<span “font-size:17.0pt;font-family:”georgia”,”serif”;=”” mso-fareast-font-family:”times=”” roman”;mso-bidi-font-family:arial;=”” color:#891c0d”=””>My Portfolio And Why I Am More Likely To Add To My Sands China Ltd (HKG:01928) Long Position In The Near Future.
<span “font-size:6.0pt;font-family:”arial”,”sans-serif”;=”” mso-fareast-font-family:”times=”” roman”;color:#2c2c2c”=””> <span “font-size:7.5pt;mso-bidi-font-size:=”” 11.0pt;font-family:”inherit”,”serif”;mso-fareast-font-family:”times=”” roman”;=”” mso-bidi-font-family:arial;color:#2c2c2c”=””>Summary<span “font-size:7.5pt;font-family:”inherit”,”serif”;mso-fareast-font-family:=”” “times=”” roman”;mso-bidi-font-family:arial;color:#2c2c2c”=””>
- <li “color:#2c2c2c;margin-bottom:3.25pt;line-height:=”” normal;mso-list:l0=”” lfo1;tab-stops:list=”” .5in;vertical-align:baseline”=””><span “font-size:7.5pt;font-family:”inherit”,”serif”;mso-fareast-font-family:=”” “times=”” roman”;mso-bidi-font-family:arial”=””>My adventure in the world of investing.<li “color:#2c2c2c;margin-bottom:3.25pt;line-height:=”” normal;mso-list:l0=”” lfo1;tab-stops:list=”” .5in;vertical-align:baseline”=””><span “font-size:7.5pt;font-family:”inherit”,”serif”;mso-fareast-font-family:=”” “times=”” roman”;mso-bidi-font-family:arial”=””>Sands China Ltd (HKG:01928) a possible buy.<li “color:#2c2c2c;margin-bottom:3.25pt;line-height:=”” normal;mso-list:l0=”” lfo1;tab-stops:list=”” .5in;vertical-align:baseline”=””><span “font-size:7.5pt;font-family:”inherit”,”serif”;mso-fareast-font-family:=”” “times=”” roman”;mso-bidi-font-family:arial”=””>My valuation of Sands China Ltd reveals it is undervalued by 26.54%.
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This article will be an introduction to my current portfolio (5/31/2015) and also why I find Sands China Ltd (HKG:01928) worthy of my hard earned money in the future. I have started investing in US equities just this January 2015.
<span “font-size:8.0pt;font-family:”inherit”,”serif”;mso-fareast-font-family:=”” “times=”” roman”;color:#2c2c2c”=””>Part 1:
<span “font-size:8.0pt;font-family:”inherit”,”serif”;mso-fareast-font-family:=”” “times=”” roman”;color:#2c2c2c”=””>Using Morningstar’s x-ray tool, this is my portfolio summary.
<span “font-size:8.0pt;font-family:”inherit”,”serif”;mso-fareast-font-family:=”” “=””>As you may observe, I do not have those stalwart companies (such as JNJ, PG, MCD, and countless others). This is because I tend to rely on what James Montier have said on his book<span “font-size:8.0pt;mso-bidi-font-size:11.0pt;font-family:”inherit”,”serif”;=”” mso-fareast-font-family:”times=”” “=””> <span “font-size:8.0pt;font-family:”inherit”,”serif”;mso-fareast-font-family:=”” “=””>Value Investing<span “font-size:8.0pt;font-family:”inherit”,”serif”;mso-fareast-font-family:=”” “=””>, that a portfolio having low PEs outperforms those portfolios that have the glamorous stocks or high PEs over a long period of time. Speaking about long term horizon, I want to have that holding period of more than two years per stock purchase.
<span “font-size:8.0pt;font-family:”inherit”,”serif”;mso-fareast-font-family:=”” “=””>The checklist that I follow prior to purchasing are: <0.50 DE ratio, increasing ROIC, >30 Operating Margin, Positive Cash Flow, increasing Book Value, >2% dividend yield, and <15 PE ratio. In addition, I would be purchasing a stock of a company undergoing a recession in its industry. As you have observed, most of the companies in my portfolio are in the energy and basic materials industry.
<span “font-size:8.0pt;font-family:”inherit”,”serif”;mso-fareast-font-family:=”” “=””>Following the aforementioned checklist is quite hard especially if I see that the stock is at its four-year low and still PE shows >15 (like RL). But, it can be also difficult to time the market. So instead of timing the market, I buy a share of a company the following day I have formed my conviction, and add up to it whenever it further falls down (catching a falling knife as one may say; such as what happened to my KORS, NOV, OAOFY, KIROY, BPIRY, and BHP).
<span “font-size:8.0pt;font-family:”inherit”,”serif”;mso-fareast-font-family:=”” “=””>Other investments here may appear uninteresting because of where the company’s operation is situated. However, I can only buy a company only if it has better fundamentals and cheaper valuations. As an example, I bought more OAOFY shares compared to CVX in the midst of that 50% in oil price decline early this year.
<span “font-size:8.0pt;font-family:”inherit”,”serif”;mso-fareast-font-family:=”” “=””>On the other hand, BRK.B is an exception. As a big fan of Warren Buffett, I bought a single share early this January just to have that opportunity to attend the 50th annual meeting in Omaha, NE.
<span “font-size:8.0pt;font-family:”inherit”,”serif”;mso-fareast-font-family:=”” “=””>Other capital misuse in this portfolio is the one assigned in the ESV. I purchased ESV in the same period of that oil drop, but it was only late when I realized that the company had increasing DE ratio from 0.19 in 2005 to 0.70 in 2015 (latest quarter). An interesting fact I have recently found out from reading John Train’s<span “font-size:8.0pt;=”” mso-bidi-font-size:11.0pt;font-family:”inherit”,”serif”;mso-fareast-font-family:=”” “=””> <span “font-size:8.0pt;=”” font-family:”inherit”,”serif”;mso-fareast-font-family:”times=”” roman”;=”” “=””>Money Masters<span “font-size:8.0pt;mso-bidi-font-size:=”” 11.0pt;font-family:”inherit”,”serif”;mso-fareast-font-family:”times=”” roman”;=”” “=””> <span “font-size:8.0pt;font-family:”inherit”,”serif”;=”” mso-fareast-font-family:”times=”” “=””>is that Richard Rainwater, an investor legend, had formed this company during the 1980’s. Regardless, I still consider this as a faulty investment that I am willing to keep for the long run given a small exposure of 1.53 weighting in my portfolio.
