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.
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.
Debt-to-Equity Ratio must be less than 1.0.
Total Debt-to-Net Working Capital Ratio must be less than 1.0.
Current Ratio must be more than 2.0.
Company must have consistently paid out annual dividends over the last ten (10) years.
Net Income must have grown by at least 33% compared to ten (10) years prior.
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.
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.
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, 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 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 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 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 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 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 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 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.
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.
Book Value Per Share
Relative Value, Peer P/E Average
Relative Value, Peer P/E Median
10.0x 2020 EPS
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 Corporation
Robinsons 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.
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.
During his thirteen-year stint as manager of the Fidelity Magellan Fund from 1977 to 1990, Peter Lynch managed to post 29.2% in average annual return, cleanly beating the S&P 500 stock market index by more than double over the same period. This phenomenal track record effectively cemented his position as one of history’s greatest investors.
Although also a proponent of value investing, Peter Lynch seemed more an advocate of straightforward fundamental analysis as a practice. He insisted on only investing in what you know which often meant performing the necessary legwork to research companies as thoroughly as possible.
More recently, Peter Lynch has commented on the “mistake” of passive investing, citing that he believes active investors have beat the market for years and would continue to do so.
In line with this, we have collected seven of our favorite Peter Lynch quotes on investing below.
“Stocks are not lottery tickets. There’s a company behind every stock. The company does well, the stock does well.”
Neat’s Notes: In the words of our lord and savior Lou Mannheim (Wall Street, 1987): “Stick to the fundamentals. That’s how IBM and Hilton were built. Good things sometimes take time.”
“If you spend fourteen minutes a year on economics, you’ve wasted twelve minutes.”
Neat’s Notes: Lynch makes reference to economics “in the broad scale” in which one attempts to discern uptrends or downtrends in whatever aspect of the economy. Lynch largely wanted to avoid “economic predictions”, preferring to stick to “economic facts” which meant actual numbers measuring things that have actually happened.
“If you can’t explain to a ten-year-old in two minutes or less why you own a stock, you shouldn’t own it.”
Neat’s Notes: In the words of whomever: “Keep it simple, stupid!”.
“You can take advantage of the volatility in the market if you understand what you own.”
Neat’s Notes: Lynch also pointed out that if a stock went down by a lot from when you bought it, you would be in a better place to know the best thing to do if you understood what you owned as opposed to, say, quickly selling out in a panic.
“You can’t get too attached to a stock. The stock does not know you own it.”
Neat’s Notes: Yes.
“Avoid long shots. I bought about thirty long shots in my life. I’ve never broken even on one.”
Neat’s Notes: We would also like to add that it is usually unwise to go headlong into something without conducting at least some sufficient amount of personal research.
“It’s always gonna be scary, there’s always gonna be something to worry about, and you just have to forget all about it. Cut it all out and own good companies and turnarounds. Study them and you’ll do well.”
Neat’s Notes: We think this quote best encapsulates Peter Lynch’s whole mindset with regards to investing. Simple and no nonsense. We also hope it can help guide you towards achieving 29.2% average annual returns over the next thirteen years.
Peter Lynch’s 1994 lecture on investing may also be of interest to those keen on getting more stock-picking tips from the man himself. We at Neat’s have watched it 3,906,483,290 times—still substantially less than the USD14.0 billion Lynch was managing at one point for the Fidelity Magellan Fund.
Cityland Development Corporation (CDC) is a potential value BUY given the company’s consistent performance over the course of the pandemic, stable financial position, and bargain price. However, interested investors should consider the fact that the recovery of CDC’s revenues over the last two years has slightly lagged its peers and Philippine property prices remain mostly depressed which could dampen the company’s prospects in the near future.
CDC, incorporated on January 31, 1978, mainly develops or leases medium- to high-rise office, commercial, and residential buildings and subdivisions located in the cities of Makati, Mandaluyong, Manila, Pasig, and Quezon City.
CDC has two subsidiaries: City & Land Developers, Inc. (LAND) and Cityplans, Inc. (CPI). LAND is also a real estate developer while CPI is engaged in the business of developing, maintaining, and selling pension plans. Cityland, Inc. (CI) is CDC’s ultimate parent.
Consistently strong 2021 profit margins even despite pandemic
Prior to the pandemic, CDC managed to post an average annual earnings before tax (EBT) margin of 36.58% against the industry average and median of 31.62% and 34.28% respectively for the years 2016, 2017, 2018, and 2019. It also posted an average annual net margin of 25.83% against the industry average and median of 22.17% and 25.23% respectively over the same period.
The table below presents the change in industry EBT margins for the first three quarters of 2020 and 2021 against the industry EBT margin for the same period in 2019.
The results show that CDC has done a commendable job improving their EBT margin by 13.98% and 11.88% against their 2019 EBT margin for the first three quarters of 2020 and 2021 respectively . This is substantially higher than the -18.35% and -13.36% averages posted by the industry over the same respective periods.
