How to Analyze Stocks in the Philippines

Introduction

Emotional decisions based on trends or fear often overshadow rational analysis. Research shows that herd mentality drives 85% of stock market crashes, such as the 2008 financial crisis. Emotional decisions often lead to panic selling during downturns, locking in losses.

But analysis gives you confidence to stay invested when the market fluctuates, instead of making decisions based on fear or greed.

This short article will help you decide which analysis you can use to invest without fear and greed. But before you go you must have a brokerage account.

Understanding the Basics of Stock Analysis

What is Stock Analysis and Why It’s Crucial for Investors

Stock analysis is the backbone of smart investing. It’s the process of reviewing and evaluating a stock to determine its potential future performance. For Filipino investors, understanding how to analyze stocks is crucial—after all, who wants to throw darts at a board when real hard-earned money is on the line?

Different Approaches to Stock Analysis (Fundamental vs. Technical)

There are two main approaches: fundamental analysis and technical analysis. Fundamental analysis is like peering under the hood of a company, examining everything from financial statements to market position. Think of it as evaluating a company’s overall health. On the flip side, technical analysis involves looking at stock price movements and trading volumes—sort of like predicting the next weather pattern based on past data.

Key Terms and Concepts Every Filipino Investor Should Know

Before diving deeper, familiarize yourself with essential terms such as market capitalization, earnings per share (EPS), P/E ratio, debt-to-equity, return on investment (ROI), profit ratios and dividend yield. These are your basic tools, like a compass and map for a hiker.

Common Misconceptions About Stock Analysis

One common myth is that stock analysis guarantees success—nope, it’s more about stacking the odds in your favor. Another is that only financial wizards can do it. Trust me, if I can learn it, anyone can.

Essential Tools and Resources for Philippine Stock Market Analysis

In today’s digital age, you have a plethora of tools at your disposal. Platforms like PSE Edge and pse.com.ph for stock information and latest disclosure reports of the company, and various stock charting services can provide you with valuable market data and research. And the best part? Many of these tools have free versions! Setting up your analysis workspace with the right resources is like a chef prepping their kitchen for a gourmet meal.

If you find yourself puzzled at any step, remember: every seasoned investor was once a beginner, questioning what a “candlestick pattern“, and “financial statement “was! The key is to keep learning and adapting.

Getting Started with Fundamental Analysis

How to Read and Understand Company Financial Statements

When I first laid my eyes on a company’s financial statement, it felt like deciphering a foreign language. But breaking it down, starting with the balance sheet, income statement, and cash flow statement, made it manageable. These documents reveal a company’s financial health—its assets, liabilities, revenues, and cash flow. It’s like taking a sneak peek into the financial soul of a company.

Sounds a lot? But if you don’t want to start from scratch you may check the course that I joined. The course is easy to understand for beginners and has a supportive community. That’s why I recommend it learning how to read financial statements.

To give you a sneak peek of financial statement, see the income statement from morning star.

Key Financial Ratios for Philippine Stocks

Ratios like price-to-earnings (P/E) and return on equity (ROE) are your analytical best friends. P/E can help you gauge if a stock is over or undervalued compared to its earnings, while ROE provides insights into how effectively a company uses its equity.

But there are other key ratios to look for therefore it is essential to write them down because you will forget until you make it.

My favorite dividend yield, Dividend yield is like a report card for a company showing how much it pays its shareholders compared to its stock price. It’s a simple percentage you calculate by dividing the yearly dividends by the stock price.

We will discuss full key ratios of fundamental analysis in our future blog posts.

Understanding Income Statements and Balance Sheets

The income statement shows you the company’s profitability over a specific period, and the balance sheet gives a snapshot of its assets and liabilities at a specific point in time. Learning to read these is like understanding the company’s story—the ups, downs, and everything in between.

Analyzing Company Management and Corporate Governance

A company is only as good as its management. Look for transparency in corporate governance and a strong leadership team. I once invested in a seemingly promising company, only to realize later that its management was embroiled in controversies—lesson learned!

Industry Analysis and Market Position Evaluation

Understanding the industry dynamics is crucial. Is the company a leader or a small player in a rapidly changing industry? Check out market trends and how the company positions itself. This helps in gauging its resilience and potential for growth.

