In this newsletter, I share content I bumped into the past month that’ll help you become more financially savvy.
This is not financial advice. It's just education. Please think through your situation before applying anything you read here.
This month's recommendation:
Bill Granting ABS-CBN New Franchise Filed In House
https://www.pna.gov.ph/articles/1241221
Commentary
Some background for readers unfamiliar with ABS-CBN (c/o ChatGPT)
ABS-CBN Corporation, the largest media and entertainment company in the Philippines, lost its broadcast franchise on May 5, 2020, after the National Telecommunications Commission (NTC) issued a cease-and-desist order, effectively halting its free TV and radio operations.
The shutdown marked the first time in Philippine history that a major network was forced off the air through a congressional vote, raising concerns about press freedom and media pluralism in the country.
What happened to ABS-CBN (ABS) stock recently
On January 7 2025, the stock price of ABS trended up slightly, moving from around 4.2 pesos to 5.06 pesos within the day - an increase of more than 20%.
Those purchases were probably made by traders with insider information (Note: Insider trading is illegal!). Later, after the markets closed, it was announced that a lawmaker filed a bill seeking to grant ABS a new media franchise.
Because of this news, the next day, ABS's stock price immediately shot up. From the previous day's closing price of 5 pesos per share, ABS opened on January 8 at 6 pesos per share. Within the first 5 minutes of trading, the price had gone up to 6.6 pesos per share.
But from that 6.6 peso stock price, it seems that there wasn't all that much upside left. The stock price went up to 7 pesos per share, and as of January 10, it has gently fallen back down to around 6.45 pesos per share.
Why you shouldn't trade off news
You might think the franchise renewal means ABS is an excellent opportunity to make money. Many people who heard about the franchise application probably purchased shares of ABS based on that announcement alone.
You can tell that this happened because most of the recent trading volume occurred during the recent peaks of ABS's stock price. This was a day after after the news came out:
However, in this case, most short-term traders lost money. The stock price of ABS went down the next day. These initial traders probably panic sold when the massive upside they envisioned didn't materialize, as evidenced by the volume spike during the price drop in the photo below:
The only group of people who actually made a lot of money were the traders who purchased on January 7 before the news was released:
Strange, isn't it? How could people lose money when such a good thing is happening to ABS? This is the best news ABS has had in years!
Markets react VERY fast to new information.
Notice after the announcement of the new franchise, there was an immediate leap from 5 pesos per share to 6 pesos per share. There was no chance to slowly accumulate at lower prices.
By the time you've seen something in the newspapers, chances are that the markets have already reacted, eating your expected upside. We all want to "buy low and sell high", but because markets react so fast to news, you'll probably be unable to buy low before prices shoot up.
Assume it's all priced in!
It is prudent to assume that there is always someone faster with better information than you who will beat you to any given market insight. There are, after all, thousands of people who trade for a living.
By the time the global political climate spooks you enough to purchase gold, thousands of gold traders have probably already finished buying up the price of gold.
By the time you hear that NVIDIA is a revolutionary stock, thousands of tech analysts and hedge funds who have direct access to NVIDIA's management have already bought, making the stock price go up before you could buy.
And, in this case, by the time you heard about the new franchise bill of ABS-CBN, traders and insiders who follow the media industry closely probably already made the stock price go up, limiting your potential upside.
Whenever you hear good news about a company, always ask yourself: Am I the first person to hear this? Or have others already heard this news before me?
You can only benefit from news if you act on it earlier than others. When trading on news, only the early bird gets the worm. The late bird usually gets nothing.
By refusing to trade off well-known news, you reduce the risk of being one of the last buyers at the peak of the hype, reducing your potential losses in the stock market. Keep this in mind the next time you hear good news about a stock, and you'll make safer decisions for yourself and your portfolio.
KEITH LIM
P.S. I had fun delivering a talk at the Rotary Club of Marikina last week, titled "How to Lose Money in the Stock Market". You can watch it here:
https://www.youtube.com/watch?v=hT10Z42FQQ0&t=1006s