Winning Cashflow 202 using a Doctor!

Cashflow 202 is the hardest most realistic financial game I have ever played. The hardest character to use is the Doctor. He has the highest cash flow but the greatest amount of expenses. After a lot of tries I was only able to finish second most of the time but today I got in the Fast Track first and got out winner of the simulated game.

My first goal was to be able to achieve a satisfactory capital to start investing in Real Estate cashflow. I shorted stocks. It was unbelievable. You can short for 5 turns and gamble 10,000 shares. One point difference in stock price is a $10,000 return! This is all using borrowed money. I also bought put and call option but the returns weren’t spectacular. The 2BR/1BA estates were the keeper.

Once I got 100,000+, another player offered the $2 million appartment with a down of 200,000. With the Doctor’s enormous cashflow, I could survive until I could’ve sold it, to which I did. With 600,000+ early in the game I bought everything! I never sold a piece of property. And when it was down to 200,000. I paid off the home mortgage! Bam. It was fast track!

This was a lucky break but I did get to understand much about the game. Now to apply it in real life. Haha. I wish!

A peek in my portfolio

I am 1/4th of an effort to reaching the Php 1 million milestone. It’s just too damn hard to pick these stocks. I have to pick 12 more. Then it’s on to phase 2 of Project Alpha.

Bargains Galore! PSE Index drops!

It usually happens after a rally. Drop in stock prices are usually due to something gloomy. My portfolio was continuing to drop in the past two weeks and probably would continue until market sentiments rise. I just learned that the issue was due to high commodity prices after the two storms hit the Philippines and created a freeze in commodity trading, literally, since crops died and those that survived cannot come down to consumers.

To those who are undecided when to enter the market, now is the best time. Nobody knows when the trend has already bottomed out. But it’s a safe bet to try investing in weekly or monthly increments, a method called cost averaging.

To those who are still skeptic. Well, go chicken yourselves out. No ris, no return.

ALFM Peso Bond Fund Inquiry

So I never had any experience chatting with a bank representative regarding opening up an Ayala Life Mutual Fund. Like most people, I just don’t have the money. It could be embarrassing to ask about a lot of stuff and not actually invest because my bank account is below it’s minimum ADB.

Now I have a job and am in the habit of putting 80% (instead of 20%) of my monthly salary to money market instruments and stocks. I manage to save up over the months to get to the minimum investment amount for a mutual fund. I had the fund for 1 month and they send me an email that I will not be able to access it on the internet. I panicked and tought that the fund is probably going bust? Then I learned that most of my fears are due to ignorance of the proper channels to buy/redeem Ayala Life Mutual Funds. So I asked them instead… by email.

ZeroMD: If I decide to contribute and the money is in my ATM, can I just transact in any branch here in Olongapo?

ALFM: Yes, interbranch payment/ redemption orders are allowed.

ZeroMD: If no, can I just call my branch of account or do I have to be there personally with identification papers?

ALFM: It would be better to update your records with your branch of account after we have migrated your account to said branch. In doing so, your documents with them are updated and if the receiving branch (i.e. the branch which will process your payment/ redemption order) requests for a fax copy, your branch of account may provide them with an updated copy of your records.

ZeroMD: If I decide to open another type of mutual fund, say the PSE index fund, do I need to do this at my branch or any branch will do?

ALFM: Any branch will do. Actually, you may also ask your branch of account to transfer your existing ALFM investment account to your preferred BPI branch (the branch nearest you) thus you need not open another investment account for a PSIF investment (i.e. you may use your existing investment account).

ZeroMD: The amount of the fund will not reflect anymore in BPI Trade starting Nov 16? How would I keep track of the fund value? (Well besides Bloomberg)

ALFM: Yes, your ALFM investment account portfolio will no longer be reflected in BPI trade starting November 16. To keep track of your fund value, just keep a record of your outstanding number of ALFM Peso shares and you may manually compute for the corresponding fund value by using the ALFM Peso NAVPs. The ALFM Peso NAVPs is posted daily in <www.bpiexpressonline.com> under Rates -> Investment Funds Daily Prices.

