What is your investment style?

Before you start investing, it is best to first gauge the investment style befitting you and your financial goals. That way, you can approach your investing in a more disciplined and organized manner.

Your investment style will typically be determined by the following factors:

  • Your temperament (i.e. your patience, the amount of effort you are willing to put in, the amount of risk you are willing to stomach)
  • Your profile (i.e. your age, income, wealth)
  • Your financial objectives

Discerning and articulating these very personal factors is a fantastic first step for any investor. What answers you reach from your discernment will guide you in finding the best investment style for you.

We broke down the most commonly practicable ones here for your consideration.

Active vs. Passive

An active investor picks his own stocks. A passive investor typically buys shares in an index fund such as BPI’s Philippine Stock Index Fund or the ATRAM Philippine Equity Smart Index Fund, effectively outsourcing the whole stock selection process. The active investor believes in his own ability to pick stocks to outperform the market. The passive investor believes that the most efficient way of producing long-term returns is by investing in the market as a whole.

The active investor bypasses the investment management fees charged by investment funds and stands the chance of finding great investment opportunities ignored by the market. The passive investor bypasses all the heavy research conducted by active investors which is not necessarily always fruitful.

Growth vs. Value

In terms of stocks, a value investor looks for companies selling at below their intrinsic value, preferably with a significant margin-of-safety. A growth investor looks for companies offering the possibility of above average growth, regardless of price in relation to intrinsic value.

Some famous value investors include Warren Buffett, Benjamin Graham, and to an extent Peter Lynch (although his style often also verges on the growth investing side). Some famous growth investors include Thomas Rowe Price, Jr. and Philip Fisher.

Investors could also consider investing in companies promising “growth at a reasonable price”. This approach blends elements of value investing and growth investing. In effect, the investor hopes to find stocks that may deliver above average growth but are not too expensive in relation to their intrinsic value.

How do I use a stock screen?

After Hours is an editorial column more loosely covering our opinions on a variety of topics in finance.

The ugly truth is that it is impossible to go through the financial statements of all available companies in the world’s stock exchanges. There is just not enough time. And although the potential for reward could be higher if you sift through each and every one, that would still mean sifting through a lot of dirt.

This is where stock screening comes in. It’s just easier and more straightforward. You pick a few criteria, making sure none are too restrictive, and then you exclude any stocks that do not meet this criteria. It is neither the most graceful practice nor the most thorough, but it quickly cuts down your universe of stocks to a smaller, more manageable group.

We have adapted some criteria borrowed from Chapter 14 (“Stock Selection for the Defensive Investor”) of Benjamin Graham’s The Intelligent Investor to serve as a starting point for any who wish to employ stock screening into their investment research process.

  1. Debt-to-Equity Ratio must be less than 1.0.
  2. Total Debt-to-Net Working Capital Ratio must be less than 1.0.
  3. Current Ratio must be more than 2.0.
  4. Company must have consistently paid out annual dividends over the last ten (10) years.
  5. Net Income must have grown by at least 33% compared to ten (10) years prior.
  6. Price-to-Earnings Ratio must be less than 15.0.
  7. Price-to-Book Ratio must be less than 1.5.

How to Invest in Mutual Funds with GCash

GCash’s GInvest lets you invest in a wide selection of stocks and bonds via mutual funds for as low as PhP50.00. The program is fast, easy-to-use, and ideal for anyone who has but spare change left over to invest.

(What is a mutual fund? See our article for all you need to know.)

(This article is an updated version of one we previously published. See here for the original article.)

As of December 31, 2021, GInvest offers seven (7) mutual funds to interested investors:

  1. ALFM Global Multi-Asset Income Fund (Risk Appetite: Aggressive)
  2. Philippine Stock Index Fund (Risk Appetite: Aggressive)
  3. ATRAM Peso Money Market Fund (Risk Appetite: Conservative)
  4. ATRAM Total Return Peso Bond Fund (Risk Appetite: Moderate)
  5. ATRAM Philippine Equity Smart Index Fund (Risk Appetite: Aggressive)
  6. ATRAM Global Consumer Trends Feeder Fund (Risk Appetite: Aggressive)
  7. ATRAM Global Technology Feeder Fund (Risk Appetite: Aggressive)

We went through the whole process of purchasing shares in a mutual fund through GCash’s GInvest and bought shares of the Philippine Stock Index Fund.

(1) Open GCash.

(2) Tap “View all GCash Services”.

(3) Tap “GInvest”.

(4) If you haven’t set up your GInvest beforehand, GCash will require you to answer a questionnaire to determine your personal risk profile. Our test returned a result of “Moderate” which means we are willing to accept a moderate amount of risk for a hopefully appropriate amount of return. After answering the questionnaire, go ahead and tap “View Investment Products”.