CDC was likewise able to post an 11.07% and 29.32% improvement in net margins against their 2019 net margin for the first three quarters of 2020 and 2021 respectively. This is also substantially higher than the -22.45% and 25.72% averages returned by the industry over the same respective periods.
EBT Margins, 2020 & 2021 vs. 2019
2020 Change (%)
2021 Change (%)
2020 Change (%)
2021 Change (%)
In terms of debt, CDC only has PhP1,208.2 million in the form of commercial papers with varying maturities ranging from 30 to 365 days as of September 30, 2021.
In its latest quarterly report, CDC also expressed its intention to continue maintaining a cautious stance with regards to financing to better ensure its ability to turn-over on-going projects in a timely manner.
The company’s debt ratios are further summarized in the table below.
as of September 30, 2021
Solvency Ratio *
Interest Rate Coverage Ratio
Acid-Test Ratio **
* Solvency Ratio = (Net Income After Tax + Depreciation Expense) / Total Liabilities ** Acid-Test Ratio = (Cash and Cash Equivalents + Short-Term Investments + Installment Contracts Receivable, Current + Contract Assets, Current + Other Receivables, Current) / Total Current Liabilities
As of September 30, 2021, CDC has PhP6,976.2 million in tangible current assets which account for 94.86% and 57.09% of its total current assets and total assets respectively.
The local property sector has been one of the hardest hit in the Philippines since the start of the pandemic as a result of disruptions to construction and higher default rates across the country. The Philippine Stock Exchange’s (PSE) Property Index is likewise down by 22.52% as of December 10, 2021 compared to its close on January 3, 2020, making it the worst performer of all the indices by far.
The tables below present the year-on-year change in 2020 and 2021 industry quarterly revenues compared to their 2019 counterparts. As can be observed, the industry as a whole has not averaged a positive growth rate for any quarter save for Q1 2020 given that the declaration of national lockdowns to curb the spread of COVID-19 in the Philippines only began in March of that year.
In terms of revenue recovery against 2019 figures, CDC has performed below the industry average. However, comparing CDC’s 2020 and 2021 revenues shows the company has actually outperformed the industry average for all but the third quarter of 2021.
Revenues, 2019 vs. 2020
Q1 Change (%)
Q2 Change (%)
Q3 Change (%)
Revenues, 2019 vs. 2021
Q1 Change (%)
Q2 Change (%)
Q3 Change (%)
Revenues, 2020 vs. 2021
Q1 Change (%)
Q2 Change (%)
Q3 Change (%)
As per the company’s latest quarterly report, CDC still has real estate properties for sale to the tune of PhP3,750.9 million and a significant land bank worth PhP896.5 million mostly located in “prime lots … ideal for horizontal and vertical developments”.
Nationwide residential property prices continue to slump year-on-year
As per the Bangko Sentral ng Pilipinas (BSP), nationwide residential property prices declined by 9.4% year-on-year in Q2 2021 compared to Q2 2020 due to the continued effects of the COVID-19 pandemic.
The decline was led by the 18.3% year-on-year drop in residential property prices in the National Capital Region (NCR) in Q2 2021 compared to Q2 2020 driven by negative price changes in single detached, condominium, and townhouse units across the region.
However, residential real estate loans for new housing units rose year-on-year by 82.3% and 27.2% across the country and in the NCR respectively in Q2 2021 compared to Q2 2020 possibly implying improved bank and consumer confidence.
These factors alongside recent uncertainty surrounding the Omicron (B.1.1.529) COVID-19 variant may negatively impact CDC’s ability to produce sales and margins as consistently and efficiently as it was previously able to under more favorable economic conditions.
Continuing with the stocks retained from our first screen, presented below are all the common stocks listed on the Philippine Stock Exchange (“PSE”) also meeting the following criteria:
Net Debt-to-Net Working Capital (“ND/NWC”) Ratio below 0.6 for property, mining, and oil companies and 0.9 for all other sectors
Capital Adequacy Ratio (“CAR”) above 15.0% for banks
Non-Performing Loan (“NPL”) Ratio below 4.0% (gross) or below 2.0% (net)
Last Traded Price not higher than 25.0% from 52-Week Low
All financial data was retrieved from the companies’ latest audited financial statements for the quarter ended September 2021. All prices were retrieved at market close on December 9, 2021 (GMT +8).
The above screening criteria was adapted from the following excerpt from Chapter 14 (Stock Selection for the Defensive Investor) of The Intelligent Investor (Revised Edition) by Benjamin Graham:
“For industrial companies current assets should be at least twice current liabilities—a so-called two-to-one current ratio. Also, long-term debt should not exceed the net current assets (or ‘working capital’). For public utilities the debt should not exceed twice the stock equity (at book value).”
The ND/NWC Ratio was used in lieu of the Long-Term Debt-to-Net Current Assets Ratio to provide even more stringent parameters in response to uncertainties surrounding the ongoing COVID-19 pandemic. Net Debt was computed by subtracting total cash from total debt. Net Working Capital was computed by subtracting current assets less cash by current liabilities less debt. An ND/NWC Ratio of 0.6 was required for companies in property, mining, and oil to provide a wider margin-of-safety given the potentially more vulnerable and capital-intensive nature of these industries.
