How to choose what stocks to buy & sell in

Philippine Stock Market

Omeng Tawid Basics - Investing in Philippines Stock Market 18 Comments

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Choosing what stocks to buy and sell in Philippine Stock Market is the real game
when it comes to investing.

In this post, Ill be giving you some practical guidance to completing this step.

Its actually easy to buy and sell stocks in Philippine stock market (the manual
part of it is contained in this tutorial >> How to Buy and Sell Stocks in Philippine
Stock Market), but whether the action will give you profits is another more
important question.
In fact, this is one common question coming from any newbie investor: What
stock can I buy now?

The answer of course depends on several factors, but each one of them
practically boils down to your target destination.
What is your target destination?
Your target destination can be one of these two: (1) Target Date (2) Target
Price.

To give you an example, lets say your Target Date of realizing your stock market
gains is on your retirement time which, for example, may come at least twenty
years from now.

In that case, choosing giant companies which you think will outlive all of us can
be your candidate stocks to buy using the strategy of Peso Cost Averaging
(Check here how this strategy works). The goal here is not really to do timing of
the market but using your long time-projection to accumulate as many shared of
great companies as possible.
So by just knowing your Target Date, you can start streamlining your stocks
selection and strategy.

Having different Target Date as destination obviously requires different stocks

and strategy. As shared in my last blog, the growth of your investments is a factor
of Time, Talent & Treasure you allow your investments to have.

TIME refers to how long youre willing to park your money in the stock market.
TALENT refers to your skill in choosing your strategy and stock selection.
This can be monitored as percentage growth your investment money achieved.
 TREASURE refers to the amount youre investing. Since growth of stocks is
reported on a percentage basis, a bigger base or capital will obviously translate
to bigger actual net profit.
In the table below, the same ending target (ending value of 7245) was obtained
with different variations in these three factors.

With the target date in mind, you can plan how to achieve your goals by looking
for the proper combination of your 3Ts Time, Talent & Treasure.

Now we go to the second type of your target destination Target Stock Prices.
If youre investing believing that its actually a business, youd want to invest in a
company you believe is going to rise in value fueled by its continuous growth and
earnings. This price which you believe a company will achieve some time in the
future is called its Fair Value (FV).
More specifically, Fair Value is a companys estimated worth or fair market value
as computed by various ways specific to its industry (i.e DCF, NAV, P/BV, P/E).

This FV kind of target price is different from short-term target prices set by
traders who buy stocks to simply ride short-term price fluctuations.

Now, calculating Fair Value is already one complicated animal especially for
beginners.

Fortunately, some online brokers provide their own analysis and figures for
Target Prices. In addition, some online brokers like COL Financial even give
sample portfolio you may want to imitate.
At this point, lets tackle how online stockbroker COL Financial can help in
determining the Fair Value of candidate stocks to buy (If you dont have an
account yet, you can follow this tutorial to open >> How to Open an Account in
COL Financial for newbies and OFWs).
This is as simple as logging-in in the website and going to its Investment
Guide by following the menu: Research >> Fundamentals >> Investment Guide.

Here youll automatically see the Fair Values calculated by COL Financials
analysts which you can use as your target price.

Theres also another helpful data included in the table above called Buy-Below
Price (BBP) which you can also follow to give you decent returns when you
decide to sell with the FV prices.
The concept of Buy Below Price is very simple you only buy when the stocks
current price is below this BBP.

As you will notice, these Buy Below Prices are actually near 85% of the FV, which
means that by observing the BBP in your transactions (meaning, you buy only
when the stocks current price is below this BBP) youre effectively strategizing
to have at least 15% expected growth should you decide to sell later on at those
FVs.
Its important to note that computed Fair Values may vary from broker to broker
because of the differences in the way they calculate it and the assumptions they
make in doing so. Understanding how the FVs you see were computed is thus
important before relying on it. Dont just follow blindly. Compare using several
researches if you can.

The discussion above gives you Target Price you can use. But more than that, COL
Financial also has model portfolio you can use in screening your stock selection.
COL Financial Model Portfolio
The model portfolio consists of stocks that COL Financial recommends in its
monthly strategy report, COLing the Shots. It consists of the stocks they believe
to have favourable fundamentals, and are expected to be the major beneficiaries
of the prevailing macroeconomic trends.

In short, its a model portfolio that COL Financial maintains. COL Financial
adds/removes stocks to/from the list depending on their performance and
market changes. Its a porftolio you could literally monitor or copy. You can check
this post for updates on COL Model Portfolio.
You can access this info still from the investment guide and choosing the Model
Portfolio Set-up.
Here you can see the selected stocks in its Model Portfolio together with their
Fair Values and suggested BBP.

So, if youre looking for some free guidance what stocks to buy and when, this is a
good start. Again, make sure you understand how the figures were calculated
before using it in your strategy.
UPDATE: This Model Portfolio is no longer accessible in COL Financials website.
However, you can see still use as a guide their list of stock picks in their COLing
the Shots reports. An example is shown below. Or you can use SAM by
Truly Rich Club which can give you the exact stocks to buy and sell.

The COLing the Shots reports are available inside the COL website
under Research section.

It is a monthly publication by COL which provides insights on investment

opportunities based on global and local developments that could affect the market.
COLing the Shots aims to provide timely and relevant information and analysis as
well as a model portfolio for successful investing.

Paid Resources
Of course there are online resources you can avail to help you in this task.

Pinoy Investor for example gives you an already consolidated data coming from
comprehensive researches of eight online brokers.

By having access to several FVs computed by several online brokers, you can
easily make comparison of their estimates and formulate consensus data. Youre
also able to validate in case one broker may have bias to one stock. Lastly, you
can also see how many brokers give buy/sell/hold recommendation to a certain
stock.

Once youre decided with the Target Price youre going to use, you can then slice
at least 15% from it and just use it as your BBP.

You can check in this post a short review how Pinoy Investor can be a big help
both for long-term and short-term investors. In fact, in its latest performance
update, it tells of its 10 out of 13 stocks with BUY recommendation from one
broker that outperformed PSEi. You can read more about it here.
Truly Rich Clubs Stocks Update is another one that can deliver all these
information straight to your email on a regular basis. But as youll read in
this Truly Rich Club Review, the club is much more than stocks update.
For example, one benefits of the membership called Stocks Alert recently sent
just advised the selling of TEL shares after achieving more than 20% growth.
This does not include yet the generous dividends TEL has paid out to its owners.
You can check the table below and read this post to see how Truly Rich Club of
investing works >> Strategic Investing with Truly Rich Club.
As a last note, it is also advisable to just check your investments once in a while
to see how it performs. Maybe once a month will do if youre not the trader type.

Also, before investing you should see your overall finances in a bigger picture
and understand that you have to start with protecting yourself and dependents
before plunging directly to investing.

I suggest you start studying BTID (Buy term, invest difference) if you have the
time to actively manage your investments. Get a term insurance before starting
investing.

Hope this helps in drafting your own investment plan.

If you have other questions, let me know in the comments below.

Have fun investing,

oMeng

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