Note to self: They didn’t actually change anything. This was actually the old style of buying, redeeming, or contributing to a mutual fund. I just didn’t know because I transacted via the net. They just took out the Internet part because of new rules. It sucks really but I bet other online brokerages are having the same problem. Good thing my broker is also my bank.

6-month checkup: TEL

TEL shares are a keeper in any portfolio. I made sure that this was the first stock I have to buy. Especially during last year’s recession, TEL is one of three stocks that stood to lose only a small portion of its value. SM and SMC are the other two. The current surge in price is due to a lot of factors:

1. Acquisition of a controlling stake at Philippine’s largest electricity distributor
2. Better than expected earnings and dividends
3. Foreigners eyeing bargain prices have bought large shares of the stock
4. TEL is enjoying a surge of subscribers as competitors’ churn rate increases

The current PE ratio stands at 13. When I bought the stock last April it was around 10 to 11. It has bought me so far a 19% gain since I bought it. This was a modest gain and I do not expect it to go up above 20% in the next 6 months. The only reason people are holding stake at this company is that it enjoys a dividend yield of 7-9% on a yearly basis with minor fluctuation in price. Fund managers choose to have a sizable amount of their portfolio to TEL because of this. TEL’s dividend is projected to increase by 10% this year. Currently, my portfolio has an allocation of 10% on it but my target is only 5% on Project Alpha’s endpoint.

I still have a bullish take on this stock but my suggestion is still hold. I would suggest that you buy the stock once there is a major dip in price. A lot of the movement this week is due to traders cashing in on profits due to the previous week’s sudden hoarding.

What’s new in PLDT? Nothing. This is already a mature company with very little to grow. That’s why it’s acquiring other companies and seeking out ventures. Improvements are largely tech dependent so if there’s nothing new in tech, there’s nothing new in PLDT.

Mutual Fund to be removed from online trading

BPI Trade is losing its teeth. After losing its fixed income trading platform, it will now complete it by losing its Mutual Fund platform. The new instructions which I perceive will be a manual procedure is not yet in my hands. Last month, I started an ALFM Peso mutual fund account and was hoping for automatic savings through online trading. Now I probably have to fall in line. Talk about interactivity.

Effectivity is next month, November 16. I cannot pull my money off the fund because of a 6 month holding period. Penalty is large and I probably have to pay tax even if it is a loss.

What’s next? I probably have to pay brokerage transfer fees. BPI Trade is probably being shut down the drain. Due to lack of marketing, BPI Trade is probably doomed to fail.

The Riviera “Sweets” Deal!

Riviera_Unauthorized

So my mother finally convinced me to get to Tagaytay but there were things we didn’t agree on. But for the most part, I did realize what a great deal it really was. My main limitations as to why I didn’t accept the deal were the following:

1. Geography. I don’t have a car and it takes me 6-8 hours by commute from Olongapo.
2. Finance. My money is tied down to what I call “Project Alpha.” It will remain there until it reaches its endpoint which is about one and a half year away. I do this deal, I will be set back by 3 years!
3. Personal. My mother’s goals were different from mine. Either she straighten her finances or I am going to be in big trouble if I got into the deal.

Here is how I look at the deal:

The name of the game is real estate. Just like in “cashflow” it has 4 components.

• The cost is Php 6,000,000.

• Mortgage will be Php 4,000,000.
• The downpayment is Php 2,000,000. I don’t have this money and there’s six ways that the developers would let me get this amount by 3 years (See the file above).  The one particularly suited to me is the balloon payment scheme. Every 6 months I pay 160,000 and 36,000 in between. The house would be built by six months and hence will be available for rent. At that time the rent money will be the one paying most of the monthly payments. This will give me enough time to pay a now decreased amount of ballooned 6-mo payment of 100,000 (consider the net income of the previous 5 months). I only need to save 20k per month. Actually I only need to save 10 because my mother is supposed to provide the other half.
• Then there’s the cash flow or income which will be as follows. If I could acquire it by bank (BPI), I have a ton of options. There is a staggard fixed rate and the classical fixed. Variable rates are very complicated and Philippines has troubles with sudden rises in inflation. Classical Fixed can get me monthly mortgage payments of 36,000 and rentals could get to 40,000 with net of 4k! But there’s a problem of paying the property managers one month worth of rent. So the net is actually 4k per annum.