<span “font-size:8.0pt;font-family:”inherit”,”serif”;mso-fareast-font-family:=”” “=””>Part 2:
<span “font-size:8.0pt;font-family:”inherit”,”serif”;mso-fareast-font-family:=”” “=””>Now, in addition to this portfolio, I also maintain a separate portfolio in Hong Kong and the Philippines.
<span “font-size:8.0pt;font-family:”inherit”,”serif”;mso-fareast-font-family:=”” “=””>For Hong Kong and the Philippines, I have the following shares and corresponding weighting in my portfolio (a separate portfolio per country):
I carefully screened almost <1,000 companies in the HangSeng Index with the aforementioned screening criteria I have mentioned above and find these companies as my best results. I also read their annual reports, and I guess it is okay to mention here that I find Perfect Shape PRC Holdings Ltd the most candid. Regardless, it is late that I found out that sending money to Hong Kong and dealing with their complex taxation and commission fees that I am only left with 10% return (instead of <15%) since I started investing this January 2015 (same time as when I started investing in US and other Foreign equities).
<span “font-size:8.0pt;font-family:”inherit”,”serif”;=”” mso-fareast-font-family:”times=”” “=””>Now, I find the ongoing crackdown on China’s notorious big spenders temporary no matter how much publicity it gets. Continuous innovation to attract visitors such as the new casino project will still be ongoing (like the Parisian Macao at Cotai Strips, Macao “sometime” this 2016) and people (not only Chinese), but people around the Asian Region would still find Macao a wonderful tourist destination. Although there are only six licensed operators in the Macao Island who may operate the casino business, I find Sands China with the best fundamentals among its peers (see checklist above-of course with some exceptions). With 70.2% ownership by Las Vegas Sands (NYSE:LVS) I do not think LVS would let Sands China easily flop. Morningstar gave Sands China a four star with a narrow economic moat. According to Value Line, the recent plunge in Sands China brought down LVS’s top line of about 25%. Despite this, they kept their 2018-2020 price projection of LVS in the $90-$130 a share versus its current market price of $50.90.
<span “font-size:8.0pt;font-family:”inherit”,”serif”;mso-fareast-font-family:=”” “=””>But my focus is still on the Sands China. The three challenges I find in this company in addition to the ongoing economic problem in Macao is its CEO succession, the ongoing lawsuit concerning an unfair dismissal of then former Sands China CEO Steven Jacobs, and the recent initiation of dividends.
<span “font-size:8.0pt;font-family:”inherit”,”serif”;mso-fareast-font-family:=”” “=””>I assume that a lawsuit can cause a lot and it may exacerbate the already struggling company, thus creating a perfect storm in the short term. First, Sheldon Anderson’s age of 81 can be an alarming factor given his influence in both the LVC and Sands China operations. In addition, Edward M. Tracy, who was recently appointed as the Sands China’s CEO in 2011, has decided to retire last March 7, 2015. He stated that there were no disagreements and only to serve as a consultant to the company then after. I am assuming the current interim president and executive director, Robert G. Goldstein, to be able to fulfill the CEO role anytime given his extensive experience in the casino-hotels business. I just find it interesting that in the midst of the allegations made by Steven Jacobs (former Sands China CEO) about Sheldon Anderson’s approval of prostitution in his casino and blackmailing of high-ranking Macao officials (Crowe, 2015), which is ongoing for four and a half years already, Edward M. Tracy, appointed as Sands China CEO after Steven Jacobs departure, now retired at only the age of 62. Lastly, the company only started giving dividends in 2012. With this short dividend history with a 98.9 payout ratio ($1.71 billion USD according to its 2014 annual report) I am thinking whether or not to just rely on possible capital appreciation in the long term rather than on the attractive 6.18% it currently provides.
<span “font-size:8.0pt;font-family:”inherit”,”serif”;mso-fareast-font-family:=”” “=””>Alright, now I am going to use my valuation to see what is the fair value of Sands China. I average eight different models so as to obtain my own fair valuation of a company. To give better information on how I evaluate a company, here are some of the important data I use: Morningstar’s key ratios, CAPM’s method of determining the cost of equity, PE PBV PS average price, using only 2/3 (67%) analyst’s dividend growth projections, using 2/3 of the company’s current earnings power, using Hagstrom’s five- and ten-year discount cash flow model, and using five, nine, and fifteen year (if applicable) dividend growth.
<span “font-size:8.0pt;font-family:”inherit”,”serif”;mso-fareast-font-family:=”” “=””>As you may observe, I value a stock based on their dividend history and growth. In this case, I am force to assume the reasonable growth of 21.37% forecasted by Yahoo Finance instead of the outrageous 752.80% forecasted by 23 analysts in The Financial Times. Let us remember that with the recent 2012 dividend issuance, the company has had a 22.37% dividend growth, a CAGR of 22.12%. In addition with the already north of 90 payout ratio, I personally do not think that this would be maintained for the long run or the payout ratio must at least be lessened to attain consistency.
<span “font-size:8.0pt;font-family:”inherit”,”serif”;mso-fareast-font-family:=”” “=””>Upon my calculation for the fair value of Sands China, I had to eliminate the analysts’ dividend growth projections. I used Hagstrom’s five- and ten-year DCF, the company’s current earning power, and the valuation (PE PBV PS) price comparison average. What my model gave me is $37.90 a share, a possible 26.54% upside if met.
<span “font-size:8.0pt;font-family:”inherit”,”serif”;mso-fareast-font-family:=”” “=””>Now, please do not consider this as an expert advice or a buying tip for Sands China, or other companies that have been mentioned. Please do your own due diligence of the company if you are interested in buying their shares.
<span “font-size:8.0pt;font-family:”inherit”,”serif”;mso-fareast-font-family:=”” “=””>Disclosure: I have shares in the companies that have been mentioned above and would not engage in any transactions within the next 72 hours.
