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Guidance for Stock Market Investing Exclusively for TrulyRichClub Members

Note: To understand the Stocks Update, first read Bo’s e-book, My Maid Invests in the Stock Market.
Click here www.TrulyRichClub.com to download now.

Volume 12, No. 2 January 2020

The Problem with Eggs:

They Break!

In the 1700s, there was a poultry farmer riding his horse, pulling a huge cart overloaded with eggs. Alas, the driver
was old, the horse was old, and the cart was old. It was a disaster waiting to happen. And in one steep incline through
a hilly path, one of its wheels hit a rock, breaking its spokes, and the entire cart tipped over, scattering its cargo of eggs
down the slope, painting the green canvas with hues of white and yellow.
One passerby, seeing the mess, shook his head and said, “Don’t put all your eggs in one basket!”
I’m sure the man who uttered those words would never have predicted that his one line would become a solid
fixture in personal finance for the next centuries.
Here in the TrulyRichClub, we apply this “eggs” principle in two very important ways: Our stock market investing,
and more broadly, all our assets.

1. Stock Market Diversification

We recommend that you grow your portfolio to five to eight stocks. We spread
our eggs in various baskets—because even if one or two companies are doing well, we
cannot predict the future.
In life, unexpected events called “black swans” will always happen, and these
events will derail or delay the company’s growth. (Case in point: The government’s
tussle with the water concessionaires, which caused the stock prices of two of our SAM
stocks—AC and MPI—to fall. It has inched its way up since then. Our great advantage
is that we are always long-term and can take it in stride.)

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2. Assets Diversification

We recommend that aside from the stock market, you also invest in real estate and business.
For real estate, owning your home has always been a wise move. I must note, however, that there are a few
sophisticated investors who have chosen to rent forever, because they like the ease of transferring homes and they
profitably grow their investments in other ways. As long as
the investment streams are doing well, this is an acceptable
strategy. But for most people, owning a home is an emotional
issue, not a financial issue. It puts their mind at ease—that
no matter what happens, they have a title to their home.
Some of our TRC members have successfully ventured
into buying rental property and earning passive income,
because they learned from Larry Gamboa’s “Think Rich
Pinoy Abundance Seminar.”
I also strongly recommend our members to have a
side hustle. Learn how to sell. Grow your business.
In the future, when your investments have grown to a certain size, you could also look at other more sophisticated
investments, but only if you have a passion for it. Two of our TRC Mentors—Ronnie Siasoyco and Rex Mendoza—lead
in this regard. They buy paintings and watches, not only because they are beautiful but also as a way of diversifying and
growing investments. Like everything else, don’t go into anything you know nothing about. You must study the craft.
Keep investing.
Keep growing.
Take care of those eggs.

Happy investing!

May your dreams come true,

Bo Sanchez

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Power Sector Outlook

By Mike Viñas

For this issue of our Stocks Update, we are going to take a pause from the usual company updates and instead
give you a prospective outlook on the different sectors that our SAM stocks belong to. This will help us know what to
expect this coming year in terms of these industries and, thus, have an idea on how our SAM stocks that are part of that
particular sector or industry will perform. For our first outlook, we will be covering the power industry. The SAM stocks
that are part of this industry are Aboitiz Power (AP) and First Gen Corporation (FGEN).

Analysts are saying that the current oversupply situation in the country’s power capacity will most likely continue
throughout 2020. The full-year operation of new capacities added in 2019, which is around 2,000 megawatts, along with
the new capacities that will be added this 2020, which is around 1,200 megawatts, represent around 14.5 percent of the
country’s current power generation capacity. Furthermore, total capacity by the end of 2020 is expected to be around
12 percent higher than the country’s projected peak demand for 2020, including the required reserve margin. With this
oversupply condition this year, the selling price of new power contracts will likely be lower compared to past contracts.

For FGEN, they have the least exposure to re-pricing risk because the bulk of its gas capacity, amounting to 95
percent, is already covered by long-term power supply contracts. On the other hand, AP will somehow be affected by
re-pricing risk due to the expiration last year of its power supply agreements that cover 15 percent of its attributable
capacity. In fact, another nine percent is scheduled to expire this 2020.

One effect of the ongoing oversupply situation is that it will keep spot prices in the Wholesale Electricity Spot
Market (WESM) subdued, unless supply is temporarily disrupted by power plant outages, which is said to be one of
the major risks of the power sector this year. This risk of unplanned outages of large baseload plants is heightened due
to the aging of power plants. Sixty-five percent of the country’s power generation capacity is at least 10 years old or
above. Unplanned outages could possibly result to higher WESM prices and be beneficial for companies with capacities
that are not contracted at that time. But such a development will be detrimental to companies which have to purchase
replacement power from the spot market. Among the power companies listed, AP has the largest exposure to the spot
market. It sells around 8.8 percent of its total attributable capacity to the WESM.

