• Initial stock picks and trading plays



    When our virtual stock trading contest got underway last Thursday, March 1, the market was struggling from a big setback it suffered the day before. The benchmark Philippine Stock Exchange index (PSEi) closed at 8,475.29 and ended with a loss for the day of 117.09 points, or 1.36 percent.

    It was a big single day’s loss suffered by the market due to unfolding events, particularly in the US, which, in turn, undermined overseas markets like ours.

    The market’s fall, based on trading results, was as well precipitated by the trading tack taken by foreign investors, for they continued to be net sellers as they have been since the beginning of the year.

    Their trading activities on a year-to-date basis, too, have fallen to only 44.93 percent of total market transactions, compared with the historical record of 50 percent and above.

    Under this declining market backdrop, it was no surprise that only three of our 10 players in the game braved the market on March 1. They were Play Hard, Swing Trader and HRB2015.

    Small Time Trader joined the foray the next day, March 2, with HRB2015 also submitting a new buy order.

    Swing Trader submitted a combination of buy and sell trading orders for March 6, but one of which was void. He had four trading orders of buying and selling for March 7, but were all later cancelled.

    In the meantime, Dud67 submitted a buy order for Now Corporation (NOW) for execution on Thursday, March 8. The other six players have remained silent as of this writing, Wednesday night of March 7.

    Below is the summary of the individual transactions by Play Hard, Swing Trader and HRB2015 as of the end of March 7:

    Notice that Play Hard limited his risk exposure to any one stock to not more than 12 percent of his virtual capital of P500,000. This is a money management strategy following the principle of capital preservation. It will save him from getting wiped out in one downturn due to overexposure to one or two stocks only.

    The selection of first-line and second-line stocks like ALI, SMPH, MBT and SM is smart.

    This will give his investment portfolio stability against short-term market volatility, and at the same time, allow him to earn dividend incomes. These are blue-chip stocks with a long history of profitability and dividend record that could equal current interest rate earnings, not to mention their potential for capital gains when their share price soars in line with the economy’s future.

    His choice for EEI and EAGLE were likewise not without good reason. As he said, these are his bets that will greatly benefit the company – and its stockholders – from the government’s “Build Build Build” program.

    To put some excitement in his investment portfolio, he included a sprinkling of speculative stocks, namely MRC and PXP.

    MRC, after successfully transitioning into a renewable energy company from its original primary purpose as a property company, is now rumored as a strong contender to be the country’s third telco player. PXP, on the other hand, is the market favorite for speculation arising from the potential of a Philippines-China joint oil exploration venture. Global price for oil has improved at the profitable level of $62 to $68 per barrel.

    This play on speculative stocks reminded me of the question made by one of our editors as we discussed the terms of the contest. He clarified if it is allowed to invest in speculative stocks only – as a strategy to win. He was obviously thinking about how speculative stocks could easily register huge gains in percentage terms in the event of a price rally and deliver tremendous investment returns.

    For instance, MRC’s price was only about P0.31 per share some 30 days ago. At the share price of P0.77, this meant a return on investment (ROI) of 148. 39 percent – an investment return that he can leave as a performance to beat till the end of the contest.

    PXP is another example. In the last 25 days, PXP was up 91.98 percent or so. Up to Wednesday, March 7, Play Hard had remained silent since then.

    Swing Trader had two buy orders for March 1. These were for 125,000 shares of National Reinsurance Corporation of the Philippines (NRCP) at P1.59 apiece and 690,000 shares of Crown Equities, Inc. at P0.29. His main basis of selection is purely technical: “NRCP is currently consolidating above the 1.57 level and CEI is presently consolidating at the 0.2850 – 0.3000 level.”

    NRCP is not the majority of investors’ favorite. The firm is a professional reinsurance corporation providing life and non-life reinsurance. It has a market capitalization of P3.0 billion. Market volume and price volatility, though consistent, were quite average. Trading plays for the stock, however, break out every now and then.

    Crown Equities, Inc. is mainly involved in the acquisition, development, and sale of real estate properties. It also delivers medical and health services to outpatients through its ambulatory care centers. It has a similar pattern of price volatility and nature of trading volume as NRCP, where you can also find some trading opportunities.

    The buy order for NRCP was considered “Not Done.” Swing Trader’s bid was for P1.59 per share, which was below even for the day’s “low” of P1.60. The buy order for 690,000 shares of CEI, on the other hand, was “Done” at his bid price of P0.29 per share.

    The additional buy order of HRB2015 was for 300 shares of Meralco Electric Company (MER) at P319.00. The order was considered “Not Done” because his buying price was way below the stock’s “low” for the day of P326.00.

    We’ll continue with the review for Small Time Trader and Dud67 in the next column.

    Den Somera is a licensed stockbroker. The article has been prepared for general circulation for the reading public and must not be construed as an offer, or solicitation of an offer to buy or sell any securities or financial instruments whether referred to herein or otherwise. Moreover, the public should be aware that the writer or any investing parties mentioned in the column may have a conflict of interest that could affect the objectivity of their reported or mentioned investment activity. E-mail address of the writer is den.somera@manilatimes.net and/or at densomera@msn.com)


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