<span “font-size:8.0pt;font-family:”inherit”,”serif”;mso-fareast-font-family:=”” “=””>Reference
<span “font-size:8.0pt;font-family:”inherit”,”serif”;=”” mso-fareast-font-family:”times=”” “=””>Crowe, P. (2015). Sheldon Adelson has to testify in a big court case against him and ‘there’s going to be mudslinging’. Retrieved fromwww.businessinsider.com/sheldon-adelson-…
<span “font-size:12.0pt;line-height:200%;=”” font-family:”times=”” roman”,”serif””=””>With my four-year experience in assessing companies along with the informal education that I got from numerous books that I have studied and a little bit of a certification course in New York Institute of Finance, I decided that I am ready to escalate my investment strategy into the U.S. and other foreign equities.
<span “font-size:12.0pt;line-height:200%;=”” font-family:”times=”” roman”,”serif””=””> I started purchasing shares in the U.S. and other countries this January 2015.
<span “font-size:12.0pt;line-height:200%;=”” font-family:”times=”” roman”,”serif””=””>As of the moment, I have holdings in the U.S, Russia, China, South Africa, Argentina, Australia, and the Philippines. Although this may sound impressive, I already have not followed Warren Buffett’s advice of limiting the amount of company purchases.
<span “font-size:12.0pt;line-height:200%;=”” font-family:”times=”” roman”,”serif””=””>Warren Buffett: “I could improve your ultimate financial welfare by giving you a ticket with only twenty slots in it so that you had twenty punches – representing all the investments that you got to make in a lifetime. And once you’d punched through the card, you couldn’t make any more investments at all” (Kennon, n.d.).
<span “font-size:12.0pt;line-height:200%;=”” font-family:”times=”” roman”,”serif””=””>Cutting it short, here are my top three holdings in each country.
<span “font-size:12.0pt;line-height:115%;font-family:=”” “times=”” roman”,”serif””=””>Ralph Lauren Corp Class A
<span “font-size:12.0pt;line-height:115%;font-family:=”” “times=”” roman”,”serif””=””>Michael Kors Holdings Ltd
<span “font-size:12.0pt;line-height:115%;font-family:=”” “times=”” roman”,”serif””=””>Computer Programs and Systems Inc
<span “font-size:12.0pt;line-height:115%;font-family:=”” “times=”” roman”,”serif””=””>BHP Billiton Ltd ADR
<span “font-size:12.0pt;line-height:115%;font-family:=”” “times=”” roman”,”serif””=””>-
<span “font-size:12.0pt;line-height:115%;font-family:=”” “times=”” roman”,”serif””=””>-
<span “font-size:12.0pt;line-height:115%;font-family:=”” “times=”” roman”,”serif””=””>Manila Electric Company
<span “font-size:12.0pt;line-height:115%;font-family:=”” “times=”” roman”,”serif””=””>Filinvest Development Corporation
<span “font-size:12.0pt;line-height:115%;font-family:=”” “times=”” roman”,”serif””=””>China Banking Corporation
<span “font-size:12.0pt;line-height:115%;font-family:=”” “times=”” roman”,”serif””=””>Tatneft ADR
<span “font-size:12.0pt;line-height:115%;font-family:=”” “times=”” roman”,”serif””=””>Sberbank Of Russia ADR
<span “font-size:12.0pt;line-height:115%;font-family:=”” “times=”” roman”,”serif””=””>Gazprom ADR
<span “font-size:12.0pt;line-height:115%;font-family:=”” “times=”” roman”,”serif””=””>Piraeus Bank SA ADR
<span “font-size:12.0pt;line-height:115%;font-family:=”” “times=”” roman”,”serif””=””>
<span “font-size:12.0pt;line-height:=”” 200%;font-family:”times=”” roman”,”serif””=””>Reference
Kennon, J. (n.d.). Warren Buffett’s 20 Ticket Punch Card. Retrieved from http://beginnersinvest.about.com/od/investingtips/qt/buffett_tickets.htm
Only recent when I came across the First Philippine Holdings (FPH) stock price. I initially had performed an analysis of this company three years ago in this link.(http://perennialinvesting.weebly.com/first-philippine-holdings-fph.html)
The current market price of 95.20 Php/share (http://www.bloomberg.com/quote/fph:PM)
indicated a big leap from the 2012’s market price of 48.90 Php/share, an almost 100% gain-taxes excluded. I am fairly somewhat not surprised that the PCOMP had a renewed appreciation of this company given its sound fundamentals and responsible management.
But, this is just one of the cases that applying sensible investing by buying cheap stocks versus their tangible book value provides a healthy margin of safety. Despite the PCOMP’s volatility, traders and investors had learned to appreciate FPH in due time-in this case, it took three years before Mr. Market recognized this gem.
Determining which shares to buy recently has not been that difficult as what I have experienced 2 years ago when I started “analyzing” a share with its price chart. There are no short cuts and all I had to do is spend 1-2 hours a day reading informative documents.
In comparison, the time spent in researching for the right stock is like shopping in a grocery store. While most people have their premeditated list on hand so that it would be less time to pick up the necessary stuff and go to their next agenda. Having this premeditated list tends to make the shopper ignore the ongoing clearance sale (50% off, etc) on quality products. This demonstrates the instinct of the shoppers’ willful blindness.
On the other hand, setting in and providing time when you are shopping (with the premeditated list on hand) will give a different, but worthwhile result. You would soon observe and realize some answers to queries that may appear nonsensical at first. Such as, why are you shopping in this grocery among other establishments? Is it the excellent customer service? Is it the grocery’s set up? Ambience? Fellow shoppers? Great pricing? Quality of products?
Translate that into taking time and analyzing a company. An example of which is the
China XD Electric Co Ltd; I have nothing against this company and had just happened to breeze through its financials.
For a chartist, this company presents the best opportunity to wait for a dip, go long and hope that the company would then exhibit the bullish cup and handle pattern.
This assumption can wipe out an unsuspecting trader when, for example, the price drops more than he was expecting; especially if he had bought it with leverage. Thus, magnifying his losses.
In contrast, after I spent 2-5 minutes reading through the company’s margins, the company looks like it is experiencing some difficulties maintaining its margins and profitability over the years. Though the management seems prudent in maintaining and improving the company’s excellent liquidity. It is having difficulties maintaining its Return on Capital (slight negative trend).
With this information, I would rather not invest and dip in to this “opportunistic” pattern with my own subjective findings, but rather find a different company with better economics at the time being.
