HIDALGO GROUP LTD.

1. HIDALGO GROUP LTD. PORTFOLIO MANAGEMENT – MARKET ANALSIS- FINANCIAL MAGAZINE.

2. INTRODUCTION TO SHARES. • Want to own part of a business without having to show up at its office every day? Or ever? Stock is the vehicle of choice for those who do. Dating back to the Dutch mutual stock corporations of the 16th century, the modern stock market exists as a way for entrepreneurs to finance businesses using money collected from investors. In return for ponying up the dough to finance the company, the investor becomes a part owner of the company. That ownership is represented by stock -- specialized financial "securities," or financial instruments -- that are "secured" by a claim on the assets and profits of a company.

3. TYPES OF STOCKS… • Common Stock. Common stock is aptly named, as it is the most common form of stock an investor will encounter. It is an ideal investment vehicle for individuals because anyone can own it; there are absolutely no restrictions on who can purchase it. Young, old, savvy, reckless -- heck, even professional mimes are allowed to own stock. Common stock is more than just a piece of paper; it represents a proportional share of ownership in a company -- a stake in a real, living, breathing business. By owning stock -- the most amazing wealth-creation vehicle ever conceived (except for inheriting money from a relative you've never heard of) -- you are a part owner of a business. • Shareholders "own" a part of the assets of the company and part of the stream of cash those assets generate. As the company acquires more assets and the stream of cash it generates gets larger, the value of the business increases. This increase in the value of the business is what drives up the value of the stock in that business.

4. HOW STOCKS TRADE… • To be able to trade in stocks at the stock exchange, the first thing that is crucial is that, the investor needs to have a CDSC account through one of the brokers, to enable the ease of purchase and sale of the securities. The account operates similar to the one of the bank, with the only difference being that a CDS account accepts the deposits of shares and not cash. • Probably one of the most confusing aspects of investing is understanding how stocks actually trade. Words such as "bid," "ask," "volume," and "spread" can be quite confusing. • The Nairobi Stock Exchange, the Ugandan one and the Tanzanian one are "listed" exchanges, meaning that brokerage firms contribute individuals known as “dealers" who are responsible for all of the trading in a specific stock. Volume, or the number of shares that trade on a given day, is counted by the dealer and reported to the exchange along with information on the price and size of each trade. • There is the element of bid, ask and spread. This is essentially controlled by the dynamics of the market:- the demand and supply ratios. The crucial underlying element to all these is what we call the aspect of settlement, once the shares are reflecting in your CDS account after a settlement period of 4-6 days, then the shares will be balance free, meaning, they will available for any action from the investor or the portfolio manager. • Trading of stocks various a lot with the different types of investor, with underlying issues of whether one is short term or long term, whether one has a portfolio manager or not, whether one is privy to the happenings at the market or not, which essentially behaves like the one for the sukuma wiki or the normal market day…

5. DIFFERENT CLASSES OF STOCKS… • Occasionally, companies find it necessary for various reasons to concentrate the voting power of a company into a specific class of stock where the majority is owned by a certain set of people. For instance, if a family business needs to raise money by selling equity, sometimes they will create a second class of stock that they control that has 10 votes per share of stock and sell a class of stock that only has one vote per share to others. Does this sound like a bad deal? Many investors believe it is and routinely avoid companies where there are multiple classes of voting stock. This kind of structure is most common in media companies and has been around only since 1987. • When there is more than one kind of stock, they are often designated as Class A or Class B shares. For example, we would have Standard group A and Standard group B, they would trade as STD A and STD B simultenously.

