Wall Street Banks and Hedge Funds

Bloomberg’s Stephanie Ruhle interviews Stan Druckenmiller, an American hedge fund manager and founder of Duquesne Capital Management LLC.

Topic of the interview was pretty wide but I lol'd on their specific discussion about hedge funds and banks, excerpts below:

Stephanie: You have these big banks that are now doing business where they look more like utilities, I don’t know how are these guys going to make a ton of money going forward, maybe there does need to be more consolidation?

Stan: I’d like to see them operate more like utilities, I couldn't care less whether they make money, unless I own their equities, but if we're talking about as a United States citizen, I have no problem with banks being utilities and going back to what banks used to do

Stephanie: Banks are about human capital, they don’t make TV sets, they don’t innovate products, they need to have the smartest, most sophisticated people in the building in those seats

Stan: Not if they’re just making loans.

Stephanie: And that’s what they should just be doing?

Stan: Yeah!

Stephanie: And the most sophisticated guys should work at hedge funds, not on sell side trading desks?

Stan: You said that Stephanie, not me

Me: BWAHAHAHAH =))

Watch the whole video here:

http://www.businessweek.com/videos/2013-03-01/druckenmiller-sees-crisis-worse-than-2008

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How to be a successful trader

I've read a lot of  stuffs on how to become a successful trader and investor in the stock market and perhaps this is one of the best.

I think Faceless Trader nailed it on this one.

More than studying the charts or the company’s fundamental positions, the more important thing that trading entails is the aspect of knowing yourself and complementing that personality to the unique trading system that you’ll eventually use to enable yourself to be a better and consistent trader. - Faceless Trader

Know your self. Find a strategy that works and makes sense to you. Stick with it.

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A Call on COL

I've been looking at COL for some time now and as you might already know, COL Financial Group Inc, the leading online stockbroker in the Philippines is actually listed in the PSE. I personally trade with them and I like their trading platform. Having this said, I really had the interest on investing on this company not only because I like it's service and products but also because of the type of business it is in. Since COL is a stock broker, they make money from brokerage commissions. Every time you and I buy or sell stocks they make money.

I have been closely monitoring how much money they make on a daily basis from their online brokerage operations since Nov last year to present, and when I saw this news below it really came to me that COL is really on a very sweet spot in it's brokerage business and it's position in the Equity capital markets in the Philippines.

Security Name	COL Financial Group, Inc.
Date	03/05/2013
Headline	DCL #1976: Press release: "COL's operating performance rebounds..." - 1
Source
Content
Operating profits of leading online stockbroker COL Financial Group Inc. (COL) rebounded during the fourth quarter of 2012. During the last three months of 2012, COL's operating profits jumped by 16.1% to Php50.1 Mil. This brought operating income for the whole of 2012 to Php339.2 Mil. Although still lower by 15.6% compared to the 2011 total of Php401.7 Mil, the drop was much slower than the 19.4% decline registered during the first nine months of the year. Consolidated net income for the full year fell 8.6% to Php305.9 Mil. Profits rebounded as COL benefited from the recovery of trading activity by local investors in the PSE.

The key takeaway of the above news is that COL's operating profit rebounded in the 4th quarter last year. Noting this, when I checked my gathered data since Nov 5, 2012 to Dec 31, 2012 (2/3rds of the 4th quarter) the average commission they get is about PHP 1.6MM per day (I computed the daily commission by multiplying the daily value turnover under COL x 0.25%). As per the article, this was achieved mainly on the increase in trading activity in the 4th quarter accompanied by COL's increase in number of clients amounting to about 46,536 as of end 2012 from only 27,704 last 2011.

Now the most interesting part here is when 2013 came in, from Jan 1, 2013 to Mar 6, 2013, COL's average commission is now standing at P2.2MM per day a roughly 40% increase!

Taking into account the seasonality of the market, trading activity is seen to pick up or to be generally higher than the year average during the fourth quarter. If 1.6MM was the above the year average daily commission on the fourth quarter of 2011. How much do you think the daily commission in the fourth quarter of 2013 will be knowing that even at the 1st Q of 2013 they're already getting PHP 2.2MM a day? We'll your guess is as good as mine haha! But what the numbers are telling us is there is a very good reason to believe that it will be higher simply by just judging from the momentum of the numbers we're seeing.

I'm a believer that what drives stock prices is earnings and the certainty of that earnings. With early signs of potentially great earnings backed with a good certainty of that said earnings due to the increasing number of clients. I think COL is really a good business to own for the long term.

COL sweeteners

Company executives a.k.a Insiders are buying at current levels

*data coming from Bloomberg

Red marks means company insiders sold COL

Green marks means company insiders bought COL

Notable insider transactions are the below from 

Edward Lee, Chairman of COL Financial Group Inc.

and Han Paulwell, Director of COL Financial Group Inc.

And last but not the least, Management owns 55% of the company

Management has a huge chunk of the company so I guess that's a pretty good indicator that they will do their best for COL as they would also hurt their pockets if they wont. Haha! Cheers! Bah that was a very long post -.-!

Happy Investing!

Personal Disclosure: I have COL in my portfolio.

DISCLAIMER: 

This is not an investment advice and the author shall not be responsible or liable for any trading or investment decisions made based on this information.

The author hereby expressly disclaims any responsibility for any error or inaccuracy in the information.

