Stock picking through Citiseconline

In this tutorial, I suggest how Citiseconline may be used to choose a company to buy or invest in. To begin, login to your Citiseconline account and choose the following sub-menu: Research..Fundamentals..Investment Guide:


Next highlight the data (CTRL-a) in the investment guide table and copy it (CTRL-c).

Then, open the Notepad application and paste the table data (CTRL-v) onto it.

Select the data from Notepad (CTRL-a) and copy it (CTRL-c). Then open Microsoft Excel and paste the copied data onto the Microsoft application (CTRL-v):

Next, right-click on column F and click Insert:

A new blank column will be inserted. On cell F1, type in the formula as indicated in this picture:

Copy cell F1 (CTRL-c) and paste it (CTRL-v) onto the rest of the cells in column F:

Now, on the Data menu of the Excel application, click the Sort icon:

Then, in the Sort dialog box, untick the "My data has headers" tickbox, Sort by Column F, and Order from Largest to Smallest:

The Excel table data will now look like this:

Select the first six rows by highlighting the left side of these rows. Then right click and choose Delete:

The data will now be reduced to as follows:

For a given stock, column C represents the current price, while column E represents the target price or the fair value of the stock as estimated by Citiseconline. The target price represents the future price value of the stock which Citiseconline thinks the stock will attain within more or less a year from now. Column F represents the percent growth of the stock price assuming that the price moves from the current price in column C to the fair value in column E. Column F is now sorted in descending order, and the stocks are listed according to their potential growth in their current stock prices, beginning with the largest growth potential down to the least.

Based on this list, ABS (ABS-CBN) has the highest growth potential of 130%. Before buying ABS, however, you have to check the story line behind ABS to see why Citiseconline puts such great value on it. The next company on the list is CEB (Cebu Pacific Airlines), and the third is FPH (First Philippine Holdings).

To see the underlying stories behind these 3 stocks, in the Citiseconline webpage, choose the following sub-menu: Research..Archive. Now, check the story line of ABS by choosing ABS from the stock list:

The news reports and commentaries about ABS will be listed:

Notice that the second report mentions that Citiseconline has terminated coverage on ABS. Note also that several recent reports show ABS missing earnings estimates: Net income drop, net income drops, below consensus forecast, misses COL forecast.

All these reports indicate that the 130% potential growth for the stock price of ABS cannot be relied on. Citiseconline has ceased analyzing the company, and most probably, ABS is not performing that well, and so Citiseconline does not want to include it anymore in its list of companies covered. To be safe, then, do not buy ABS as its earnings are in a declining trend.

Next, we check the story line behind CEB:

Again, like ABS, CEB seems to be recently declining in earnings as well: performance disappoint, earnings decline, all in the negatives. Therefore, it would not be a good idea to buy CEB. The investment guide of Citiseconline often is not updated so you have to confirm the story line to check whether a good potential growth in stock price has an underlying fundamental story basis at all.

Finally, we check on FPH:

Based on the headlines alone, overall, FPH looks like a good company to invest into. Simply put, it has fundamentals. We check one of the stories to check if this is a safe investment:

The story line looks all right. Nothing scary like the company not meeting forecasts or estimates. Next we check the technicals through bloomberg. Go to http://www.bloomberg.com/quote/FPH:PM

We check for an approximate one-year trend:

The stock price chart shows that the price is in an uptrend. It would have been best to come in at the start of 2012, but even at this time, it may still be a good time to come in, given the fair value of 117 Pesos as estimated by Citiseconline. This corresponds to a gain of about 50%.  It would have even been better to come in before 2012, but it is usually safer to wait for a breakout to confirm an uptrend. Prior to 2012, as shown in the chart, the price was in a side-ways, neutral trend. Then in November 2011, there was a breakout. Once you have the breakout from a side-ways, rectangular trend, then it is a good sign to come in.

Before buying into FPH, it would be even safer to check other brokers besides Citiseconline to see what their opinions are regarding FPH. We can, for instance, check on the analysis of AB Capital Securities:

In this case, not only does Citiseconline recommend FPH, but AB Capital Securities recommends the company as well. This double affirmation confirms that FPH has fundamentals; that is, there is basis for believing that it is currently underrated or undervalued, and that it is actually worth more than what it is currently worth today. Note, however, that AB Capital Securities estimates a more conservative fair value of 85 Pesos per share, in contrast to the 117 Pesos estimate by Citiseconline.

In summary, Citiseconline provides an investment guide that can aide investors in finding which companies are the best buys. The investment guide, however, may not be updated, and so, it is always best to check the story lines to see if there is any basis on why Citiseconline highly recommends certain stocks. Besides having good potential stock price growth, and a good underlying story, it is wise also to check that the 1-year stock price chart is on an uptrend. It might be dangerous if it were on a downhill trend. Lastly, check with other brokers to see if they have similar positive opinions about a stock or not. If one has several positive confirmations about a company, then there is less reason to fear, particularly if the whole economy is on depression mode due to some recession or disaster. If the company has true substance, then its price will most likely eventually recover and rise in the future until it reaches its fair value. The more knowledge you have, the less impulsive you become, and the less emotionally-driven your decisions become with regard on what to buy and more importantly, on when to sell.

Stock portfolio: Change in strategy

Previously, selldown made the following strategy:

1. Trade a maximum of one buy-transaction per month.
2. A buy-transaction must not exceed 33,000 Pesos.

I thought about it and I think it would be better to change it to the following:

1. Buy transactions for a single month must not exceed 33,000 Pesos.

This would mean that one could issue an infinite number of buy transactions in a single month as long as the sum of the transactions do not go beyond 33,000 Pesos.