1. The Financial Times LTD. (2015). China XD Electric Co Ltd. In Financial Times. Retrieved from: http://markets.ft.com/research/Markets/Tearsheets/Summary?s=601179:SHH
2. Investopedia, LLC. (2015). Technical Analysis: Chart Patterns. In Investopedia. Retrieved from http://www.investopedia.com/university/technical/techanalysis8.asp
It has been a couple of months since I last wrote anything in this blog. I even forgot how to write a new post.
Having a vision of investing solely in the Philippine Stock Market Exchange (PSE) and expecting great results definitely was a mistake. I am thankful that I was able to read Templeton’s book “Investing the Templeton Way” some time in May 2014. Whereby the book opened my mind of possibly investing in other countries, especially investing in the United States and elsewhere. As Gordon Gekko said, “Money Never Sleeps.”
This realization lead to my multiple attempts on opening brokerage accounts and understanding how to invest in the different major stock exchanges. Luckily, I was able to set up a “trading” account both in the U.S. and China. This event further opened the door for me to invest in different countries through American Depositary Receipt (ADRs).
For those who are interested, I have kept the following: A. SORIANO CORP, CHIB, FDC, MB, MER, and PSE for the Phil. speculative portfolio; and I have sold all of my holdings for the Phil. value-oriented portfolio. After seeking out the most cheap (PE ratio of <15) and financially sound listed companies in the exchange, the 170+ securities did not yield any potential investment (for heavy buying).
It may initially appear easy to rely on technical analysis (TA) in buying stocks for short term hoping for a sudden spike in price and selling it at the top, but there are only limited people who can do this consistently. I remember J. Montier and H. Marks providing the same idea that in general, it is difficult to time the market. That is why I depend now on my fundamental analysis of companies through their ratios, margins, competitors, and plans for contingencies to name a few. All of which can be found in their annual report and through different online providers (some through subscription).
A recent concern was the the >40% oil price drop. I can recall some news that stated from Summer 2014 to Winter 2014, oil drop from $110/barrel to $56/barrel. It does make a difference economically. People (consumers) now can spend more money elsewhere, however, exploration and production (E&Ps), midstream, and downstream companies definitely will experience a tougher time. Through this, all (may it be an international or a midstream) oil companies came into discount in the U.S. (XOM, CVX, MLP, WPZ, OXY, etc.).
Further geopolitical concern escalated when Europe sanctioned Russia with Crimea concerns. The Moscow Interbank Currency Exchange (MICEX) had an observable drop from 1578 (early December 2014) to 1477 ([January 2015]; Bloomberg chart) . Russia is rich in oil and relies on oil (other than potash-a fertilizer component, and metals) for it to grow its economy. As a result, Russian oil companies suffered most on this event.
In conclusion, many economists, traders, investors, and other professionals are already throwing darts where and when this oil plunge would end and how far it can have its effect in the global market. But, damage has already been done. As I go back to my initial point of this blog, it will be hard to predict and time the market. So I had to stick with my own analysis and buy financially sound oil companies (regardless of which country) with at least a concern to its shareholders (consistent dividends and repurchases) and hold it for long term (3-5 years) unless fundamental change within the company that is not favorable appears.
As the great John Maynard Keynes stated, “when the facts change, I change my mind.”
1. Bloomberg. (n.d.). MICEX Index. Retrieved on January 3, 2015, from http://www.bloomberg.com/quote/INDEXCF:IND/chart
A. Job Growth 1991-2011
Job growth appears not so much impressive with comparison to the late 1990’s decade. Years 2001-2011, Philippines’ job growth may just be a little above the line compared from the rest of the “Developing Asia.”
B. Foreign Direct Investments 2004-2013
Deciding to have the FDI compared to other “leading” (not updated chart above) job growth countries in the east. With Philippines represented in red and just a little over Pakistan, one can assume there is a quite a potential for more growth in this aspect (versus Vietnam’s FDI decline which puts the Philippines in a neutral-midway position). The fledgling author also only decided to add these fellow “third world countries” into the mix secondary to incompatibility due to the fact that FDI among indices like Hang Seng, STI, and the like are well over the Philippines’ current FDI measures.
C. Indices on the Rise Comparison 2010-2014
Not surprisingly, the fledgling author may somewhat verify here that indeed, PCOMP have risen well above the couple of the most competitive indices in the world (i.e. DJIA, HSI) ever since the crash of 2008-2009.
Though the fledgling author may now claim that he will try not to guess what will happen next with the index. After reading a couple of more value investing books from more than a dozen that had been purchased. It has been clearly proven that it would be untimely and ultimately hard to predict what the future (more over macro-economically) of these Indices may direct itself into.
As for now, the fledgeling investor decides to just further delve into more research about the concept of value investing and probably still stay in the sidelines and clear out probable losers and not so good candidates that may qualify as a good investment.
“An investment in knowledge pays the best interest.”
Often times recently the fledgling author would be in a state of ‘analysis paralysis’ so as to seeking more valuable information about being a value investor. Countless, priceless scripts had been published with most SUPPOSEDLY “familiar” authors (as a self-proclaimed value investor), this had brought along much wisdom in words for the fledgling’s juvenile thinking to endeavor in pursuit of much more understanding about the subject and hoping that eventually some of it would be retained to attain some form of prosperity.
Given much of the fact, stocks v. bonds (barely tackled) v. precious metals. The author would clearly get ahead of himself and still stick with investing in what had been the primary source and also what had always been the foundation of a developing economy (may it be the U.S. economy, The Philippines economy, etc.) which is as said by “Uncle” John here at the last paragraph concerning the uncertainty the investor’s will certainly always be facing.
John M. Templeton
Lyford Cay, Nassau, Bahamas
June 15, 2005
Financial Chaos – probably in many nations in the next five years. The word chaos is chosen
to express likelihood of reduced profit margin at the same time as acceleration in cost of
Increasingly often, people ask my opinion on what is likely to happen financially. I am now
thinking that the dangers are more numerous and larger than ever before in my lifetime.
Quite likely, in the early months of 2005, the peak of prosperity is behind us.
In the past century, protection could be obtained by keeping your net worth in cash or
government bonds. Now, the surplus capacities are so great that most currencies and bonds
are likely to continue losing their purchasing power.
Mortgages and other forms of debts are over tenfold greater now than ever before 1970,
which can cause manifold increases in bankruptcy auctions.