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My 2nd Online Stock Broker - BPI Trade

It was about 3 years ago when I opened my first online trading account with COL Financial, they were referred to as CitisecOnline then, but it's been quite a while that I've been contemplating on signing up for a 2nd broker because I want to have a 2nd account to track the performance for my different portfolio constructed using a different strategy other than my personal calls. Hence the idea of opening an account either with FirstmetroSec or BPI Trade.

But it was EkkayTrader who convinced me to just go with BPI Trade as a 2nd online broker since as she pointed out, there was a major improvement on BPI Trade's trading platform, not to mention it was pretty easy to open an account with them. So yeah, thanks to E! haha

COL and BPI Trade

Though BPI Trade has improved, I personally think that COL is the superior broker in terms of functionality, ease of use, research and built in functions. For the COL account owners I think the extra value you get with opening a 2nd trading account with BPI Trade are as follows:

1. Interest on your cash balance - cash balances that will be used to purchase stocks will be parked under a BPI Direct savings account opened under your name, I think interest rates will be the same with regular savings account (w/c is though is close to nothing, interest is interest haha)

-A caveat here however is that BPI Trade charges a PDTC Depositary Maintenance Fee of PhP 0.00000833 for every Peso market value of your holdings as of month end will be debited from your BPI Trade Bank Account monthly. - Take note of the word monthly. To put this in perspective, this is like 1% fee on the NAV of your positions for 100 years. Not that bad if you ask me, this should be offset on the interest you get on your cash balance.

2. More research - You get access to BPI's sell side analyst reports if you have a BPI Trade account

3. Broker diversification - Just like the idea on parking your funds on multiple banks to reduce your risk in the event one of those banks go under, then same with a the online stock broker.

4. No cash out - no need to lay out cash in opening an account with BPI Trade for as long as you have an account with BPI.


Final remarks
COL is still the best online stock broker, pero panalo din mag-open ng account with BPI Trade. Haha!

Happy investing!
Cheers!

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Some points on Adversity Quotient (AQ)

Adversity - is defined by google as "difficulties" or "misfortune" w/c is synonymous to having experience disaster - distress - calamity and hardship.

Pretty heavy words right? In business or life in general, these are not just mere words but real challenges that one has to manage everyday. Whether you're a start-up company, a diversified conglomerate or just an individual investor managing his exposures in different types of risks from various asset classes from different markets. One should always have the ability to survive in the event that things go wrong the next day or few years down the road.

I think Adversity Quotient (AQ) therefore, is a measure of your ability to manage your way out of difficult business environments and situations in a good shape, whether you've done it through successful anticipation, consistent preparation or through creativity and innovation as you experience adversity. Hence, business-people w/ high AQ tend to succeed in business as they are able to stay or survive in the bad days and be there to reap the rewards in the good days. Adversity Quotient is more of the "survivability factor" if there is such a word. Haha!

See the below video from ANC's On the Money w/c discussed briefly about Adversity Quotient.

Quote from the video below by Mark Yu, CFO, SEAOIL Philippines, Inc.

"I think it's a perspective in life that you don't look at adversity as failure, you have to look at adversity as an opportunity to learn and become better". 

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The Filipino Investor Quantitative Model Portfolio

I have conducted a Multi-factor analysis on stocks listed in the Philippine Stock Exchange last Jan 23, 2013.

From the top 25 stocks that passed that analysis, I made a dummy or a "model" portfolio if you may to track it's performance. 

The model portfolio is dominated in PHP and assumes a PHP 10,000 exposure for every stock on purchase date. The purchase date is on Jan 24, 2013 w/c is one day after the analysis was done. The purchasing price is the closing price of the Jan 24, 2013. There are 25 stocks in this model portfolio hence the initial capital  is PHP 250,000. Brokerage cost and taxes are not accounted for this model.

Let's find out if this "Multi-factor" strategy can outperform the Philippine index (PCOMP:IND) in terms of return.

This is a buy and hold strategy w/c re-balances annually. I'm not sure yet how i'm going to account for the dividends or if this Bloomberg watch list can account that for me (though I think it cant). Anyways, I'll just figure that out later.

For tracking purposes let's name this model portfolio as "The Filipino Investor Quantitative Fund" or in short, "TFI Quant Fund".

TFI Quant Fund:

Capital: PHP 250,000

Analysis date: Jan 23, 2013

Purchase date: Jan 24, 2013

Number of stocks: 25

Exposure per stock: PHP 10,000

Benchmark: PCOMP:IND

TFI Quant Fund return since Jan 24: +8.04%

PCOMP return since Jan 24: +5.58%

TFI Quant Fund

DISCLAIMER: 

This is not an investment advice and the Author does not have any position on the stocks mentioned above as of the publishing date of this article - Feb 08, 2013. The author shall not be responsible or liable for any trading or investment decisions made based on this information.

The author hereby expressly disclaims any responsibility for any error or inaccuracy in the information.

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The Wisdom of Benjamin Graham

I stumbled upon this great video of Benjamin Graham's "legacy" in Youtube and I thought the followers of The Filipino Investor should really know about it, hence I'm sharing it on this blog.

To those who do not know who Benjamin Graham is. He is actually one of the "look-up-to-guys" when it comes to Value Investing. If you ask me, I think it is even safe to say that he is the father of value investing. Ben Graham is a business professor at Columbia University where he taught Warren Buffet and the other business tycoons (shown in the video below) on how to view stocks in a business and value investor's perspective. He is also an author of various books such as "The Intelligent Investor" and "Security Analysis" to name a few.

My top 2 favorite lines the segment below.

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