Today’s
Topic
1. I
want
to
invest
in
stocks!
But
how?
a. Fundamental
Analysis
(FA)
b. Technical
Analysis
(TA)
3. Conclusion
I
want
to
invest
in
stocks!
…but
how?
What
are
stocks?
• Share
of
ownership
in
a
company
How
do
I
make
money
from
stocks?
PHP 160
32X
PHP
5
What
stocks
do
I
buy?
2
Branches
of
Analysis
Fundamental
Technical
Analysis
(FA) Analysis
(TA)
üNews
and
plans
of
the
company üHistorical
charts
and
graphs
üFinancial
statements
üPrice
patterns
üValue
of
the
company üSupply
and
demand
üLong-‐term
by
nature üShort-‐term
by
nature
Fundamental
Analysis
• “How
much
does
the
company
earn?”
• “What
is
the
company’s
growth
prospects?”
• “Does
the
company
have
significant
competitive
advantage
over
its
competitors?”
• “Is
the
management
team
credible?”
SELL
Real
Value SELL SELL
Stock A Stock B
Current Price: Php10 Current Price: Php100
2016 EPS: Php1 2016 EPS: Php20
10X P/E 5X P/E
General Rule:
A stock is relatively cheaper if P/E is lower
Relative
Value
Stock A Stock B
Current Price: Php10 Current Price: Php100
10X P/E 5X P/E
2017: 100% EPS growth 2017: -50% EPS growth
B 20% 8.0
Company B looks cheap
Company D looks expensive C 15% 12.0
D 8% 15.0
Sources
of
Information
• PSE
Website
– financial
statements,
press
releases,
disclosures
• We
don’t
know
how
long
will
it
take
for
the
stock
price
to
reflect
the
real
value
of
the
company
Technical
Analysis
• Focuses
on
historical
charts
to
determine
supply
and
demand,
and
to
forecast
the
stock’s
future
movements
• Technicians
do
not
care
much
about
the
company’s
fundamentals
Assumptions
in
Technical
Analysis
1. The
market
discounts
everything
ØFundamentals/news
are
priced
in
already.
Current
price
reflects
all
available
information
Resistance
P
12.00
P
10.00
Support
Goal
of
Technical
Analysis
• Buy
low,
sell
high
– buy
at
support,
sell
on
resistance
SELL
AREA
P
12.00
P
10.00
BUY
AREA
Buy
Low,
Sell
High
Resistance
Support
Buy
Low,
Sell
High
Goal
of
Technical
Analysis
• Buy
high,
sell
higher
– buy
on
break
above
resistance
Goal
of
Technical
Analysis
• Buy
high,
sell
higher
– buy
on
break
above
resistance
Support
Note:
Once
a
resistance
is
broken,
it
will
become
the
new
support
of
the
stock.
The
same
goes
for
a
broken
support,
it
will
become
the
new
resistance.
Buy
High,
Sell
Higher
Resistance
New
Support
Challenges
of
Technical
Analysis
• Requires
time
and
effort
in
monitoring
stock
prices
and
studying
stock
charts
on
a
regular
basis
• Take
risks! If
you
win,
you’ll
be
happy.
If
you
lose,
you’ll
be
wise.
Learn
from
your
mistakes.
J
I
want
to
invest
in
stocks!
Can
I
start
now?
Of
course
you
can!
• Join
the
UP
Stock
Competition
ØUse
this
as
an
opportunity
to
try
out
stock
trading
without
risking
real
money
• If
you
realize
the
stock
market
is
not
for
you,
don’t
worry!
ØYou
can
still
invest
through
mutual
funds