Equities Investing

“An Overview of the Equities Market”
Mr. Eliezer Joshua M. Gonzales, CFMP (MBA)
www.pse.com.ph
COURSE TOPICS:
Theories and Basics
How to pick a Stock?
To Buy, Sell or Hold?
www.pse.com.ph
COURSE TOPICS:
Theories and Basics
www.pse.com.ph
PICK YOUR STOCK!
Stock 28-Jun-12
ABS-CBN ?
AC ?
ALI ?
BPI ?
BDO ?
GLOBE ?
JFC ?
MER ?
PLDT ?
URC ?
source: PSE
www.pse.com.ph www.pse.com.ph
COMPANY FUNDRAISING OPTIONS
• Bank financing
• Debt financing
• Equity financing
WHAT’S A STOCK?
EQUITIES
SHARES
STOCKS
ISSUES
WHAT’S A STOCK?
Ownership interest in a
EQUITIES
company
SHARES
A stock represents a 50% return

ISSUES
claim on the company's in 1 day is
assets and earnings possible!
WHAT’S A STOCK?
A GOOD FORM OF
INVESTMENT
Example,
An assetifor
a company
item that is
issued 100 shares of
purchased with the
stocks and an investor
hope10
owns that it willthen he
share,
generate
owns 10% ofincome
that or
appreciate in the future.
company
WAYS TO MAKE MONEY FROM STOCKS
➢ DIVIDENDS
➢ STOCK APPRECIATION
www.pse.com.ph
“ Invest in companies that are profitable
today and will be more profitable in the
coming years ahead”
“ Profitability is positively correlated
with cash dividends and stock price
appreciation”
“ LAW OF DEMAND AND SUPPLY”
POSITIVE NEWS MORE BUYERS LESS SELLERS HIGHER SHARE

(PROFITABILITY) (DEMAND) (SUPPLY) PRICE
HIGHER PROFITS – HIGHER CASH DIVIDENDS – MORE

BUYERS/DEMAND COMPETING TO ATTRACT SELLERS – HIGHER
SHARE PRICE
“ LAW OF DEMAND AND SUPPLY”
NEGATIVE LESS BUYERS MORE SELLERS LOWER SHARE

NEWS (DEMAND) (SUPPLY) PRICE
LOWER PROFITS – LOWER/NO CASH DIVIDENDS – MORE SELLERS

COMPETING TO ATTRACT BUYERS – LOWER SHARE PRICE
“ Profitability is positively correlated
with cash dividends and stock price
appreciation”
Capital Appreciation
Stock 22-Jun-03 22-Jun-07 22-Jun-10
ABS-CBN 20.50 31.50 38
AC 139.26 471.69 317.00
ALI 4.48 18.25 13.5
BPI 25.80 58.62 45.5
BDO 18.75 71.00 44.00
GLOBE 538.16 1,213.07 875
JFC 17.20 54.06 68.5
MER 8.73 90.45 190
PLDT 484.08 2456.91 2395
URC 4.22 19.00 28.00

source: PSE
Dividends
EX-DIV RECORD DATE
SYM TYPE VALUE DATE DATE PAYABLE
SECB CASH P0.25 per share (regular) 21-May-10 26-May-10 22-Jun-10

MBT CASH P0.60 per share 22-Mar-10 25-Mar-10 15-Apr-10
PSB CASH P2.75 per share 12-May-10 17-May-10 31-May-10
PSB CASH P0.15 per share 26-Mar-10 31-Mar-10 16-Apr-10
HLCM CASH P0.40 per share 31-May-10 03-Jun-10 25-Jun-10
UBP CASH P2.20 per share 05-May-10 11-May-10 04-Jun-10
MFC CASH CAD 0.13 per share 13-May-10 18-May-10 21-Jun-10
SLF CASH CAD 0.36 per common share 21-May-10 26-May-10 30-Jun-10
ABS CASH P1.11 per share 26-Mar-10 31-Mar-10 29-Apr-10
ICT CASH P0.40 per share 27-Apr-10 30-Apr-10 20-May-10
URC CASH P0.94 per share 30-Apr-10 05-May-10 20-May-10
TEL CASH P76.00 per share (regular) 12-Mar-10 17-Mar-10 20-Apr-10
TEL CASH P65.00 per share (special) 12-Mar-10 17-Mar-10 20-Apr-10
AC CASH P2.00 per share (regular) 17-Jun-10 22-Jun-10 16-July-10
source: PSE
DIVIDEND YIELD = (CASH DIVIDEND / BUYING PRICE) x 100
PLDT (TEL)
Cash Dividend 2011 = Php 222/share

