Introduction

AMDG

About this blog:

Hi! Warmest greetings to anyone who may have stumbled into this blog and decided against his/her better judgment to read on. Welcome to rpstockblogger.com, my personal logbook about the Philippine Stock Market – a montage of thoughts, opinions, statistics, rumors, personal conspiracy theories, facts and what-else-not that I believe is worth writing down.

Seeing as this blog might go in all directions all at once, let me just set a few parameters and disclaimers:

1. All you see and read here are personal – i.e., they are not to be taken as professional advice or anything like that. I am as far from being a professional stock investor as from being a professional anything. So anything you see here, take it with a grain of salt.

2. My primary objective for doing this is to have a venue for remembering whatever thoughts, strategies, eureka moments and sudden, gut-wrenching realizations of a wrong investment that I may have made that pops into my head. It only happens to often with me: I’m sterilizing my daughter’s milk bottles or changing her diaper when I realize I should’ve looked into this or invested in that, only to forget it the next day when I go to the office. Though I have a spreadsheet for qualitative and quantitative data and opinions, I find that writing my thoughts in prose gives it more structure.

3. My secondary objective is to share – and, in the same process, to learn. There are many other stock market investors out there who may be looking for insights and who may want to read my cockamamie opinions. Also, there may be a lot of stock market enthusiasts out there who may want to CORRECT my cockamamie opinions. Both reasons, I believe, will make this endeavor worthwhile.

About the latter reason, though – the part where others may want to correct me – this is something I would highly appreciate. All stock investors are in it to make money, so feel free to be as frank as possible when commenting on any of my thoughts or opinions. I’d rather be corrected than realize too late that I’m stuck with a bad stock. Additionally, for those times when I believe I am correct, a more lengthy exchange of ideas would be a good thing to have J

4. The scope of my blog is largely limited to the Philippine Stock Market, i.e., the Philippine Stock Exchange. Expect to find also tidbits about the Philippine economy, specific Philippine industries, rumors from business clubs, etc. Of course, we can’t exactly pull ourselves away from the web of the global economy, so cause-and-effect relations from abroad will play a huge role here too.


About me and my trading style:

I consider myself a fundamental investor. I buy a stock based on financial soundness, operational efficiency, growth prospects and price attractiveness. To judge according to these criteria, I look mainly at news reports, PSE disclosures, annual reports and financial statements. Of course, I also get in touch with my broker and other friends who also invest for rumors, news, etc. From there, I come up with a quantitative and qualitative database per company that I pore over when deciding whether or not to buy.

As a fundamental investor, I usually hold stocks until I find them too expensive (that is, when the price becomes much greater than the book value, the price per share returns and the qualitative premium over that I place over these two, as dictated by my comfort level and appetite for risk). That usually takes anywhere between several months to several years, depending on the stock and the condition of the market. The shortest stock I ever held that I can remember (i.e., that I have a record of) is EIB, which I bought at P0.49 on March of 2007 and sold at P0.54 of the same year. The longest stock which I’ve held (and still holding onto to date) is PX, which I started buying at August of 2006 at an average price of P4.03 a share.

As for the buying, I prefer stocks with healthy balance sheets, good management strong growth potential and low per and p/bv ratios. Too much to ask under normal circumstances, yes, but that’s just the ideal. I’m pretty open to compromise as far as these criteria are concerned, otherwise I would have never been able to buy a single stock.

I have been investing in the stock market for over five years now. For the first two or three years, I just bought whatever stock I felt like buying; I was the coin-toss investor. After and 8%-15% gain, I’d usually sell, toss the coin again, buy again, and repeat the process. Luckily enough, I made 50% in my first year of investing in PSE!

The second year, I lost around 15% in the BDO IPO. The IPO price was P18.00, and it went down to the P15-P16 level in a few months. I cut my losses (a mistake, considering BDO is trading now at around 80 bucks a pop – but that’s why I’d like to learn and be constructively criticized) and went back to my darling at the time (and incidentally, a bank that was gobbled by BDO just last year): EPCI. I gained back what I lost and got out barely breaking even.