But if I acquire it by staggard fixed rate, I will have the first 8 years with monthly amortization of approx 28-30 thou! This translates to about 8k per month while considering property manager’s commission. I sell the house and lot before that time and I could probably get more than what I bargained for.

So that’s how I could acquire a Golf-course Tagaytay lot without spending too much money. But I refused. This may be one of the greatest investments I would be passing for now. I just wish I have somebody tell me whether this is a great or foolhardy decision. I cannot trust my mom’s intuition on this one, even though I love her.

See the Big Picture! Take the Red Pill.

The rich controls your country, not the government. It has been this way since Medieval Times. If you find yourself an employee and still in the rat race, it was because they destined you to be there. It is hard to believe that you are in a “Matrix” – like world. But once you see the big picture, you become free. Read the book and understand. I’ll be like Laurence Fishburne and you, Keanu… Take the red pill (Click the link), you will begin to see the real world. Take the blue pill  (and ignore this post) and you will go back to your normal everyday life being a slave to the system.

Wide bid-ask spreads at PSE

FEU, CEU, ATI, and VVT have not enjoyed a recent trade due to high asking prices and low bids. Either people are trying to short these stocks or the demand is really higher. But after days of no trading for this issues, it’s obvious they’re trying to short to gain money. I would have bought ATI but instead I grabbed PCOR. The price is bound to go down I assume but hey I’m doing cost averaging. Up, down? It doesn’t matter, once I like the stock, I buy it.

Some stocks are really not traded for months and years! It’s a wonder why they even went public? PCKH, CA, CAB, LMG… Only 140 of 300+ stocks at the PSE are ever traded on a single day. We need more people trading and drive these stocks out of slumber.

Stock Picking: Out of Ideas

When I started a year ago, I made a mess out of stock picking. BPI Trade doesn’t allow short selling and ALL stocks hugged the bear. All valuations fell. Foreign investors pulled out. There were 4 stocks holding ground: TEL, PCOR, SMC, and SMCB. I pulled out.

Changes in sentiment and some personal life changing moment got me back to the stock market last March. Every stock was on very low P/E’s.Half the PSE index were selling at 10 below. They were all cheap. It was too bad, I spent all the money I had before.

I tried to catch up and it seems all my picks thus far were satisfactory. It was no surprise. Post the stock market table at the dartboard and just shoot. But now with the valuations “corrected” (I don’t know if this is the correct terminology) I find myself tinkering around Bloomberg and the PSE for days, looking at what could be the next stock in my portfolio. The best bet would be to just choose one of the 30 stocks in the PSE index. I don’t like the PSE index per se particularly because half is dominated by 3 conglomerates and their “tracking/subsidiary” stocks. And most of the stocks in my previous watch/wish list is now expensive with P/E of 15 and above. Although they still pose an attractive price, I would like to stick to the principles that have gotten me thus far.

If asked for three stocks I would consider to buy this week, they would be the following:

1. SLF, Sun Life Financial Inc. – its an insurance company that, as I have discovered, have a lot of “hidden” charges to clients. They sell well but they of course don’t explain their commissions to a prospective client unless asked. I, after being offered a variable life insurance, asked. Amazing, they charge  commisions (a.k.a. loads) on sale and also on redemption while maintaining a monthly charge. They make a lot of money that way. I denied the insurance offer and decided to take an investment position instead.

P/E : 22, its expensive but pre-2008 P/E has reached to 30! It still looks like a bargain to most investors including me.

2. PCOR, Petron Corporation – Ashmore group bailed and the stock is plummeting. The company once topped sales among all the other corporations in the country. But with the next generation hybrid cars threatening its growth, everybody’s selling. It now becomes a bargain opportunity as it is selling at a 6 month new low.

P/E: -11 (Net loss posted last year)

3. ATI, Asian Terminals Inc. – If I were given a crayon and asked to draw how this company makes money, I could draw doodles. I have no idea why I am choosing this stock except for rising earnings, rising dividends, a P/E of 8 and a declining price. P/S and P/B are likewise attractive.

So what’s keeping me from buying? My mood, I guess. I have some reasons to think they are trading at a bargain and I have a part of me wishing the prices could still go down. I hate market timing.