Jay’s Buying Price = Php 484/share
PLDT Dividend Yield = (222/484) x 100 = 45.87%
• Higher than 1% interest income in savings deposit

• Higher than 3-5% interest income in bonds and PDA
• Higher than the prevailing inflation rate of 4.2%
TOTAL RETURN =((CASH DIVIDEND + CAPITAL GAIN) / BUYING PRICE)) X 100
PLDT (TEL)
Cash Dividend 2011 = Php 222/share

Current Market Price = 2,750/share
Jay’s Buying Price = Php 484/share
Return = (222 + (2750-484))/484 x 100% = 468.18%
• Higher than 1% interest income in savings deposit

• Higher than 3-5% interest income in bonds and PDA
• Higher than the prevailing inflation rate of 4.2%
CRITERIA OF A SOUND INVESTMENT
• Returns
• Safety
• Liquidity
• Beats Inflation
• Tax Advantage
• Minimum Investment
TYPES OF STOCKS
•Common
•Preferred
B. Equity Securities
Common Stock
• Corporations issue at least one class of common
stock in the form of shares.
• Shares of stock are a form of equity securities

because they represent ownership or equity in
the corporation.
Ex. If Mr. Reyes owns 10,000 of the 100,000 shares of

common stock that have been issued by XYZ
Company, he effectively owns 10% of the
company.
www.pse.com.ph
Common Stock
• Most common stocks are assigned a par value,
generally from P0.01 to P100.00. But some have
a “no par” designation and recorded as stated
value. These are bookkeeping items only and
bear no relationship to the shares’ book value or
market value.
• The book value is the tangible net asset value
per share.
• The market value is the price at which someone

is willing to pay for each share.
www.pse.com.ph
Common Stock
• Most corporations’ charters stipulate that current
common stockholders must be given the first
option to buy any additional shares that the
company may offer. This is known as the stock-
holders’ preemptive right. It allows the current
shareholders to maintain their proportionate
ownership in the corporation.
Ex. If XYZ Company issues 50,000 additional shares to

other people, Mr. Reyes’ 10% ownership in the
company will be reduced to only 6.67% (10,000 ÷
150,000). Preemptive rights will allow him to buy an
additional 5,000 shares and maintain his 10%
ownership in the company.
www.pse.com.ph
Common Stock
• Dividends are declared out of the unrestricted
retained earnings (accumulated profits) of the
company and stockholders have the right to
receive such dividends.
• However, it is only the Board of Directors that can
declare dividends. Stockholders cannot demand
that dividends be paid out even if the company
is profitable.
• There are basically three types of dividends that

a corporation can declare: cash dividends,
stock dividends and property dividends.
www.pse.com.ph
Common Stock
1. Cash Dividends
• As the name implies, cash dividends are paid to stock-
holders in cash.
• They are usually quoted in peso amounts (say P0.50 per

share) or as a percentage of the par value (hence, a 5%
cash dividend on a common stock with a par value of
P10.00 is equal to P0.50).
Ex. If the Board of Directors of XYZ Company declares a

cash dividend of P0.50/share, Mr. Reyes will receive
P5,000.00 on his 10,000 shares.
www.pse.com.ph
Common Stock
2. Stock Dividends
• In order to conserve cash, the Board of Directors may
decide to declare stock dividends instead of cash
dividends. In this case, stockholders are given additional
shares of the company.
• Stock dividends are quoted as a percentage of the

company’s outstanding shares.
Ex. If the Board of Directors of XYZ Company declares a