(5) Tap the investment product you plan to invest in. In this case, we chose the Philippine Stock Index Fund. Make sure to always thoroughly research whichever fund you plan to invest in beforehand.

(6) Tap “BUY”. Again: Research is key.

(7) Read and consider the fund’s terms & conditions, risk disclosure statement, and prospectus. Make sure to check if there are any hidden fees/required holding periods. Investment funds usually charge a fee for the asset management services they provide and have a required holding period to prevent investors from liquidating their positions too soon. If everything looks fine, press “Proceed”.

(8) You will be asked to enter an authentication code to verify your identity.

(9) Enter the amount you wish to invest, then press “Next”.

(10) GCash will ask you to confirm your order.

(11) After confirming, GCash will send you a notification and text message confirming your buy order.

GInvest Fund Breakdown: BPI’s Philippine Stock Index Fund

GCash’s GInvest allows users to invest in a wide selection of stocks and bonds via mutual funds for as low as PhP50.00. In this article, we broke down all you need to know about one investment fund GInvest offers: the Philippine Stock Index Fund (PSIF).

For a step-by-step run-through detailing the process of buying shares of investment funds through GInvest, see our guide: GCash’s GInvest: How to Invest in GInvest’s Mutual Funds.

Fund Description

PSIF mainly invests in the stocks that comprise the Philippine Stock Exchange Composite Index (PSEi) in the same weights as the index. Like all other stock funds, GInvest classifies the PSIF as “Aggressive” in terms of risk profile given the greater fluctuations that come with stock prices compared to, say, bonds.

Based on PSIF’s prospectus, the minimum initial investment for the fund is PhP5,000.00 and PhP1,000.00 for each succeeding purchase. However, this only applies to those who do not purchase shares of the fund through GInvest which only requires a PhP50.00 minimum initial investment and blocks of PhP50.00 thereafter.

The PSIF is managed by BPI Investment Management, Inc. (BIMI), the investment management arm of the Bank of the Philippine Islands (BPI).

Management Fees

Index funds tend to charge lower fees than actively-managed funds since index funds are passive by nature. Nonetheless, investors should still consider management fees when purchasing index funds. Aim to select those charging the lowest fees. In our opinion, the fees charged by PSIF are acceptable.

Management Fee0.475% p.a.
Distribution Fee0.475% p.a.
Transfer Agent Fee0.050% p.a.
Total1.00% p.a.

Redemption

Investment funds usually charge a penalty for early redemption of shares. This is to prevent investors from withdrawing their funds all too quickly and harming the fund’s liquidity. PSIF is no different as it charges a flat 1.00% on the total withdrawal if an investor has held his shares for less than ninety (90) days.

Holding PeriodEarly Redemption Fee
Less than 90 days1.00%
More than 90 daysNone

Investment Considerations

Merits

  • Convenient way of investing in a wide variety of shares in the country’s leading companies
  • Lower fees compared to actively-managed funds

Risks

  • As with any investment, returns are not guaranteed and research is very much necessary.
  • Stocks perform better over longer time periods. Therefore, investing in a stock index fund could produce better results if shares of the fund are held over a longer period of time.

Megaworld: Blue-chip bargain buy?

Megaworld Corporation (MEG) is a bargain buy given its position as one of the country’s top property developers, its sizable and geographically-diversified portfolio of high quality real estate developments, and its stable financial position notwithstanding its current 33.47% discount to our calculated fair value. However, interested investors should also consider the potential threats to MEG’s future growth such as any possible disruptions to vital company operations as a result of the still ongoing COVID-19 pandemic and the highly competitive nature of the local real estate market.

Source: Megaworld Corporation

Company Overview

MEG, incorporated on August 24, 1989, is primarily engaged in the design, construction, and management of large-scale mixed-use planned communities and townships. Its current portfolio includes an assortment of condominiums, subdivision lots, townhouses, hotels, offices, and retail spaces.

For the year ended December 31, 2020, it reported PhP43.5 billion in sales, making it the fourth largest Philippine property developer in terms of revenues.

TOP STOCKHOLDERS

No.NameSharesOwnership (%)
1Alliance Global Group, Inc.11,590,219,05835.80%
2PCD Nominee Corporation (Filipino)6,943,582,40221.45%
3New Town Land Partners, Inc.5,066,514,39015.65%
4PCD Nominee Corporation (Non-Filipino)3,741,380,18611.56%
5Alliance Global Group, Inc.2,500,000,0007.72%
Source: List of Top 100 Stockholders (Common Shares) as of September 30, 2021

Key Personnel

NamePosition
Andrew L. TanPresident, Chief Executive Officer
Jesus B. VarelaLead Independent Director
Kingson U. SianExecutive Director
Lourdes T. Gutierrez-AlfonsoChief Operating Officer
Kevin Andrew L. TanExecutive Vice President, Chief Strategy Officer
Francisco C. CanutoChief Financial Officer, Treasurer
Source: 2021 General Information Sheet

Investment Considerations

MERITS

Leading local property developer

For the year ended December 31, 2020, MEG posted sales of PhP43.5 billion even despite the COVID-19 pandemic, making it the fourth largest Philippine property developer in terms of revenue behind only Ayala Land, Inc. with PhP96.3 billion, SM Prime Holdings, Inc. with PhP83.9 billion, and DMCI Holdings, Inc. with PhP70.8 billion.