However, research analysts believe that the oversupply condition we’re seeing now will end in 2023. This is because
of the ruling of the Supreme Court in May 2019 that all power supply agreements (PSA) submitted on or after June 30,
2015 should go through a Competitive Selection Process (CSP) before being able to obtain PSAs with power distribution
firms. This development affected seven new power projects with an aggregate supply of 3,551MW. These plants would
have increased the country’s power supply by around 16 percent starting 2021. However, due to the Supreme Court

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ruling, analysts believe that many of the projects will be delayed or cancelled. Hence, leading to a power shortage after
2022. With the expected shortage in 2023, power prices should be going up, moving forward. This improves the long-
term outlook of power generation companies.

As for coal prices, it has gone down by 29 percent in 2019. This is a 40 percent decrease from its recent high in
July 2018. If coal prices continue to go down this year, analysts are saying that this will have a mixed impact on power
companies. AP will benefit because some of its power supply contracts through Retail Electricity Supply (RES) are not
protected by fuel pass through provisions. Thus, lower coal prices will lead to higher margins. As for FGEN, they will not
be affected as well, since the capacity of its entire gas plant is covered by power supply contracts where savings in terms
of fuel cost are passed through to customers.
Despite expectations of lower re-priced contracts, net income of most power firms is still expected to go higher
in 2020. This will be significantly driven by the income distribution from new capacity. AP’s end-of-2020 earnings is
projected to go higher by 35 percent to P25.6 billion. AP will benefit from the first full-year earnings contribution of its
300MW Cebu Coal Project and the 68MW Manolo-Fortich hydroelectric plant. Last year, earnings were unusually low due
to unplanned outages and higher replacement power costs. For FGEN, analysts forecast that its end-of-2020 net income
will grow by 2.6 percent to US$204 million. This is expected to be driven by the higher earnings contribution of its FG
Hydro and EDC.

Currently, we continue to recommend AP as part of our SAM stocks. However, we do have to wait as to when we
can buy AP again, as it is above its buy-below price as of this writing. But this recommended inclusion in our SAM stocks
is because its profits are expected to grow by a CAGR of 15.6 percent from 2019 to 2021. This is the fastest in the power
sector, despite its lower contract prices. As for FGEN, we have a buy recommendation for it because of its relatively stable
cash flow and it is the only clean energy play in the Philippine Stock Exchange.

TRC STARTER STOCKS GUIDE FOR JANUARY 2020

The figures below (P50,000 and P250,000) are simply our recommendations, designed for safety and less volatility (up and down movements). But if you so
choose, even if your money hasn’t reached yet the figures indicated, you can buy the other stocks listed in the SAM Table, provided you’re psychologically
prepared to stay calm through the volatility.
For more clarity, we outline here two baby steps you can take to grow your investments if you’re a newbie investor:
Baby Step #1: If your portfolio is below P50,000, buy Philequity Index Fund first before you buy specific stocks. It’s less volatile than any stock and
you also get to invest the entire amount that you put into your account, unlike in stocks where there is a minimum board lot.
Baby Step #2: If your portfolio is between P50,000 to P250,000, buy our recommended starter stocks below (first table). Each month, we specify
what these two or three stocks are, based on what we believe are the most stable and least volatile of our SAM stocks (second table below).
Once again, these are only our suggestions. If you feel you can handle the up-and-down, roller-coaster ride of our other stocks, then by all means,
buy our other SAM stocks. They are all great companies that will do well over the long term.

Portfolio Amount Recommendation

P50,000 and below Philequity PSE Index Fund

Starter Stocks:
P50,000 – P250,000
MPI, DNL, FLI

P250,000 and above Stocks from the SAM Table

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Here are our SAM and Mutual Fund Tables as of January 23, 2020 Market Recess:

Cash
current buy target action
stock max% Dividend
price below price price to take
Yield