25% stock dividend, Mr. Reyes will receive an
additional 2,500 shares (25% x 10,000 shares).
www.pse.com.ph
Common Stock
3. Property Dividends
• Although rarely done, the Board of Directors may also pay-
out dividends in the form of assets (such as shares of
another corporation owned by the company). This is called
a property dividend.
www.pse.com.ph
Common Stock
• There are four dates to remember when
dividends are declared:
1. The declaration date is the date when the Board of
Directors declared the dividend.
2. Aside from the amount, the Board of Directors also
declares that the dividends are to be paid to shareholders
of record as of a specified date. This is the record date.
3. However, because of the time required to record the
transfer of ownership of shares, major stock exchanges
specify an ex-dividend date, which is usually 4 business
days prior to the record date.
4. Finally, the payment date is the date when the checks are
mailed out.
www.pse.com.ph
Common Stock
• Another feature of common stock is that holders
of these shares have voting rights.
• There are two methods of voting:
1. With statutory voting, a stockholder may vote for every
directorship, a maximum number of votes equal to the
number of shares he owns. Thus, if 5 directors are to be
elected, a holder of 100 shares may cast a maximum of
100 votes for each of the positions to be filled.
2. Under cumulative voting, the stockholder may spread his
total votes among the number of positions to be filled in
any manner. A stockholder with 100 shares may therefore
cast all his 500 votes for one candidate. This type of
voting affords minority shareholders their best opportunity
of gaining representation on the Board of Directors.
www.pse.com.ph
Preferred Stock
• Preferred stock are called as such because they
are senior to or has preference over common
stockholders as to dividends and claims on the
assets of the company in the event of
liquidation.
• However, it is junior to bondholders and other
creditors of the company.
• Preferred stock does not usually carry voting

rights (i.e. the right to elect members of the
Board). Nevertheless, holders of such stock are
still entitled to vote on certain issues affecting the
company.
www.pse.com.ph
Preferred Stock
• Preferred stockholders are entitled to receive
dividends which is set at a fixed rate based on
the par value of the preferred stock. For
instance, the holder of a preferred stock with a
par value of P1,000 and a dividend rate of 10% is
entitled to receive a dividend of P100 per year.
• These dividends are not automatically given to
preferred stockholders but must likewise be
declared by the Board of Directors. However, no
dividends may be distributed to common stock-
holders unless the dividends due preferred
shareholders are paid.
www.pse.com.ph
Preferred Stock
• There are different features or types of preferred
stock:
1. A participating preferred allows the holder to participate
in extra dividends declared on common stock.
2. A cumulative preferred carries a provision that no
dividends may be paid to common stockholders until all
previously unpaid dividends to preferred stockholders are
paid.
3. A callable preferred may be redeemed by the
corporation at predetermined dates and prices.
4. A convertible preferred gives the holder the option to

convert his shares into common stock at a fixed ratio.
www.pse.com.ph
Preferred Stock
• Among the four types of preferred stock,
convertible preferred offer the greatest oppor-
tunity for capital appreciation.
• If a convertible preferred is exchangeable to 10
shares of common stock, it is said to have a
conversion ratio of 10.
• If the market price of the convertible preferred
issue is equal to the price of the common stock
multiplied by the conversion ratio, the prices of
the two issues are said to be at parity.
www.pse.com.ph
Preferred Stock
Formula for computing parity price for convertible preferred:
Parity Price for

Convertible = Price of Common Stock x Conversion Ratio
Preferred Stock
Ex. If the price of a company’s common stock is P10 and

the conversion ratio of its preferred stock is 10, then
the price of its convertible preferred stock must be
P100 for the two issues to be at parity.
www.pse.com.ph
Capital Gains
• Aside from dividends, another way to profit from
an equity investment is through capital gains or
capital appreciation. Capital gains (or loss) is
simply the difference between the price at
which a security is sold and the price at which it
was originally purchased.
• If an equity investment has not been actually
sold but has increased in price or value over its
original cost, such increase is called capital
appreciation. The difference between the
market value and the cost is also referred to as
unrealized gain (or loss) or paper profits.
www.pse.com.ph
FORMS OF STOCKS
• Bluechip
• Income
• Growth
• Speculative
• Defensive
• Cyclical
• Seasonal
BEFORE OPENING A TRADING ACCOUNT
1. Learn first before investing.