MEG’s current property portfolio is also one of the largest in the country with locations in key Philippine economic hubs such as Metro Manila, Cebu, and Iloilo. Some of MEG’s largest completed developments include:

EASTWOOD CITY

Eastwood City, home to more than 25,000 residents, is an 18.5-hectare community property in Libis, Quezon City with three malls, 19 completed luxury condominium towers, 10 first-class corporate office buildings, and a modern IT park.

FORBES TOWN CENTER

Forbes Town Center is a 5-hectare development in Bonifacio Global City, Taguig, Metro Manila home to 12 residential towers with approximately 3,500 residential units and host to Forbes Town Road, a retail strip with 37 restaurants and shops. The township is also connected to Burgos Circle, a popular leisure spot in Bonifacio Global City.

MCKINLEY HILL

McKinley Hill is a 50-hectare community township in Fort Bonifacio, Taguig, Metro Manila consisting of office, residential, retail, educational, entertainment, and recreational spaces. The township is also home to the McKinley Hill Cyberpark which is a PEZA-designated IT special economic zone.

UPTOWN BONIFACIO

Uptown Bonifacio is a 15.4-hectare property located at the heart of Fort Bonifacio, Taguig, Metro Manila housing Uptown Place Mall, a high-end commercial center, a selection of top-grade office spaces, and a residential zone. It is also located near St. Luke’s Medical Center, one of the country’s most advanced healthcare institutions.

ILOILO BUSINESS PARK

Iloilo Business Park is a 72-hectare mixed-planned community located in Mandurriao, Iloilo. It is home to The Street of Festive Walk, a 1.1-kilometer retail strip and 5 residential condominium developments.

Forward-looking expansion plans

Despite its position as one of the country’s top property developers, MEG continues to aggressively expand its portfolio with a selection of properties yet to be completed located in areas beyond the comparatively more developed Metro Manila. Some of these properties include:

SUNTRUST ECOTOWN

Suntrust Ecotown is a mixed-use development located on 350-hectares of land in Tanza, Cavite which MEG hopes would become a major hub for world-class light to medium export-oriented industries and residential, commercial, and institutional establishments south of Metro Manila. MEG is allotting 111 hectares to the potential industrial park, an additional 40 hectares for the expansion of the industrial park as well as the integration of a hotel and various commercial, retail, and leisure spaces, and 200 hectares for future development which may include residential and recreational facilities.

NORTHILL GATEWAY

Northill Gateway is a 53-hectare property that will rise in the northern part of Bacolod. MEG plans to construct a commercial town center, upscale residential villages, and mixed-use office and retail developments on the property.

WESTSIDE CITY

Westside City is a planned 31-hectare leisure and entertainment township located in Entertainment City, Parañaque, Metro Manila. The township will be the home of upscale residential condominiums, a luxury mall, a selection of international hotels, as well as the Philippines’ first Grand Opera House.

Stable financial position

As of September 30, 2021, MEG has over PhP28.9 billion in cash and cash equivalents, more than enough to cover the current portion of its interest-bearing loans and borrowings amounting to PhP12.4 billion.

Furthermore, MEG’s poorest performing net income year over the past five (5) years was only the PhP9.9 billion it reported in 2020 due to the global economic impact of the COVID-19 pandemic. For the period beginning 2016 to 2020, its average was PhP13.5 billion. This is more than enough to cover the PhP52.0 billion MEG expects in maturities on its interest-bearing loans and borrowings and bonds and notes payable over the next five years as per MEG’s 2020 annual report.

MEG’s financial soundness indicators are further broken down in the table below.

Ratioas of September 30, 2021
Current Ratio3.34
Acid Test Ratio1.55
Debt-to-Equity Ratio0.42
Solvency Ratio0.17
Interest Rate Coverage Ratio3.92
Source: Q3 2021 Quarterly Report
Discounted price

MEG’s closing price of PhP3.06 as of December 22, 2021 is 33.47% below the calculated median PhP4.60 fair value of MEG as computed below. This meets our minimum required 30.0% margin-of-safety. The median was employed in lieu of the average to provide a more stringent indicative valuation given that with regards to MEG’s indicative fair value the median is lower than the average.