AC   728.00 915.00   1,077.00   Continue buying   15% 0.9%

ALI   40.35 45.00   53.00   Continue buying   15% 0.5%

CEB   85.20 101.00   135.00   Continue buying   5% 7.2%

CHIB   25.00 27.40   36.50   Continue buying   5% 3.5%

FGEN   20.75 24.20   32.27   Continue buying   10% 3.6%

FLI   1.51 1.80   2.56   Continue buying   10% 3.5% 

GTCAP   774.00 897.00   1,055.00   Continue buying   10% 3.8%

MBT   64.50 66.00   88.50   Continue buying   10% 0.3%

MEG   4.27 5.30   7.60   Continue buying   10% 1.6%

MPI   3.46 7.00   9.37   Continue Buying   10% 2.3%

SHLPH   31.85 42.00   56.00   Continue buying   5% 8.9%

TEL   1,035.00 1,224.00   1,440.00   Continue buying   10% 6.5%

BDO   154.50 122.00   144.00   Hold   10% 0.8%

AP   32.55 32.00   43.10   Stop buying   10% 3.7% 

DNL   8.94 7.00   9.20   Stop buying   10% 3.4%

RLC   27.55 25.30   29.82   Stop buying   10% 2.0%

SM   1,032.00 920.00   1,082.00   Stop buying   15% 0.9%

SMPH   40.15 36.00   42.30   Stop buying   15% 0.9%

NAVPS WHEN CURRENT

ESTIMATED
FUND CODE FUND BOUGHT NAVPS RECOMMENDATION
RETURN
(01/12/16) (01/23/20)

XPEEQ Philequity Fund 31.0639 36.2337 16.64% Continue buying

XPEIF Philequity Index Fund 4.2155 4.9882 18.33% Continue buying

Sunlife Prosperity Equity

XSLEQ 3.4805 3.9792 14.33% Continue buying
Fund

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SAM PRICE WATCH

  CHEAP % FROM TARGET PRICE ESTIMATE EXPENSIVE

  -45% to -30% to -15% to 0% to 15% to 30% to

-30% -15% 0% 15% 30% 45%
Banking &
CHIB  MBT   BDO    
Financials

Commercial & SHLPH          

Industrial CEB

Holding AC SM
GTCAP      
Companies MPI
Consumer   DNL      
Gaming            
Mining            
Power   AP, FGEN      

FLI
Property ALI SMPH      
MEG RLC
Telecoms   TEL      

LEGEND CONTINUE BUYING STOP BUYING HOLD

Mike Viñas is a stock market investment trainer, Certified Securities Representative, and Certified Investment
Solicitor of COL Financial Group, Inc.

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2018 Top Winners of the TrulyRichClub’s Stocks

STOCK TIME ESTIMATED PRICE ESTIMATED

STOCKS
SYMBOL RECOMMENDED TIME HELD RANGE RETURN

May 2016 to 29.07

Unionbank UBP 24 months P59.00 to P91.40
May 2018 percent
June 2011 to January 28.63
Metrobank MBT 42 months P50.06 to P93.94
2018 (partially sold) percent
December 2016 to 11.21
Meralco MER 16 months P275.00 to P307.00
April 2018 percent
July 2017 to January P1230.00 to 10.47
GT Capital GTCAP 6 months
2018 (partially sold) P1350.00 percent

Top Past Winners of TrulyRichClub’s Stocks

STOCK TIME ESTIMATED PRICE ESTIMATED

STOCKS
SYMBOL RECOMMENDED TIMEHELD RANGE RETURN

June 2011 to February 2012 P15.09 to

 Ayala Land ALI 9 Months 35 percent
(3rd week) P21.65
Bank of The
February 2012 to November P68.45 to 34.29
Philippine BPI 10 Months
2012 (4th week) P91.00 percent
Islands
SM Prime February 2012 to December P12.48 to 27.75
SMPH 10 Months
Holdings 2012 (1st week) P17.00 percent
January 2013 to April 2013 P268.00 to 28.05
Meralco MER 3 Months
P377.00 percent
32.92
First Phlippine P63.18 to
FPH June 2011 to June 2013 25 Months percent
Holdings P95.20
percent
JG Summit P25.75 to 39.96
JGS February 12 to October 2013 18 Months
Holdings P43.50 percent

D&L Industries DNL February 2013 to April 2014 14 Months P6.45 to P10.00 44 percent

May 2016 to P59.00 to 29.07

Unionbank UBP 24 months
May 2018 P91.40 percent

June 2011 to January 2018 P50.06 to 28.63

Metrobank MBT 42 months
(partially sold) P93.94 percent
P89.60 to 24 percent
Banco De Oro BDO April 2013 to August 2014 16 Months
P93.00 percent

(Disclaimer: Past performance doesn’t guarantee that you’ll have the exact same results in the future. After all, your earnings depend on
the market’s performance.)

Stocks Update Volume 12, No. 2 • January 2020 7