2. Determine the amount of money you can
invest. Invest you’re a part of your
disposable income only.
3. Know your profile as an investor.
www.pse.com.ph
RISK AVERSE VERSUS RISK TAKER
RISK TAKER RISK AVERSE
✓Aggressive ✓Conservative
✓TRADER: Short-term, Velocity Trading ✓INVESTOR: Long-term
✓Buys and Sells 2nd and Third Liner ✓Invest in bluechip, income, defensive
Stocks (Speculative and Growth)
✓Focus on dividends
✓Focus on capital gains
www.pse.com.ph
INVESTMENT PROCEDURES
 Select your stockbroker

 Open a trading account (CAIF, 2 Valids IDs, Specimen
Signature Card)
 Discuss which stocks to buy/sell
 Give orders to the broker
 Get the confirmation receipt
 Deliver/pay before settlement date
 Receive payment
TYPES OF BROKERS
 TRADITIONAL
 ONLINE
ORDER PLACEMENT
Thru Ph o n e
Investor Broker
Internet
Walk-In
www.pse.com.ph
CHARGES
BUY SELL
Brokers’ Commission (BC) - minimum of

0.25/maximum of 1.5% + 12 VAT  
Clearing Fee of .0001  
PSE Transaction Fee (1/200 of 1% of value of stocks  
Stock Transaction Tax (1/2 of 1% of value of stocks) 
CHARGES
SAMPLE COMPUTATION
(BUYING)
2,000 shares x P 5.00 = P10,000.00

Add:
Broker’s Commission (1.5% + 12% VAT) 168.00
Clearing Fee of .0001 (P10,000 x .0001) 1.00
PSE Transaction Fee (1/200 of 1% of value
of stocks) .50
_____________
Total cost of transactions P 10,169.50
==========
CHARGES
SAMPLE COMPUTATION
(SELLING)
2000 shares x P 6.00 = P12,000.00

Less:
Broker’s Commission (1.5% + 12% VAT) 201.60
Clearing Fee of .0001 (P12,000 x .0001) 1.20
PSE Transaction Fee (1/200 of 1% value
of stocks) .60
*Stock transaction tax (P12,000 x 0.005%) 60.00
**Cancellation Fee P20 + 10% VAT 22.00
___________
Net amount to be received P 11,714.60
==========
*Sales tax is already a final tax. No more capital gains.
**If certificated
STOCK MARKET QUOTES
• OPEN & CLOSE
• 52-WK HIGH AND LOW
• VOLUME & VALUE TURNOVER
• GAINERS & LOSERS
• PRICE TO EARNINGS RATIO
• EARNINGS PER SHARE
THE ELECTRONIC BOARD
NAME BID ASK HIGH LOW L/T VOL
ABS 13.00 13.50 13.25 13.25 13.25 82,000