Surplus capacity, which leads to intense competition, has already shown devastating effects
on companies who operate airlines and is now beginning to show in companies in ocean
shipping and other activities. Also, the present surpluses of cash and liquid assets have
pushed yields on bonds and mortgages almost to zero when adjusted for higher cost of
living. Clearly, major corrections are likely in the next few years.
Most of the methods of universities and other schools which require residence have become
hopelessly obsolete. Probably over half of the universities in the world will disappear quickly
over the next thirty years.
Obsolescence is likely to have a devastating effect in a wide variety of human activities,
especially in those where advancement is hindered by labor unions or other bureaucracies
or by government regulations.
Increasing freedom of competition is likely to cause most established institutions to
disappear with the next fifty years, especially in nations where there are limits on free
Accelerating competition is likely to cause profit margins to continue to decrease and even
become negative in various industries. Over tenfold more persons hopelessly indebted leads
to multiplying bankruptcies not only for them but for many businesses that extend credit
without collateral. Voters are likely to enact rescue subsidies, which transfer the debts to
governments, such as Fannie May and Freddie Mac.
Research and discoveries and efficiency are likely to continue to accelerate. Probably, as
quickly as fifty years, as much as ninety percent of education will be done by electronics.
Now, with almost one hundred independent nations on earth and rapid advancements in
communication, the top one percent of people are likely to progress more rapidly than the
others. Such top one percent may consist of those who are multi-millionaires and also, those
who are innovators and also, those with top intellectual abilities. Comparisons show that
prosperity flows toward those nations having most freedom of competition.
Especially, electronic computers are likely to become helpful in all human activities
including even persons who have not yet learned to read.
Hopefully, many of you can help us to find published journals and websites and electronic
search engines to help us benefit from accelerating research and discoveries.
Not yet have I found any better method to prosper during the future financial chaos, which
is likely to last many years, than to keep your net worth in shares of those corporations that
have proven to have the widest profit margins and the most rapidly increasing profits.
Earning power is likely to continue to be valuable, especially if diversified among many
“The best, perhaps the only, durable education is self education.”
“OCTOBER: This is one of the peculiarly dangerous months to speculate in stocks in. The other are July, January, September, April, November, May, March, June, December, August, and February.”
And Peter Lynch’s,
“Basing a strategy on a maxim is a folly”
Taking into consideration adding another doctrine-volume confirmation, that a perceived bull/bear market must also be supported by an observable volume to further support the ‘trendness’ of the market. However, early/delayed by a month or so and a not so relevant volume by the initiation of the excess phase (December 2013) , volume spikes still can be observed with these subtle changes (which can never be seen, if an investor always see the market with a myopic eye).
With that in mind and the current 6,901.09 level (7/11/2014). It can be suggested by the fledgling author that there was and still an existing consolidated phase of the market since May 2013 until the present time.
*Disclaimer: 1. The author has yet to finish any writings written about the Charles H. Dow nor any of his WSJ writings and is currently poring over these documents. The author has no intention to bastardize the local bourse and is stating what may or can be applied based on the current findings over the internet and book references. 2. Keep in mind that a primary trend may last > or equal than 1 year or so.
Finding that Montier, 2002 had rather depicted with a study that had shown rather an interesting finding that only when markets fall do they have certain correlation i.e. 52% with a rising relationship of just about 8.6%. With this brief information, the fledgling investor is open to speculate whether this small percentage at latter may be significant.
Concluding with another one of the Dow theory tenets, it was stated that for a booming/imploding market, indexes trend must confirm with each other. This basic sentence brings forth an added self-attribution bias that the fledgling author is looking for. However great the development in comparison with any indexes that had existed with Mr. Dow’s time and as compared to what exist and is compared with now.
Current P/E (Bloomberg):
which after the rape are thrown into the fire,
After discovering all is exhausted and dissipated by debt.
All scripts and bonds are wiped out.
-Michel de Nostradamus, The Centuries, 1555
3. Behavioural Finance by James Montier, 2002
4. Charles H. Dow and the Dow Theory by George Bishop, 1960
Several confident projections and conjectures (hopefully the former) had been spurred over time. Just type in to your Google search engine “Economic Collapse,” you will be surprised for yourself what you will be unearthing with just those words.
Albeit the presence of the bears and bulls of the market and the uncertainty of the future. The author decided to just but base everything on the charts that are available. Using the Google search engine and with some knowledge of the ongoing commotion, the only sensible thing that is to be done is to just stick with the numbers and historical patterns so as to increase confidence on what “can” serve as a hypothesis and as a guide for the struggling investor down the road of junior stock investing.
Picture and then contrast..
Notice any possible correlation? You decide what may be the next possible thing to happen..
Another thing the author would like to have place as an adjunct to the current findings attached above is with some of the “hard assets” that may or are currently experiencing a not “so noticeable” trend.
Albeit the “more volatile” situation represented by this hard assets, some claim it could be the next possible safe haven if all else fails. Equip with bits and pieces of knowledge about where the next possible tide that would bring forth the next best opportunity–one may just need to be vigilant enough to ride it.
The author eventually had decided to trim down the current speculative portfolio to just the following:
The much vigilant investor have not yet decided on which junior security to purchase after selling most of the MB shares (see previous post below).
Looking at the PCOMP chart, basic analysis of peak/trough would show that the current index is hitting the resistance at 6,890 mark and ‘speculatively’ speaking that with the ‘somewhat’ weak declining trend in both the MACD and RSI may indicate a possible breakdown to the nearest 6,500 support.
For the mean time, more junior security analysis are on the investor’s to-do list so as to waiting when the next best opportunity to go long on the local bourse.
As per the naïve junior security analysis, MB had been undervalued for quite a while .50-.60 cents per share and had a real value of at least 1.00-1.02 per share. A 1.80 market price/spike on that single day triggered the selling point and thus it was took out of the speculative portfolio-for that, some memories about the company had been placed all through out the posted blog, and until then, the MB junior security would still be on the watch list.