For banks, a CAR of 15.0% and an NPL Ratio of 4.0% (gross) or 2.0% (net) was required in lieu of the ND/NWC Ratio.
Companies trading at more than 25.0% over their 52-Week Low were also eliminated. This extra screen was adapted from the following excerpt from a 2000 MSN Money article by famed “Big Short” Michael Burry:
“As for when to buy, I mix some barebones technical analysis into my strategy—a tool held over from my days as a commodities trader. Nothing fancy. But I prefer to buy within 10% to 15% of a 52-week low that has shown itself to offer some price support. That’s the contrarian part of me.”
Last Traded Price
Asia United Bank Corporation
China Banking Corporation
Metropolitan Bank & Trust Company
Rizal Commercial Banking Corporation
* Net value used in lieu of gross value due to lack of coverage
Presented below are all the common stocks listed on the Philippine Stock Exchange (“PSE”) meeting the following criteria for the month of December 2021:
For non-banks, Enterprise Value-to-EBITDA (“EV/EBITDA”) Ratio below 15.0 for the last twelve (12) months ended September 2021
For banks, Price-to-Earnings (“P/E”) Ratio below 15.0 for the last twelve (12) months ended September 2021
For all companies, Price-to-Book Value (“P/B”) Ratio below 1.5 for the most recent quarter ended September 2021
All ratio data was retrieved from FactSet Research and Investing.com on December 2, 2021 (GMT +8).
The above screening criteria are loosely based on the following excerpt from Chapter 14 (“Stock Selection for the Defensive Investor”) of The Intelligent Investor (Revised Edition) by Benjamin Graham:
“Current price should not be more than 1 1/2 times the book value last reported. However, a multiplier of earnings below 15 could justify a correspondingly higher multiplier of assets. As a rule of thumb we suggest that the product of the multiplier times the ratio of price to book value should not exceed 22.5.”
However, the decision to use the EV/EBITDA Ratio in lieu of the P/E Ratio to screen non-bank companies was inspired by the following excerpt from a 2000 article written by Michael Burry for MSN Money:
“I will screen through large numbers of companies by looking at the enterprise value/EBITDA ratio, though the ratio I am willing to accept tends to vary with the industry and its position in the economic cycle. If a stock passes this loose screen, I’ll then look harder to determine a more specific price and value for the company. When I do this I take into account off-balance sheet items and true free cash flow. I tend to ignore price-earnings ratios. Return on equity is deceptive and dangerous. I prefer minimal debt, and am careful to adjust book value to a realistic number.”
The list below will be further streamlined in a succeeding article to eliminate companies with less than ideal financial positions and any adverse findings which might negatively affect the company at a fundamental level.
Asia United Bank Corporation
BDO Unibank, Inc.
China Banking Corporation
East West Banking Corporation
Metropolitan Bank & Trust Company
Philippine Business Bank
Philippine Bank of Communications, Inc.
Philippine National Bank
Rizal Commercial Banking Corporation
Union Bank of the Philippines
Alsons Consolidated Resources, Inc.
Cemex Holdings Philippines, Inc.
Cirtek Holdings Philippines Corporation
Crown Asia Chemicals Corporation
First Gen Corporation
First Philippine Holdings Corporation
Holcim Philippines, Inc.
Integrated Micro-Electronics, Inc.
Mabuhay Vinyl Corporation
Macay Holdings, Inc.
Manila Water Company, Inc.
PetroEnergy Resources Corporation
SFA Semicon Philippines Corporation
Victorias Milling Company, Inc.
Aboitiz Equity Ventures, Inc.
Alliance Global Group, Inc.
Cosco Capital, Inc.
DMCI Holdings, Inc.
Jolliville Holdings Corporation
Lopez Holdings Corporation
San Miguel Corporation
Seafront Resources Corporation
Top Frontier Investment Holdings, Inc.
* Estimated for the twelve months ending December 2021 ** For the twelve months ended June 2021
8990 Holdings, Inc.
Cebu Landmasters, Inc.
Century Properties Group, Inc.
City & Land Developers, Inc.
Cityland Development Corporation
D.M. Wenceslao & Associates, Inc.
Filinvest Land, Inc.
Global-Estate Resorts, Inc.
Robinsons Land Corporation
Rockwell Land Corporation
Sta. Lucia Land, Inc.
* For the twelve months ended June 2021
Asian Terminals, Inc.
Centro Escolar University
Grand Plaza Hotel Corporation
Harbor Star Shipping Services, Inc.
Lorenzo Shipping Corporation
Metro Retail Stores Group, Inc.
Robinsons Retail Holdings, Inc.
SSI Group, Inc.
STI Education Systems Holdings, Inc.
Waterfront Philippines, Inc.
* For the twelve months ended May 2021
Mining & Oil
Apex Mining Company, Inc.
Atlas Consolidated Mining & Development Corporation