I stopped trading for a year or so after that, stung by the fact that I jeopardized my life savings (oh how youth is wasted on the young!). Then a good friend of mine (let’s call him compounder888) asked me about the stock market and how to invest therein. I gladly took him to my broker and introduced him to another friend (let’s call this other guy spyfrat – yes, he’s the same spyfrat whose name is among the most respected technical analysts in the PSE forums). From there, compounder888’s portfolio really took off. I was particularly challenged when he tripled his money in URC. His success made me take a long, hard look at how I was investing; I mean, whatever he was doing, I’m sure it was better than tossing coins.

So it was at this point that I decided to have a little discipline in how I invested. I still made some mistakes along the way (SMCB, PCOR). By and large though, I began to find my rhythm, and things started to fall into place. Overall, in the eighteen months spanning November 2005 to May 2007, my portfolio jumped 104.55% - can’t say I wasn’t happy with that.

But despite the satisfactory returns I got that year, there are still things I now realize in hindsight. There were stocks where I got lucky, stocks which I bought for the wrong reasons. There were the recommendations that I took at face value without any research on my part, and there were tons of research on my part that I did not act on because of the recommendations I took just at face value (JGS at P3.50++, ASIA at P5.00++ and RCB at P8.00++).

I suppose you could also say that I, along with many others, just got lucky that year because stocks were good overall anyway. You could say that I could’ve stayed on with my coin-toss method of stock-picking and still make money, given how hot the market was. Well, maybe. But to this I would point out one barometer of gauging how good your progress is in the stock market, one that my friend compounder888 uses: whether or not you beat the index. I don’t have solid figures for the PSEI during that period, but I’m confident I beat it. But, much more importantly, I would point out that it was during this time that I developed my investment style, a style that (let’s hope) is much more successful and sensible that tossing coins.

It was this investment style that helped save me from the initial onslaught of the global meltdown brought about by the American credit crisis. By May of 2007, my portfolio was too bloated for comfort. I had stocks trading at beyond six times its book value (PAX) or thirty times its earnings (MEG). It was at this point when I decided to sell everything I had except PX, whose extremely bright prospects allowed me to look past the fact that its price was hovering just below 2:1 p/bv.

True enough, all the stocks that I let go took a beating (particularly PAX, which lost 90% of its value). True enough too, PX continued its stellar rise, hitting a high of P11.75 before being pulled back down to earth (I’m still confident this guy has what it takes to reach the low teens).

But I wasn’t totally spared: I bought into AGI just weeks before the meltdown. I also went back into the market too early (now would’ve been better) and downed a sizable amount into SMDC (enough to make it 17% of my portfolio) – a company that has 60% of its assets in equities and a quarter of whose revenues comes from mark-to-market gains. Needless to say, with the downturn, SMDC was slaughtered.

So now, here I am, coping with an 11% loss since June of 2007 and with no more money to buy more shares at lower prices. The journey’s just beginning.

(On a more personal note, I’d like to express my gratitude to my friend, compounder888, for forcing me to pull my head out of my ass and discover there’s more to stocks than posting a list of blue chips on the wall, throwing a dart at it and buying whatever I hit. Although this guy and I barely agree on anything stocks-, market- and economy-wise even until now, I don’t think I’d be writing this blog if he didn’t challenge me to be better at investing. As a matter of fact, his own blog, www.chiefstocks.blogspot.com, is one of the reasons why I thought of making one of my own. Copy-cat, yeah, I know, but who introduced who to stocks anyway?! Hehe, just kidding, Chief. “You can’t argue with success,” as compounder888 would say about Warren Buffett, but you sure can try to copy it. Anyway, this guy’s had more than his fair share of good calls as far as stocks is concerned, so check his blog out too while you’re at it.)

So now you know what the blog is about, and you have a background idea about the person writing it. Feel free to read on, comment, ask, object or refute. For any of that, don’t hesitate to e-mail me at rpstockblogger@gmail.com.

Enjoy!