With the current local bourse up trending, it would still be a bit difficult to buy into good priced securities and so as to remain active in the ‘investing/speculating’ scene–deciding to use the ordinary approach of the deadly Technical Analysis, the occasional investor turned into a momentarily speculator had screened out the CHI as a possible short term investment (1-2 month/s duration); as can be seen and dissected from the simple chart alone. A 5.00-5.50 peso per share range. *
1. ‘Minute’ profit taking
2. Brief quantitative review between speculative junior securities
3. Good video understanding how global investment ratings ‘really’ work
Very few times the author have had paid attention to any much news –(with the exception of the global bond-purchase cutting which then had hit the local bourse) –outside the realm of just looking the quantitative numbers derive from his own excel calculations and nevertheless ensuing any of the 2 typical situation/s: the unavoidable forecasts/speculation versus purchasing junior securities with estimated risks.
Albeit unable to locate the article where the author was able to read it, if he may unprofessionally reproduce it here–(as recalled and not exact words), that ‘US has to mind its own spending-bond purchasing regardless on how the third world countries react to its decisions and that third world countries must be able to pursue their own economy etc’–
Given this type of information had further led the author to think of himself as a ‘mid-long term investor’ in the local field and rather not partake in the day to day/month-month carry-over action-reaction of the market (e.g. FTSE->DOW->SHNG->PSEI etc.) as professional traders do.
Done with the blabber, the juvenile investor decided to sell the following junior securities given certain number of days just this previous week (MY SPECULATIVE STOCK). March 2-15, 2014.
- to invest in casino? Compare BEL vs BLOOM (Belle Grande-non operating vs Solaire-operating)
- to invest in financials? (BDO vs MBT)
- to invest in mining (again)?—which brings the author has had a document stated that the Philippines has the 3rd world’s worst mining policy.*As per introductory paragraph to Mr. Domingo’s article, “The Philippines has the third-worst mining policy regime in the world, better only than those of troubled Venezuela and Kyrgyzstan, according to a study by the Canadian think-tank Fraser Institute etc..” –see reference after blog.
As to discerning which move should the juvenile investor pursue in terms of obtaining optimal investment results; here are just some highlights whereby the author matched a couple of speculative stock as to its few quantitative flaws and facts.
*Notes to read to avoid confusion:
1. Charts are in order from top to bottom as follows:
- Diluted EPS
- Operating expenses
- Long term debt
- Capital expenditures
2. Chart is shown as a 5 year retrogression, whereby 1 is equivalent to year 2012; 2 is to 2011; 3 is to year 2010; 4 is to year 2009; 5 is to year 2008
(PHILIPPINE SERVICES SECTOR)
(PHILIPPINE FINANCIAL SECTOR)
(PHILIPPINE MINING SECTOR)
Ingesting much time in looking for a better bargain among the three given sectors, the author decided to lay eyes on some TED videos, in amazement, the naïve investor was able to have a good find TED video providing some third party view on the world wide known rating agency/ies.
Security Name : Atlas Cons. Mining and Dev’t Corp.
Date : 03/05/2014
Headline : C00987: Atlas Consolidated Mining press release – 1
Content : Atlas Consolidated Mining and Development Corporation (“Atlas Mining”) posted a core income of Php2.62 billion in 2013, realizing a 4% year-on-year growth despite lower realized metal prices. Revenues slid slightly by 7% to Php14.45 billion, but such decrease resulting from lower realized metal prices was tempered by an 8% drop in total operating cash costs from Php9.80 billion to Php9.05 billion. In 2013, Atlas Mining’s wholly-owned subsidiary, Carmen Copper Corporation (“Carmen Copper”) registered a total production of 91.51 million pounds of copper metal in concentrate, 2% higher year-on year, and raised its average daily milling capacity by 4% to 43,010 tonnes per day (tpd). In July, Carmen Copper’s ore processing plant achieved a record peak milling capacity of 50,000 tpd from its existing nameplate capacity of 40,000 tpd. Throughput was optimized by the introduction of process efficiency enhancements in the existing plant. The total volume of copper shipments was maintained at 90.56 million pounds of copper metal in concentrate. Shipments of gold metal in concentrate, on the other hand, grew significantly by 51 % to 19,555 ounces, translating to a 25% increase in gold revenues to Php1.14 billion. The realized price of copper dropped 9% to an average of US$3.30 per pound, while the realized price of gold registered 17% lower at US$1,385 per ounce. Atlas Mining posted a net income of Php1.90 billion in 2013, 45% lower year-on-year due mainly to the recognition of an unrealized foreign exchange loss of Php1.02 billion on US dollar-denominated debts. In 2012, the Company reported a net income of Php3.43 billion that is partly attributable to the posting of an unrealized foreign exchange gain of Php593 million. The group’s debt obligations are mostly US dollar denominated to match US dollar revenues. This establishes a natural hedge against foreign exchange fluctuations. Thus, when US dollar debts are settled using US dollar cash reserves of the group, there is no realizable foreign exchange effect. (See attachment for additional information on unrealized foreign exchange gain/loss.)
- Ralph Waldo Emerson. March 18, 2014. http://en.wikipedia.org/wiki/Ralph_Waldo_Emerson
- COLFinancial.com. March 18, 2014. Www.Colfinancial.com
- Quote by Ralph Waldo Emerson. March 18, 2014. https://www.goodreads.com/quotes/28432-it-is-easy-in-the-world-to-live-after-the
- Domingo, Ronnel W. PH has 3rd worst mining policy regime. March 18, 2014. http://business.inquirer.net/165657/ph-has-3rd-worst-mining-policy-regime
- Company pictures (courtesy from google image search). Google.com March 18, 2014. https://www.google.com.ph/imghp?hl=en&tab=wi&ei=v10oU4ukLtOKogSF6YKQDw&ved=0CAQQqi4oAg.
- Solaire. Solaireresort.com
- Belle Grande. Www.pagcor.ph
- BDO. Www.philstar.com
- MetroBank. http://www.clix.com.ph
- Atlas Consolidated Mining. Cityofbacolod.com
- Philex mining. Blogs.terrapinn.com
1. Review on a suggested dividend stock
2. FDI’s impact on the local bourse (a tinge of optimism)
3. Yellen’s remarks (quotations)
Looking at the current trend of PSEI versus the current Speculative and Value-Invested portfolio (slideshow 1), it can be appositely observed that the ‘Frozen Stock Portfolio’ (see reference) is somehow able to manage itself through the short term range <-> uptrend the local bourse is experiencing.
