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How to select stocks for investment – Trading Through Troubling Times

How to select stocks for investment during troubling times.
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Profit in Emerging Markets

When the economy is doing great, the market usually has volume and liquidity. Fund managers, local and foreigners alike invest because they see profit in emerging markets. Trading in the market is like throwing darts on a board, every target will surely go up. It is often referred to as a bull market. The reverse of it is called a bear market. Bears happen when there is a recession, low volumes, and a slowdown in the economy. Due to the pandemic and lockdowns, playing the market takes a different form.

buy and sell stocks

Information is Power

In the movie Tomorrow Never Dies, Elliot Carver, the movie’s villain states that “Information is power.” This mantra should be taken to heart when playing the market. You must take time to read on the fundamentals (earnings per share, price to equity ratio, and growth forecasts) at the same time as the price movements. You must be discerning when you go into forums because most of the discussions and recommendations there are hyped up and ripe for taking a profit. You must also be attuned to the current political and economic news so you can act early in your trades.

Careful review is always necessary

Let us use Lucio Tan Group (LTG) as an example. The Lucio Tan Group is a conglomerate composed of different companies and subsidiaries. When Philippine Airlines declared bankruptcy in New York, it caused a stir in the market. Upon careful review, it is a wise move for the airlines to restructure its loans because it is taking a big hit in the current situation. With the current trading price (9.03), it has a dividend yield of 10% or more so parking a few of your funds here is a wise move.

Moderate your greed

Other stocks to consider: Ayala Land, Ayala Corp, SM Prime, Puregold

When trading speculative stocks, price action and volume is a must. You have to look at the buying or selling pressure, especially if there are a sizeable number of trades that push the stock. If you did not get in the initial wave of buying, you can still play it as long as you set targets and parameters. If you are happy with your profits, and you feel the stock is still going up, try top slicing. You sell a portion of your holdings, it is insurance. It is important to moderate your greed. Once you sell all your position, be happy already. Losses are incurred when you feel left out and chase the rabbit.

When to sell stocks

Learn when to stop

This year, Abra mining started at .0007, and it went as high as .013. As the stock was going up, traders kept on buying it to dizzying heights. Targets were set from as low as .001 to as high as .01. Everybody joined in the bandwagon, and a lot of traders were making a killing. There were different rumors going around and as the price goes up, so is the target. Every day, the target price goes higher, enticing more investors to trade it. When the price hits one centavo, instead of selling, people still buy because they heard that there is a new target. In a week, long time traders sold their positions, leaving stragglers holding the bag. What’s worse is, the regulatory board notices a discrepancy in the number of outstanding shares in the market. Trading for AR was halted and up to this day, it is still suspended, so does the money of traders.

High-yield yet high-risk

This is a cautionary tale for those who want to play in speculative stocks. They are high-yield yet high-risk plays. If you see there is a massive sell-off, it’s time to let go of emotions and attachments and decide whether to cut your holdings or hold and hope the stock can bounce back. Unfortunately for novice investors and traders, such losses leave a bad taste in their mouths and they develop a phobia for the market.

Bad Taste in the mouth

Examplles of Equities that leave a lot of investors crying: Best World (now known as Suntrust Home Developers), NOW Corporation, AAI (now known as Bloombery).