STUDY FIRMS, NOT SECTORS, STOCK MARKET ADVISOR SAYS

Amid the volatility, the local bourse will continue to expand in the positive territory in the long-term supported by strong corporate earnings and intact economic drivers.

When deciding where to invest, a stock market advisor encouraged Filipinos to study the financial performance of individual firms, instead of deciding on the basis of sectors. “If you invest on a sector basis, you buy the story and you don’t connect that with the earnings,” Unicapital advisor to the board Alvin Arogo said in a panel discussion hosted by the Institute of Corporate Directors (ICD) in Radisson Blu Hotel in Cebu City yesterday.

A stock market expert cautioned investors to not fall prey to advice identifying which industries or sectors have the most potential, as this could be erroneous.

Instead, Unicapital advisor to the board Alvin Arogo said that investors should look individually into a publicly-listed company’s financial performance when deciding to invest.

“I actually advise not to invest on a sector basis…If you invest on a sector basis, you buy the story and you don’t connect that with the earnings,” Arogo said in a panel discussion attended by local business owners during the Institute of Corporate Directors (ICD) discussion at Radisson Blu Hotel in Cebu City yesterday.

For instance, the cement industry in 2016 was anticipated to be one of the most profitable sectors to cash in on because of the infrastructure programs of the Duterte administration. Unfortunately, the cement players saw a rise in cement imports that brought down the earnings of local cement players, Arogo said.

Gone wrong

The case of Cemex Holdings Philippines (CHP) is one example, he cited, where sector projections had gone wrong.

In July, Cemex debuted in the Philippine Stock Exchange (PSE) at an IPO price of P10.75. As of yesterday, stock price of Cemex closed at P4.23. Further, its net income shrank 46 percent in the first half, recording P486 million from P896 million registered in the same period a year ago.

“To me, invest in a company, if you are a long-term investor, on conglomerates with good track record,” Arogo said, citing the likes of Ayala Group, SM, and Aboitiz, among others.

“Aside from that, focus on stocks with good earning poten- tial, but avoid (investing by) sectors because you are only creating a story,” the official added.

Positive territory

Generally, Arogo said the Philippine stock market, amid the volatility, will continue to expand in the positive territory in the long-term as supported by strong corporate earnings and intact economic drivers of the country, including its fast-expanding gross domestic product (GDP) and its young population.

In addition, with the rise of GDP per capita to $3,000, a growing number of Filipino investors in the stock market also signals optimism.

“As the economy improves, and as we can afford to invest more, there will be a shift of allocation to equities which means there would be more buyers than sellers, and with more buyers than sellers, the prices go up,” he said.

Focus on stocks with good earning potential, but avoid (investing by) sectors because you are only creating a story. ALVIN AROGO Unicapital adviser to the Board