
BDO 18.75 71.00 44.00
2,042
GLO 538.16 1,213.07 875
212
JFC 17.20 54.06 68.5
304.80
MER 8.73 90.45 190
1,112
TEL 484.08 2456.91 2395
149.40
URC 4.22 19.00 28.00
 CAUSES OF VOLATILITY
Outline of Presentation
 Movers

Economic Data
& News
• Local & Global
Markets & Data

• Inflation & Interest

Rates

• News Reports &

Developments
YIELD CURVES
REMEMBER: Longer-term bonds tend to give
higher yields on account of greater risk
BOND PRICES & INTEREST RATES
 Movers

Abrupt Investor
Reactions
• Disruption in
Operations

• Acquisitions or
Mergers

• Deviation from
Expectations
 Movers

Earnings
Reports
• Vs. Consensus

• Vs. Previous
Performance

• Vs. Peers or
Indices
VIA FIRST METRO SEC ACCOUNT
Outline of Presentation
Outline of Presentation
Outline of Presentation
 USEFUL FINANCIAL RATIOS
Outline of Presentation
Price-to-Book
Ratio

Dividend Payout
Ratio

Price-to-Earnings
Ratio

Price-to-Earnings-
Growth Ratio
 HOW FAR WILL YOUR MONEY GO?
Outline of Presentation
 PRICE-TO-BOOK RATIO
Outline of Presentation
FORMULA: P/B Ratio = Price per Share / Book Value per Share  
 

DEFINITION: Book value (BV) is already listed on the balance

sheet, it's just under a different name: shareholder equity. Equity is
the portion of the company that owners (i.e. shareholders) own free
and clear.

Essentially the number of dollars you'll have to pay for $1 of

equity.
P/B Ratios of Banks

Metrobank: 0.95 Security Bank: 1.31 PNB: 0.50

BPI: 1.65 East West: 0.60 China Bank: 0.74

BDO: 1.84 RCBC: 0.61 Union Bank: 0.80

 DIVIDEND PAYOUT RATIO
Outline of Presentation
FORMULA: Dividend Payout Ratio = Dividend / Net Income

DEFINITION: The percentage of profits distributed as a dividend

is called the dividend payout ratio. Some companies maintain a
steady payout ratio, while other try to maintain a steady number of
pesos paid out each year (which means the payout ratio will
fluctuate).

Each company sets its own dividend policy according to what it

thinks is in the best interest of its shareholders.

(CEBU PACIFIC) 2018 2017 2016 2015 2014

 DIVIDEND PAYOUT RATIO
Outline of Presentation
(PLDT INC.) 2018 2017 2016 2015 2014

(Globe Telecom, Inc.) 2018 2017 2016 2015 2014

(GMA Network, Inc.) 2018 2017 2016 2015 2014

(Meralco) 2018 2017 2016 2015 2014

(CEBU PACIFIC) 2018 2017 2016 2015 2014

(Semirara Mining & Power Corp.) 2018 2017 2016 2015 2014
 PRICE-EARNINGS RATIO
Outline of Presentation
FORMULA: P/E Ratio = Price per Share / Earnings Per Share

DEFINITION: A valuation ratio of a company's current share

price compared to its per-share earnings.

Think of the P/E ratio as the price you'll pay for $1 of earnings. A
very, very general rule of thumb is that shares trading at a "low"
P/E are a value, though the definition of "low" varies from industry
to industry.

Ex: if a company is currently trading at P45.00/sh and earnings over the

last 12 months were P2.50/sh,

P/E ratio for the stock would be 18x (P45/P2.50).

VALUE METRIC

PRICE: PRICE:
P 1,880/sh P 3.10/sh
P/E RATIO: P/E RATIO:
12.42x 570x
SHOULD PEOPLE AVOID HIGH P/E RATIOS?
 DEPENDS ON OUR GOALS
Outline of Presentation
Conservative Aggressive

2016-Present 2019 (Jun-Oct)

GLO: +7.43% GLO: -16.81%
NOW: +263.53% NOW: +16.60%

WHY DON’T PEOPLE JUST SELL IT DOWN?

SENTIMENT METRIC
 A LOOK AT FINANCIALS
Outline of Presentation
 P/E RATIOS OF BANKS
Outline of Presentation
(Metrobank) 2018 2017 2016 2015 2014

(Banco de Oro) 2018 2017 2016 2015 2014

(Bank of the Phil. Islands) 2018 2017 2016 2015 2014

(Security Bank) 2018 2017 2016 2015 2014

(Philippine National Bank) 2018 2017 2016 2015 2014

(East West) 2018 2017 2016 2015 2014

(RCBC) 2018 2017 2016 2015 2014

 PRICE-EARNINGS GROWTH RATIO
Outline of Presentation
FORMULA: PEG Ratio = (P/E Ratio) / Projected Annual Growth
in Earnings per Share 

DEFINITION: The PEG ratio uses the basic P/E ratio for a
numerator and then divides by the potential growth for EPS, an
estimate.

The two ratios may seem to be very similar but the PEG ratio is
able to take into account future earnings growth.

A very generally rule of thumb is that any PEG ratio below 1.0 is
considered to be a good value.
 PEG RATIOS IN ACTION
Outline of Presentation
(Universal Robina) 2018 2017 2016 2015 2014

(Cebu Pacific) 2018 2017 2016 2015 2014

(Jollibee) 2018 2017 2016 2015 2014

(PLDT, Inc.) 2018 2017 2016 2015 2014

(Globe Telecom) 2018 2017 2016 2015 2014

(Ayala Land) 2018 2017 2016 2015 2014

(Filinvest Land) 2018 2017 2016 2015 2014

The higher, the
better

Profitability of a
company over the
past 3 yrs
The closer to 1, the
more value

Effectiveness of
Management to
convert assets into
Profits
 Return of
Dividends based
on Market Price
# of times a
Company can pay
dividends
The lower, the better
(assuming good
company)

High performance
over last year
COMMON SENSE QUESTIONING
Company Analysis
What does the company sell/do? Who owns it? How is the
management team?

Industry Analysis
Industry booming? Future bright? Supported by Gov’t?

Economic Conditions
Job availability? Inflation status? Inflation rates? GDP growth
present?

Future Profit Outlook

Still good 5-10 years from now? Do they innovate? Are they
expanding?
HUMBLE BEGINNINGS

Pure department store selling only shoes

EVOLUTION OF A GIANT
Do you think SM will still exist 20 years from now?
OUTPERFORMANCE
MATTERS SM: +911%
(2009-2019)

PSEi: +295%
OUTPERFORMANCE
MATTERS ALI: +662%
(2009-2019)

PSEi: +295%
OUTPERFORMANCE
MATTERS
(2009-2019) URC:
+3,160%

PSEi: +295%
“Investing puts money to work.
The only reason to save money is to
invest it.”
Grant Cardone
 Tha nk y ou!

Melvin Jason S. De Vera, CIS, AFA

09053818090
[email protected]