Updated: January 6, 2020
When people ask me which companies should they buy in the Philippine Stock Market, my default answer is the list of companies that my primary stock broker, COL Financial, recommends.
- Ayala Corp. (AC)
- Ayala Land, Inc. (ALI)
- Aboitiz Power Corp. (AP)
- Banco De Oro (BDO)
- Bank of Philippine Islands (BPI)
- DMCI Holdings, Inc. (DMC)
- First Metro Phil. Equity ETF (FMETF)
- GT Capital Holdings (GTCAP)
- Int’l Container Terminal Services (ICT)
- Jollibee Foods Corp. (JFC)
- Metropolitan Bank & Trust (MBT)
- Metro Pacific Investments (MPI)
- Manila Water Company (MWC)
- Robinsons Land Corp. (RLC)
- SM Investments Corp. (SM)
- SM Prime Holdings (SMPH)
- Philippine Long Distance Tel. Co. (TEL)
- Universal Robina Corp. (URC)
These companies were selected by COL Financial using their “GEMSS” criteria, which meant these companies exhibit the following:
- G – Growing industry
- E – Earnings visibility
- M – Management credibility
- S – Superior products
- S – Strong balance sheet
These factors are not what you’d typically hear from a stock market trader, who usually speaks of moving averages, RSI indicators, and P/E ratios, among other things. That’s because these criteria is for a long-term investment horizon.
The Past 10 Years
Recently, someone asked me how these companies have performed in the past decade. So I did some research on their historical prices, and this is what I got.
I sorted the companies from highest to lowest in terms of profit / loss:
It’s apparent that if you bought shares of any of these companies 10 years ago, then you would have earned money except for two cases — Manila Water Company (MWC) and Philippine Long Distance Tel. Co. (TEL).
The stock price of MWC hav been sideways in previous years, which is acceptable if you’re doing cost averaging. However, its price dropped massively recently following service problems and ongoing issues with the government.
On the other hand, the stock price of TEL have been on a steady decline since 2014 because of many factors, which includes low earnings, poor service, and possible emergence of a new 3rd telco in the country.
On a related note, those who started investing back in 2015 and in later years on equity funds would probably have little earnings or a negative portfolio today.
That’s because most funds, specially index funds, actually have MWC and TEL in their list of holdings. Additionally, it’s also because the Philippine stock market index itself have been moving sideways for several years already.
So what now?
First of all, the table shows us that the stock market is a good long-term investment despite its obvious risks.
When you put money in the stock market or in an equity fund, you have keep yourself updated on what’s happening in both the global and local economy. This is so you can adjust your portfolio and investment strategies accordingly.
I used to have MWC shares, but after several years of going sideways, I thought that it would be better to take profit and invest the money in another company. I did this about 3 years ago.
Moreover, a friend also sold his TEL shares little-by-little back in 2016 until 2017 when its price started to drop amidst rumors of a 3rd telco coming out soon. He took the modest profits he had, and invested it in another stock.
Interestingly, we both decided to buy shares of ALI on each of our cases, because Ayala Land Inc. have been showing potential during those times. Fortunately, its stock price has actually moved up in recent years.
And that’s the second thing to remember… monitor what’s happening with the companies you’re holding. Evaluate your portfolio at least once a year, and remember to rebalance and adjust every 3-4 years.
Thirdly, I’d like to emphasize the importance of diversification. Investing in different companies in the stock market and in various equity and index funds isn’t a good way to diversify. Instead, explore and invest in other types of investments as well.
In my case, I also invest in bonds, time deposits, real estate, government securities, and cooperatives. I’ve also used my investment fund as business capital for new startup ventures.
The stock market remains as one of the best places to invest for the long-term. But you need to have a financial plan and an investment strategy. Otherwise, you will lose money if you just follow rumors and invest based on intuition or gut feelings.
Peso cost averaging is a viable investment strategy if you’re too busy to do technical and fundamental analysis. But it is required that you stay aware of what’s happening in the news, particularly on the stocks that you own.
Lastly, it’s important to diversify your investments. Which also means it’s important to constantly work on increasing your cashflow and creating multiple sources of income. Because this is best and easiest way you can grow your investment fund and diversify.