AC 295.00 297.50 297.50 292.50 295.00 67,160
JFC 34.50 35.00 35.50 34.00 35.00 279,700
TEL 1535.00 1540.00 1555.00 1540.00 1540.00 4,810,000
SMPH 212.00 213.00 212.00 212.00 212.00 51,370
SMC 65.00 65.50 65.50 65.00 65.50 18,000
GUIDELINES IN INVESTING IN THE STOCK MARKET
❑ Buy stocks when the market is bullish or when stock prices go up as a result of
growing economy and rising corporate earnings.
❑ Learn first before investing.
❑ Unburden yourself with “ trading-related stress and tension ” by ditching
speculative stocks. Pick stocks with solid fundamentals.
❑ Employ fundamental and technical analyses to know what stocks to buy and
when to trade those stocks.
❑ Choose a good broker and consult them all the time!
❑ Hearsays about stocks must be verified first before making them as a basis of
your buying and selling decisions.
❑ Invest only your disposable income.
❑ Put an end to procrastination. Invest and win in the stock market now!
www.pse.com.ph
QUALITIES OF A GOOD BROKERAGE HOUSE
✓It should be in good standing with the PSE and SEC. It strictly adheres to the rules and
regulations of the PSE and the SEC
✓A good broker boasts a portfolio of satisfied clients
✓A good broker provides its clients with free research services and free consultations
✓A good broker provides accurate and reliable information
✓A good broker is always accessible. A good broker is always available for consultations
✓A good broker responds quickly to the customers’ requests and instructions
www.pse.com.ph
QUALITIES OF A GOOD STOCK BROKERAGE HOUSE
✓A good broker promptly settles customers’ claims
✓A good broker offers reasonable brokers’ commission
✓A good broker is equipped with broad and advance communication and trading facilities
✓A good broker should have a research and customer service departments
✓A good broker is run and manage by competent and qualified professionals
✓A good broker is transparent. It allows its customers access to its books and financial
records
www.pse.com.ph
SOURCES OF STOCK MARKET
INFORMATION
Primary
PSE Website for the latest disclosures

Brokers/Brokers’ website
PSE Accredited data vendor – Live Data (Technistock, Red Suns, Bloomberg, Thomson Reuters)
IPO prospectus
Secondary
PSE Daily Quotation Reports

PSE communication channels
Brokers’ Reports
Broadsheets
Social sites/blogs
For beginners
www.pseacademy.com.ph
PSE Activities for the Students
• PSE Stock Trading Game

•Bloomberg Watch List Account
• PSE Exchange Visits
• Free Seminars
• Class Stock Funds
• Quiz Bee Competition
• PSE Academe Week
• The PSE Bluechip Club
SOURCES OF STOCK MARKET INFO
TV NEWS, BUSINESS SEGMENT
ELECTRONIC BILLBOARDS
ELECTRONIC BILLBOARDS
“Be greedy when others are fearful,
be fearful when others are greedy”
Warren Buffet
3rd Richest Man in the World
COURSE TOPICS:
Theories and Basics
www.pse.com.ph
Fundamental Analysis
Technical Analysis
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Technical Analysis
www.pse.com.ph
* Understanding Finances of the company.

* Financial Statements, EPS, P/E ratio
* Using news, current events and other external

related factors to predict the potential stock price of
security.
• Economic Indicators, GDP.
• Efficient Market Hypothesis.
www.pse.com.ph
Technical Analysis
www.pse.com.ph
Technical Analysis
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Technical Analysis
Technical analysis is a method of evaluating securities

by analyzing statistics generated by market activity,
such as past prices and volume. Technical analysts do
not attempt to measure a security's intrinsic value, but
instead use charts and other tools to identify patterns
that can suggest future activity.
Resistance
Support
www.pse.com.ph
Technical Analysis: is about
... FORECASTING
price movement, ...using:
1. Price Trends
2. Price Patterns
3. Any & ALL Indicators

Parts of the Technical Chart
1. Range
2. Header
3. Candlesticks
4. RSI (Relative Strength Index)
www.pse.com.ph
Candlestick
74
Long Versus Short Bodies
The Longer the body, the

more intense in buying
and Selling.
Long Versus Short Bodies

The Longer the shadow
show prices extend past
the open/close.
75
CHART TYPES
1. GAPS
www.pse.com.ph
2. Head and Shoulders
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3. Triple Bottom/Top
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4. Double Bottom/Top
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5. Saucers
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6. Uptrend / Downtrend
MER
What is
the
TREND?
FNI
Mostly
UPWARDS
Check
Long-
term
Chart
Mostly
DOWN-
WARDS
“Fundamental” Vs. “Technical”
Fundamental Analysis Technical Analysis