Technical Analysis for Philippine Stocks

Essential Technical Indicators for Beginners

Technical analysis can feel like wizardry at first. Start with simple indicators like moving averages and relative strength index (RSI) to identify trends and potential stock movements.

Reading Candlestick Patterns and Price Charts

Candlestick patterns might seem cryptic, but they can reveal valuable insights into market sentiment. For instance, a doji pattern can signal indecision in the market. Reading these charts is like learning to interpret the mood of the market.

Understanding Support and Resistance Levels

Think of support and resistance levels as the floor and ceiling for stock prices. They help you understand potential entry and exit points. I once avoided a costly mistake by recognizing a strong resistance level that signaled a potential downturn.

Volume Analysis and Its Importance

Volume analysis indicates the strength of a price movement. A significant price change on high volume is like a loud market announcement—pay attention!

Moving Averages and Trend Identification

Moving averages smooth out price data to identify trends over a period. They’re like the GPS for spotting whether a stock is on an upward or downward trajectory.

Practical Tools and Platforms for Stock Analysis

Best Stock Analysis Platforms in the Philippines

Platforms like PSE Edge, Instagrams, and Bloomberg Terminal provide comprehensive data and analytics. They’re indispensable tools for any serious stock analyst.

Free vs. Paid Tools Comparison

There are plenty of free resources to get started, but paid tools often offer deeper insights and advanced features. Weigh the benefits against your needs and budget.

Mobile Apps for Stock Analysis

If you’re always on the go, mobile apps like Investagrams offer real-time data and analysis. It’s like having a stock analyst in your pocket!

Where to Find Reliable Market Data and Research

Accessing reliable data is key. Websites like the Philippine Stock Exchange and financial news outlets offer consistent updates and insights.

Setting Up Your Analysis Workspace

Having a dedicated space with all your tools organized is crucial. It’s like a craftsman’s workshop—everything within reach, ready for action.

Creating Your Stock Analysis Strategy

Developing a Systematic Approach to Analysis

A systematic approach involves setting clear goals, regularly reviewing your process, and adjusting as needed. It’s like having a roadmap for your investment journey.

Building a Stock Screening Process

Screening helps you filter out stocks that meet specific criteria. It’s like sifting through a treasure chest to find the gems.

Creating a Watchlist of Potential Investments

Keep an eye on stocks that fit your strategy. A well-maintained watchlist helps you act swiftly when opportunities arise.

Risk Management Techniques

Understanding and managing risk is crucial. Techniques like position sizing and setting stop-loss orders can help protect your capital.

Portfolio Diversification Strategies

Diversification is your safety net, spreading risk across different sectors and stocks. It’s the old adage, “Don’t put all your eggs in one basket.”

Common Mistakes to Avoid in Stock Analysis

Emotional Decision-Making Pitfalls

It’s easy to let emotions rule your decisions—been there, done that. Stick to your analysis and strategy, not momentary impulses.

Over-reliance on Single Indicators

Using one indicator to make decisions is like trying to navigate with one eye closed. Combine multiple indicators for a clearer view.

Ignoring Market Context and Economic Factors

Always consider the broader economic environment. Stocks don’t operate in a vacuum. Ignoring this context is akin to ignoring storm clouds in the distance.

Following Hot Tips Without Proper Analysis

Hot tips can be tempting but always do your homework. I learned this the hard way when a “sure thing” turned sour fast.

Poor Timing and Patience Issues

Timing is everything in stock investment. Patience, too. Sometimes the best move is to wait.

Conclusion

Analyzing stocks can be overwhelming at first, but with a structured approach, it becomes manageable and even exciting.

I’m not a guru I just want to blog what I know, but history (Warren Buffet) says fundamental analysis has been a reliable strategy for building wealth over the long term. Therefore it is worth it to learn.

But I don’t say technical analysis is not good. I believe it is best for short-term goals and those who have a lot of time to trade, still some people are earning in this analysis.

But In the end, your first stock must have some analysis. Choose what’s best for your skills, goals, and risk appetite – fundamental or technical.

Remember, the key is continuous learning and staying disciplined. So go ahead, take the first step, and start analyzing.