Let me start this post by saying I love fundamental analysis as well as technical analysis. Warren Buffet is my mom’s hero and I do love him very much. I love TA and FA but I hate ignorance.
If you want to know my thoughts about Warren Buffet at kapag gusto ninyo din malaman saan siya kumukuha pera niya or anong trading style niya when he started just go HERE.
I often hear traders say this phrase “only average down on stocks with good fundamentals.” Today you and me ay maglalakbay gamit ang facts at titingnan natin kung may sense nga ba ang advice na yan. Let us remove ignorance.
When you say good fundamentals what do you mean? According sa Investopedia, Fundamental analysis (FA) is a method of measuring a security’s intrinsic value by examining related economic and financial factors. Fundamental analysts study anything that can affect the security’s value, from macroeconomic factors such as the state of the economy and industry conditions to micro-economic factors like the effectiveness of the company’s management.
Fundamental analysis is the process of looking at a business at the most basic or fundamental financial level. This type of analysis examines the key ratios of a business to determine its financial health. Fundamental analysis can also give you an idea of the value of what a company’s stock should be.
Unang chinicheck lagi is earnings. If maganda ang earnings o panget. Then comes EPS, P/E, Book Value, etc.
Sa Pilipinas ang benchmark ng stock market ay ang PSEi which is composed of 30 stocks na tinatawag natin na bluechips. Its only proper na doon tayo tumingin sa bluechips. Let us randomly pick a bluechip stock and pretend to invest 100,000 pesos mula 2015 which was five years ago para pasok siya sa “long term” na mostly sinasabe ng traders.
Our investment 5 years ago now would be 114,000 pesos. In five years we have gained 14k pesos. Let us not include inflation sa pag value ng gains natin kasi lalong baba ang gains.
Lets consider AEV. Let us invest 100k pesos in AEV in 2015. That would give us roughly 1,838 shares kasi 54.4 pesos ang AEV back then. (Let us not include tax and fees)
Today our investment 5 years ago would give us 99,200 pesos. Talo ng konti.
Let us put 100k pesos in ALI 5 years ago.
Today our investment from ALI noon would be 125k pesos.
Lets do FGEN. 100k pesos investment in 2015
We will only have 80k by today if we invested 100k pesos 5 years ago.
Sa TEL naman 37k pesos na lang ang 100k pesos natin 5 years ago.
Sa URC naman 78k pesos na lang.
Sa MEG naman ay 82k pesos na lang.
Now, I want you to look at MWC back in March 2013. Ang ganda na company nito noon. Lahat ng tao noong 2013 would agree na ang ganda ng fundamentals ni MWC. Annual earnings niya is 5M which was awesome na sa time na yun. Noong 2013, investing money sa MWC was a great idea. 37 pesos ang stock price ni MWC noon.
Fast forward 2019 na biglang nag decide si President Duterte to go after owners of MWC.
10 pesos na lang price ni MWC ngayon.
Nag change ba fundamentals ni MWC? Bumaba ba earnings? NOPE! Bumagsak siya dahil sa pag go after ni President.You would probably say na “Black Swan yan kasi di expected” I can take that. Valid point kasi walang nag expect ng ginawa ni President.
Now, lets look at Petron Corp or PCOR.
Back in April 2013 PCOR was booming! 15.4 pesos ang stock price. Member ng PSEi. Ang ganda ng fundamentals. STRONG STOCK! Everybody loved PCOR.
Then, this happened. REBALANCING!
Today, PCOR is 3.93 pesos in stock price. Out sa PSEi at -60% ang income last quarter. If you invested in PCOR noon kasi ang ganda ng fundamentals niya at hinayaan mo lang kasi nga basta maganda ang fundamentals ay safe at ok siya for long term malaking loss ang matatamo mo.
Black Swan pa rin ba? NOPE.
One more example. EDC. Nasa 8 peso noong 2015. Nagkaroon ng private investor. Nagpa delist sa PSE. Nag tender offer ng 7.25 pesos. If you bought EDC noong 2015 dahil sa tingin mo it will grow at hinayaan mo lang ang pera mo baka mahirapan ka e benta shares mo if today ka lang tumingin sa investment o since delisted na siya. Kung nabenta mo naman sa tender offer price ay talo ka pa.
Black Swan pa rin? Sige lest put this “black swan” reason out for good.
Ano ba ang pinaka strong na economy sa mundo? US diba? Ano ang sukatan ng strong companies sa US? Fortune 500. How many original companies from fortune 500 ang natitira ngayon?
I would have used S&P 500 index kasi yan yung parang PSEi ng US pero mas credible kasi ang fortune 500. In any given year, around 330 companies are included in both the S&P 500 index of large-cap U.S. stocks and the Fortune 500. But the differences between the lists matter in the market. Since 1996, publicly traded Fortune 500 companies have outperformed the S&P by 0.5 percentage points annually, according to Barclays, and using an “equal weighting” strategy, Fortune outperformed by almost two points a year. While the S&P 500 often includes stocks of popular but unproven businesses, a company can’t crack the Fortune 500 until it earns significant revenue; that explains much of the performance gap.
Seeing all the facts above, do you still think its a smart idea na sundin ang famous advice na mag average down sa stocks with strong fundamentals? Strong yan ngayon e panu a year from now? Si JFC at SM ba example ng guru mo? Eh paano kapag out of the blue sila naman mapansin at e go after ni President? MWC never expected na mangyayare sa kanila ang nangyare sa kanila, remember that! Only average down on stocks with good fundamentals is an ignorant advice. It has nothing to do with fundamental or technical analysis na mas better. It has a lot to do about you not knowing what will happen sa future. Past performance does not guarantee future success tandaan ninyo yan.
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