Here are some fundamental/overview I highlighted on this particular stock reco for as stated perhaps, ‘a good dividend stock’:
*Read disclaimer in the DISSECTED STOCK SECTION first before proceeding:
*CHARTS are displayed in reverse (2012 <-> 2008 )
Company Name: Philippine Long Distance Telephone Co
1. Diluted EPS
2. % Gross Profit Margin
3. % SGA/G.Profit
4. Operating Margin
5. Net Income for Common Stockholders
6. EBIT (efficiency in making money)
1. Net receivables/total revenue
4. Return on Assets: stringent vs less stringent –should be increasing over time
5. Account payables
6. Short term debt
7. Long term debt vs Net earnings vs Cash
8. Current ratio
9. D/E ratio
10. True Book Value per share
Going back, one may wonder and instinctively look back at one good ‘stock-mood chart’;
Spurious versus sincere commentary/ies leave juvenile/naïve investors looking for a better resolution as to just ‘let go’ of their losing portfolios or just add more to their already mired to the red-tinted portfolio to suffice an ‘average down’ event.
From the kernel that FDI (Foreign Direct Investments) are experiencing a reciprocal pattern as to last year’s performance. As the gathered commentaries supply more information and are shown in the following:
1. “The Fed’s monthly bond purchases were cut back from $85 billion to $75 billion in December and further to $65 billion in January.”
2. “The Bangko Sentral ng Pilipinas reported a $1.8-billion net outflow of foreign portfolio investments in January, a development seen in most emerging markets. This was the biggest monthly net outflow on record, and was a reversal of the net inflow of $1.27 billion reported in January 2013.”
3. “Registered investments in January reached $1.3 billion—less than half the $2.8 billion in gross investments that entered the country the year before. These investments were offset by the $3.1 billion that flowed out of the country last month.”
4. “The country recorded a net hot money inflow of $4.225 billion last year, up eight percent from $3.911 billion in 2012. The level also breached the BSP’s assumption of $3.2 billion. For this year, the central bank expects a net hot money inflow of $2.1 billion.”
These outflows that had caused such direct despondency among the juvenile PSEI ‘investors’ probably had staged most of these ‘investors’ (like yours truly) in the ‘contempt’/despondency phase.
These somehow negative sentiments typically points out a probable undesirable market trend in the near to short term future for the very subjective local bourse performance.
A s a juvenile investor, I had to resort in some convincing resource/s that the ‘turnaround’ may probably be just around the corner; so with the market financial risk/opportunity figure as provided, a rookie theory may be pointed out that the local bourse is somehow settling (hopefully) now in the aforementioned despondency area.
Besides these preceding contemporary facts, the powerful Janet Yellen had already spoken which may provide further assumptions/probabilities in the concerned local bourse, this was just this past February 12, 2014 in Capitol Hill, and that,
1. “She expects to continue predecessor Ben Bernanke’s plan to wind down its bond-buying gradually and keep interest rates low until the jobs market improves significantly.”
2. “Yellen said that when the Federal Open Market Committee meets again in March it could consider a pause to the taper if economic conditions show a significant deterioration.”
Edgar Allan Poe
1. Burton, Jonathan. How the market’s mood can make you money. February 16, 2014. http://www.marketwatch.com/story/how-the-markets-mood-can-make-you-money-2013-07-11
2. Ong, Henry. Should I invest in dividend stocks? February 16, 2014. http://business.inquirer.net/162031/should-i-invest-in-dividend-stocks
3. Efren Ll. Cruz. Frozen stock portfolio? Let it go!
4. Philstar.com. US Fed’s stimulus cutback triggers massive ‘hot money’ outflow from Phl. February 16, 2014. http://www.philstar.com/business/2014/02/15/1290936/us-feds-stimulus-cutback-triggers-massive-hot-money-outflow-phl
5. Remo. Michelle V.. PH seen strong enough to withstand capital flight. February 16, 2014. http://business.inquirer.net/164036/ph-seen-strong-enough-to-withstand-capital-flight
6. Montecillo, Paolo G.. ‘Hot money’ flows out of PH. February 16, 2014. http://business.inquirer.net/163984/hot-money-flows-out-of-ph
7. Martin, Kathleen A.. February 16, 2014. Net hot money outflow reaches $1.844B in Jan: Investors shy away from EMs as US Fed cuts bond buying program. http://www.philstar.com/business/2014/02/14/1290049/net-hot-money-outflow-reaches-1.844b-jan-investors-shy-away-ems-us-fed
8. Agence France-Presse. Asia shares rise on Yellen remarks, debt ceiling vote. February 16, 2014. http://business.inquirer.net/163914/asia-shares-rise-on-yellen-remarks-debt-ceiling-vote
9. Sanghoee, Sanjay. Even If Janet Yellen Is Wrong About the Economy, She Is Right About Fed Policy. February 16, 2014. http://business.time.com/2014/02/14/even-if-janet-yellen-is-wrong-about-the-economy-she-is-right-about-fed-policy/
10. Rochan, M. February 16, 2014. Janet Yellen: Fed Reserve To Trim QE When US Economy Sustains Job Growth. http://www.ibtimes.co.uk/janet-yellen-federal-reserve-senate-testimony-qe-522606
11. Wikipedia.org. February 16, 2014. Edgar Allan Poe. En.wikipedia.org/wiki/Edgar_Allan_Poe
12. “Philippine Long Distance Telephone Co,TEL:PHS FINANCIALS.” markets.ft.com. December 20, 2013.
13. “Philippine Long Distance Telephone Co, TEL:PHS FINANCIALS.” markets.ft.com. December 20, 2013.
A bit of a ‘comeback’ performance and the Discontinuation of the stock dissected section –temporarily
However, challenged or not, the author still decided to place here the value invested and the speculative portfolio performance along with the PSEI chart. Some improvements can be seen since the depressed 2013 Christmas season performance and that the speculative portfolio is seemingly trying to recover back to where it was once staged in the November 2013 period.
The author had let go of his entire minute 4.22% (% in Speculative portfolio) in MEG (THE MEGAWORLD CORPORATION) and took the profit of 11.56% during the down/boring days of late December.
No other major trade/changes were noted in the speculative account. As for the value-invested portfolio, a somewhat relieving sign that it had reach some new high of 18.13 from 17.97 level (based on its relatively very short performance since conception on November 10, 2013).
Taking a moment from the deluged portfolios, the author decided to browse through one of Mr. Greenblatt’s work.