Financials & Economics • Trends (to continue?)
• Turning points (reversals)
Sales
– Costs
= Net profits
Earnings
per
Share
Stock Price versus Past prices

Company VALUE vs Future prices 83
PSE Index at 6,430,
in March 2014. ?
10,000
Prospects?
9000
8000
7000
6000
5000
4000 Long-Term
Moving Average
3000
2011 2012 2013 2014 2015 2016 2017

PSE Index at
6,897.77
?
10,000
November 13,2015.9000
PROSPECT?
8000
7000
6000
5000 Long-Term
4000 Moving Average
3000
2012 2013 2014 2015 2016 2017 2018

Where will it, u-turn?
You are determined, to invest.

The only question, is when, and how much.
Scenario 1
70%
30%
Invest 30% at the support level.

Invest 70% on “confirmation”...
Scenario 2
30%
40%
30%
Invest 30% at the first support level.

Invest 30% at next support level,
then 40% after “confirmation.”
Scenario 3
30%
30%
Invest 30%
then 30%, then 40%
40%.
? Hoping that it
is Unlikely ?
Thank you very much!!!
www.pse.com.ph

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“An Overview of the Equities Market”

Mr. Eliezer Joshua M. Gonzales, CFMP (MBA)

Theories and Basics

How to pick a Stock?

To Buy, Sell or Hold?

Theories and Basics

How to pick a Stock?

To Buy, Sell or Hold?

A stock represents a 50% return

POSITIVE NEWS MORE BUYERS LESS SELLERS HIGHER SHARE

HIGHER PROFITS – HIGHER CASH DIVIDENDS – MORE

NEGATIVE LESS BUYERS MORE SELLERS LOWER SHARE

LOWER PROFITS – LOWER/NO CASH DIVIDENDS – MORE SELLERS

Stock 22-Jun-03 22-Jun-07 22-Jun-10

ABS-CBN 20.50 31.50 38

AC 139.26 471.69 317.00

ALI 4.48 18.25 13.5

BPI 25.80 58.62 45.5

BDO 18.75 71.00 44.00

GLOBE 538.16 1,213.07 875

JFC 17.20 54.06 68.5

MER 8.73 90.45 190

PLDT 484.08 2456.91 2395

URC 4.22 19.00 28.00

SECB CASH P0.25 per share (regular) 21-May-10 26-May-10 22-Jun-10

Cash Dividend 2011 = Php 222/share

PLDT Dividend Yield = (222/484) x 100 = 45.87%

• Higher than 1% interest income in savings deposit

Cash Dividend 2011 = Php 222/share

Return = (222 + (2750-484))/484 x 100% = 468.18%

• Higher than 1% interest income in savings deposit

• Shares of stock are a form of equity securities

Ex. If Mr. Reyes owns 10,000 of the 100,000 shares of

• The market value is the price at which someone

Ex. If XYZ Company issues 50,000 additional shares to

• There are basically three types of dividends that

• They are usually quoted in peso amounts (say P0.50 per

Ex. If the Board of Directors of XYZ Company declares a

• Stock dividends are quoted as a percentage of the

Ex. If the Board of Directors of XYZ Company declares a

• Preferred stock does not usually carry voting

4. A convertible preferred gives the holder the option to

Parity Price for

Ex. If the price of a company’s common stock is P10 and

1. Learn first before investing.

RISK TAKER RISK AVERSE

✓TRADER: Short-term, Velocity Trading ✓INVESTOR: Long-term

 Select your stockbroker

Brokers’ Commission (BC) - minimum of

Clearing Fee of .0001  

PSE Transaction Fee (1/200 of 1% of value of stocks  

Stock Transaction Tax (1/2 of 1% of value of stocks) 

2,000 shares x P 5.00 = P10,000.00

2000 shares x P 6.00 = P12,000.00

ABS 13.00 13.50 13.25 13.25 13.25 82,000

✓A good broker boasts a portfolio of satisfied clients

✓A good broker provides accurate and reliable information

✓A good broker responds quickly to the customers’ requests and instructions