ValuationPrice
Book Value Per SharePhP5.86
Relative Value, Peer P/E AveragePhP6.63
Relative Value, Peer P/E MedianPhP3.34
10.0x 2020 EPSPhP2.90
AveragePhP4.68
30% Margin-of-SafetyPhP3.28
MedianPhP4.60
30% Margin-of-SafetyPhP3.22

MEG’s indicative fair value was calculated by finding the average and median of the company’s book value per share, relative valuation based on the average and median P/E of local industry peers, and 10.0x its 2020 earnings per share (EPS).

MEG’s book value per share was based on the PhP5.86 it reported as of September 30, 2021.

MEG’s relative value of PhP6.63 and PhP3.34 are based on the average and median P/E respectively of the local industry peers listed below. The EPS employed to calculate the final relative value was MEG’s 2020 EPS given that 2020 was the company’s poorest performing year in the last five years due to the widespread impact of the COVID-19 pandemic.

Ayala Land, Inc.Ayala Land, Inc. is the real estate arm of the Ayala Corporation. It was the largest Philippine property company in terms of revenues for the year 2020.
DMC Holdings, Inc.DMC Holdings, Inc. is a holding company consolidated the construction, property, mining, power generation, and water concession interests of the Consunji family.
Robinsons Land CorporationRobinsons Land Corporation is the real estate investment arm of JG Summit Holdings, Inc. It has five main business units: commercial centers, residential, office buildings, hotels and resorts, and industrial and integrated developments.
SM Prime Holdings, Inc.SM Prime Holdings, Inc. is the real estate investment arm of SM Investments Corporation. It has four main business units: malls, residential, commercial, and hotels and convention centers.
Vista Land & Lifescapes, Inc.Vista Land & Lifescapes, Inc. is the holding company for the Vista Group’s property interests. Vista Land and Lifescapes, Inc. mainly operates through its residential, commercial, and recreational segments.

MEG’s price at ten times its 2020 EPS falls to PhP2.90. MEG’s EPS for the year 2020 was chosen to provide a “weakest year” valuation given that this was its poorest performing year over the last five years.

RISKS

PH property market still largely vulnerable to economic impact of COVID-19 pandemic

The continued threat of business disruptions as a result of the COVID-19 pandemic is not expected to subside any time soon especially with the recent spread of the Omicron (B.1.1.529) COVID-19 variant.

As such, any possible disruptions to the construction sector may lead to delays in property turnover and generally weaker economic conditions may make it more difficult for MEG to sell its properties at ideal prices.

Highly competitive local property landscape

The local property market is also highly competitive and MEG must remain strategic in its approach to expansion if it plans to maintain any of its current advantages. Moreover, property prices in Metro Manila have become increasingly less affordable which may lead to future difficulties in MEG’s ability to acquire lots in the capital city at reasonable prices for its future development plans.

GCash’s GInvest: How to Invest in GInvest’s Mutual Funds

GCash is currently the Philippines’ top mobile wallet services provider with over 46 million registered users as of July 2021.

GCash offers a selection of financial services to its users such as mobile payment, affordable insurance via GInsure, and investment services via GInvest.

Through GInvest, GCash users can access a variety of investment funds for as low as PhP50.00.

An investment fund is a financial vehicle through which investors pool their money to invest, usually through a professional fund manager or by following an index (in the case of the Philippines, this is usually the Philippine Stock Exchange Index).

Recently, GCash partnered up with the Bank of the Philippine Islands to expand the offerings on its GInvest marketplace to include BPI Investment Management, Inc.’s (BIMI) ALFM Global Multi-Asset Income Fund and Philippine Stock Index Fund.

(1) Open GCash.

(2) Tap “View all GCash Services”.

(3) Tap “GInvest”.

(4) If you haven’t set up your GInvest beforehand, GCash will require you to answer a questionnaire to determine your personal risk profile. Our test returned a result of “Moderate” which means we are willing to accept a moderate amount of risk for a hopefully appropriate amount of return. After answering the questionnaire, go ahead and tap “View Investment Products”.

(5) Tap the investment product you plan to invest in. In this case, we chose the Philippine Stock Index Fund. Make sure to always thoroughly research whichever fund you plan to invest in beforehand.

(6) Tap “BUY”. Again: Research is key.

(7) Read and consider the fund’s terms & conditions, risk disclosure statement, and prospectus. Make sure to check if there are any hidden fees/required holding periods. Investment funds usually charge a fee for the asset management services they provide and have a required holding period to prevent investors from liquidating their positions too soon. If everything looks fine, press “Proceed”.

(8) You will be asked to enter an authentication code to verify your identity.

(9) Enter the amount you wish to invest, then press “Next”.

(10) GCash will ask you to confirm your order.

(11) After confirming, GCash will send you a notification and text message confirming your buy order.