With leer and heeding for much more needed information, the information obtained from it was that Mr. Graham’s work may not work due to the his much stringent requirements in screening for prospective junior securities (this was during the 2006 period-the time when the book was published). As has been stated in this paragraph in Mr. Greenblatt’s own words, —
“Although Graham’s formula has continued to work over the years, especially during periods when stock prices are particularly depressed, in today’s markets there are usually few, if any, stocks that meet the strict requirements of Graham’s original formula.”
Experiencing the vicissitudes of the PSEI, and with the current PSEI P/E ratio of 17.42, the fledgeling author still would like to continue performing specific analysis (in MY VALUE-INVESTED PORTFOLIO) basing it STILL in the old-school style of Mr. Graham’s immortal ~80 year work (along with the current Warren Buffet methodology) to be applied for the greater part of the much reduced junior security market prices in the PSEI for purposes of stock picking–which then may ensue some more fruitful results in the future.
“With respect to order, knowledge comes first, and with respect to importance, action is more important.” –Zhu Xi
1. Greenblatt, Joel. (2006). The Little Book That Beats The Market. Hoboken, New Jersey. John Wiley & Sons, Inc.
2. “Bloomberg – Business, Financial & Economic News, Stock Quotes.” bloomberg.com. January 5, 2014.<http://www.bloomberg.com/>
3. “Zhu Xi.” Wikipedia.org. January 5, 2014. <http://en.wikipedia.org/wiki/Zhu_Xi>
Despite the despicable performance of the local bourse, this fledgeling investor had found some new focus on dissecting 1 and ½ annual summary for at least a couple of days of effort- 1 and ½ because AP’s balance and cash flow statement are yet to be done. I may promise that these discussions are not fully of an impeccable work but are always subject to corrections, but the try hard actuary still would prefer his own work compared to anyone else’s trend assessment and unsolicited predictions.
However, time is of the essence, and at times this type of information is no longer or might not be much more applicable to the current situation of the market. And regarding to its applicability as an accurate ‘purchase point’ when as identified a potential ‘GROWTH’ stock. To have a brief but meaningful way of deciphering this ‘applicability’; I may repeat as was accurately stated before–poring over the Great Value Investor’s work, “Characteristically, stocks thought to have good prospects sell at relatively high prices. How can the investor tell whether or not the price is too high? We think that there is no good answer to this question—in fact we are inclined to think that even if one knew for a certainty just what a company is fated to earn over a long period of years, it would still be impossible to tell what is a fair price to pay for it today.”
Now focusing on the great analysts’ predictions that are popping out everywhere during a full blown to a dying Bull Run (denial stage) cycle. Probably this down trend that had been happening might not be one of the things accurately PREDICTED and/or expected by these qualified professionals as had been found in the following short statements, “Our fearless forecast is 7,000 by yearend”, “meaning the investors are willing to pay a higher multiple for the Philippine market”, “THE PHILIPPINE Stock Exchange index (PSEi) could hit 7,000”, etc.
The PSEI currently (December 25, 2013) is in a (negative) 9.92% return at 5,835.13 from the 6,477.94level three (3) months ago (during the time these forecast/conjectures were made).
I guess there is always unlimited opportunities to predict the next Bull Run or Bear Market every now and then, having such expectations that these types of enthusiasts to constantly predict what may or may not happen in the PSEI’s future in 2014 and beyond. I may apply as one of Montier’s works (which worth mentioning at least 2 here) stated that either there is the presence of (1) ‘ceteris paribus’ defense (something happened that we did not expect e.g. the devastation of typhoon Haiyan-far away from Metro-Manila (business capital), recognition of one corrupt Philippine official to another and their hidden modus operandi, etc.) or the (2) “it just hasn’t happened yet” defense that are available for their fallible projections to support. But I wish not to discredit anyone this Christmas Day; probably the turnaround is just around the corner. Who knows? It is just as waiting for the next accurate prediction when it has already happened- A wonderful and accurate technical analysis, Hindsight 20/20 it is. and so.. Cheers! 🙂
Japanese’s “Nana Korobi Ya Oki”
Proverbs 24:16’s “For though the righteous fall seven times, they rise again, but the wicked stumble when calamity strikes.”
1. “Mystockquery.com.” Mystockquery.com. December 25, 2013. <http://mystockquery.com/>
2. “PSEi seen to hit 7,000 by yearend.” Bworldonline.com . December 25, 2013. <http://www.bworldonline.com/content.php?section=Economy&title=PSEi-seen-to-hit-7,000-by-yearend&id=77188>
3. Loyola, James. “PSEI seen to hit 8,000-9,000 in 2014.” December 25, 2013. <http://www.mb.com.ph/psei-seen-to-hit-8000-9000-in-2014/> Montier, James.
4. “Seven Sins of Fund Management.” Er.ethz.ch. December 25, 2013. <http://www.er.ethz.ch/teaching/Seven_Sins_fund_Management.pdf>
5. Graham, Benjamin and Dodd, David L. (1988). Security Analysis. United States of America: McGraw-Hill Companies, Inc.
With the ‘squall’ (an understatement) hit the local bourse, the naïve investor was temporarily struck out of the market, paralyzed due to the unforeseen circumstances from mid-June 2013 to present. Knowing nothing but just P/E ratios, Dividend Rate versus Yield, MACDs, RSIs, etc. The ‘investor’ prior to his additional minute knowledge of some of the salient investor’s (Benjamin Graham) security analysis; found himself in despair to see much of his entire portfolio taken out at a consistent day to day loss rather than in any recovery. This alarming consequence of lax presumptions of the local bourse ensued for further security research so as to bear much more weight over the objectivity rather than the subjectivity of a stock analysis.
The said junior security assessment that is already on going and probably few more stocks that may be dissected in the future would be posted under the head link of a much deserving “Stock Dissected Section” unless the naïve investor may think about any peculiar name; it may change.
“All things are excellent are as difficult as they are” –Baruch Spinoza (Click to know more about Spinoza)
1.”Security Analysis: The Classic 1940 Edition.” Books.Google.com. December 19, 2013. <http://books.google.com.ph/books/about/Security_Analysis_The_Classic_1940_Editi.html?id=7RULWTojgWgC&redir_esc=y>
2. “Baruch Spinoza.” Wikipedia.org. December 19, 2013. <http://en.wikipedia.org/wiki/Baruch_Spinoza>