On why I think this is better is because there are so many good companies out there that isolating a buy transaction to a single company for a given month would lose us the opportunity of cost-averaging the purchase of other good companies. So our strategy would be to cost-average the purchase of several good companies simultaneously over time.

Stock portfolio: Initiation

The following are some initial strategies for the stock portfolio simulation:

1. Trade a maximum of one buy-transaction per month.
2. A buy-transaction must not exceed 33,000 Pesos.

Given that the global economy is in a recession, it would be best to be prudent with investments. As such, we should be extra careful in buying companies, or else the stock prices may fall significantly any time and we become stuck with the stock holdings, being unable to liquidate them without realizing large losses.

I am estimating the economic recession or stagnation to last from about two to five years. As it would be unwise to plunge all cash into stocks very quickly, it would likewise be unwise to wait for five years before starting to invest again, as we never know when the next bull run will start all over again in the cycle that is called the economic cycle.

As such, we take a balanced approach by slowly buying into stocks that are undervalued. We spread our investments over a course of about two and a half years. Investing about 30,000 Pesos every month for the next two and half years, would sum up to a total investment of one million pesos, which is the starting cash balance of our stock portfolio.

Going forward into the recession, we will expect stock prices to further drop. We will be able to take advantage of these drops by investing as we go deeper into the recession. But we cannot wait to reach the bottom of the recession, or else we will miss it.

In a way, what we are doing is what is called cost-averaging. That is, the strategy of buying small amounts of stocks at regular intervals in time, in the hope of averaging down the total costs of purchasing these companies. Also, it is a good way to compromise the impossibility of finding the rock bottom of bull market conditions such as today.

The stock portfolio simulation

Assumption of the stock portfolio:

1. The stock portfolio is unreal. It is just a simulation game.
2. It assumes an initial cash balance of 1,000,000 (1 million) Philippine Pesos.
3. It assumes a 2% charge for every transaction.
4. It assumes Philippine time is used.
5. It assumes the currency of the Philippine Peso.

The purpose of the stock portfolio is to test whether the strategies to earn money via stock trading, as discussed in this blog, are successful. A strategy is considered successful if it was able to earn money. It is considered a failure if it lost money.

The following is the initial stock portfolio:

Date: 10:34 AM, 29 January 2008

Cash Balance:
1,000,000

Stock Portfolio
No stocks in portfolio.

Transaction History:
No transactions in history.

On why EEI might be a good buy

Not everybody is familiar with the company EEI in the Philippines. Most probably, perhaps maybe just even one out of a hundred Filipinos know that such a company exists. But for a person familiar with stock trading in the Philippines, there's a higher chance that he has heard of this company.

EEI is generally a construction firm based on the Philippines. Though its logo claims that it has been in the construction business since 1931, its name is relatively unknown to the common Filipino perhaps because most construction firms remain largely uncommon to the ear of the average person, regardless of geographical region, at least in comparison to popular names such as McDonald's or WalMart.

So on why I think EEI is a good buy is simple. At least for me, whenever I go to work, I see its name and logo almost at every corner. From my home, I would see its logo at a huge construction going on along Quezon Avenue corner EDSA. From the MRT, I would see the deep escavation and the huge cranes swinging their mighty arms several stories above ground.

Then when I near my office along Shaw Boulevard corner EDSA, I see the same logo again. And with the logo comes some big, big construction going underway, consisting of twin towers. I think these towers belong to the St. Francis Square company. Then when I visit some friends at Fort Bonifacio, there's another huge residential construction going on beside the Serendra condominiums. And you guessed it right, I see the logo again that becomes more and more familiar as the years go by.

Well, one may argue that just because one sees a company's businesses sprouting everywhere in the city, does not mean that the company will automatically be earning big in the near term. Heck, this company has been in the Philippines since 1931. And no one still knows about it.

Think about it. If this company has had a high of about 5.5 Pesos in the past two years, and it is now trading at 0.90 Pesos a share because of the global economic recession which nobody has control of, then give it around two to five years and the chances of it rebounding to its previous highs of five Pesos are quite optimistic.

HK fund buys Alliance Tuna

A Hong Kong-based fund, Victoria Fund, has bought 13% or about 80 million shares of listed Thai-Filipino company, Alliance Tuna, at the start of the year 2009 at a price of 1.60 Pesos per share.

“They believe in our strategy of embracing globalization, our global sales and new products and acquisitions to leverage on our already formidable market coverage,” Alliance Tuna president Jonathan Dee said of the block sale.

Dee remarked that Alliance Tuna has been compoundedly growing at about 26% for the past 5 years and expects the rate to push up to 30% this year. This may have caused the attraction of the Hong Kong fund.

In a separate disclosure, the company plans to acquire a 51% stake in Prime Foods New Zealand, which is the second largest seller of salmon-smoked products in New Zealand. The acquisition is said to come in two parts: one to be paid immediately at NZ$650,000 and the other worth NZ$500,000 to be paid later in the year.

Alliance Tuna and Prime Foods plan to form a joint venture of selling salmon to the rest of the world excluding New Zealand.

Alliance Tuna is primarily engaged in the canning of tuna for institutional and retail-pack sizes. In the first nine months of 2008, it reported $18 million revenues from the institutional size and $19 million from the retail size.

Welcome!

Welcome to Sell Down!

In this blog, I discuss about money matters. Anything under the sun about money. These can be but are not limited to stocks and companies, insurances, pre-need plans, funds, etc.

As I am from the Philippines, most of the financial instruments or markets I will be discussing are local to my country.