6. STOCKS DERIVATES:-Options & Futures • Arguably the most volatile and risky investments possible, options and futures are "derivative" securities, meaning their value is "derived" from that of another security or commodity. Options and futures are both very volatile because they often carry an incredible amount of leverage. For instance, each option contract on an individual stock controls 100 shares of that stock for a fraction of the stock's current value. Since option traders have only invested a small percentage of the stock's price, any move in the price represents a big percentage change for their investment. Say they paid $5 per share for an option on a stock that sells for around $50 a share. If the price of the stock goes up $5, that's a 10% move in the price of the stock, but it's 100% of the option trader's investment. So a relatively small upward movement in the stock can be a huge upward movement for the option. • This potential for gain is offset by the fact that the entire purchase price of an option is at risk. If an investor holds an option and the underlying stock does not exceed the target price within the given time period, the option expires worthless and the entire purchase price is lost. (Most options end up worthless on their expiration date.) Traders also have to cover the price of the option. That five-dollar increase in the value of the stock wouldn't actually make the trader any money if the option expires at that point. It would just have covered the cost of the option. And if you think this is getting complicated, we've barely scratched the surface! • Hidalgo does not consider options and futures to be worthwhile investments, especially in an emerging economy like ours. Some people make a living trading derivatives -- they make their living trading against people like you. The chance of losing money with derivatives is much too high for options to be considered a useful part of any completely nutritious investment strategy.

7. BUYING STOCKS… • Use a Brokerage. The most common way to buy stocks is to use a brokerage. In Kenya, we have the basic stock broker and then the investment banks that do offer brokerage services, like Faida Investment Bank. Both have varied services that they do offer to their clientele. Besides these, we do have stock agents who act on behalf of the principal stock broker and they do have added services that the broker might not be able to offer due to various reasons. • Given the number of people investing in the equities, brokers are having it rough wit the aspect of human capital and resource. That’s why a company like Hidalgo has been formed with such an issue in mind to help the budding investor, focus on their primary job as Hidalgo does invest and circulate their capital in the equity market on a weekly basis. Basically this is the principal work of the portfolio manager. Based on market research and trends, key fundamental aspects of various companies, the investor’s funds are circulated every settlement cycle in various stocks, in the process, making money for the investor, as they are bought at a low price and sold at a high price, of even 0.50 appreciation, as long the even breaking point is reached and surpassed. All these is done in the clients account so that the client is able to follow up on the progress of his funds to the last coin. Plus its easier for accountability issues.

8. DIVIDEND REINVEST PLAN • Dividend Reinvestment Plans (DRPs) and Direct Investment Plans (DIPs). Known lovingly by many investors as Drips, these are plans sponsored by individual companies that allow shareholders to purchase stock directly from a company with only minimal costs or commissions. These plans are great for those who have small amounts of money but who are willing to invest it at regular intervals.

9. SHORTING STOCKS… • If you buy a security with the expectation that the price will rise, you are "long" the stock. But you can profit from stocks that go down, too. This is an advanced investing technique called "short selling.“ Basically, at the end of the day, the investor has feelings, be it a corporate, whose fund manager is human, just like the retail investor like you and me, thus, the aspect of fear and greed do control us and a very interesting trend has been developing, when retail investors are off loading their holdings for various reasons, principally because it’s a crowd reaction, corporate and high net investors will be buying for accumulation at low prices from the panicking retail investor, only to sell to them again, two weeks later at premium prices, thus the retail investor loosing out, just because they didn’t pat attention or hold the panic out. This is what we want to prevent and help our clients to make some good money. • Properly done, shorting can work as a hedge against a falling market. Improperly done, you can lose even more money on a short than you would lose if you invested in a company that went bankrupt. Imagine that you buy a company for $50 per share and it goes belly up. You've lost $50. (You should have shorted it!) But imagine shorting a stock for $50 that subsequently triples. When you close that short position, it will cost you $150 a share to buy back the shares you sold for $50. Many a short seller has been caught in this trap because brokers won't let you hold on to a short position unless you have money or other assets to cover the short at all times.

10. INVESTING PROCESS… • What is investing? Any time you invest, you are putting something of yours into something else in order to achieve something greater. You can invest your weekends in a good cause, you can invest your intelligence in your job, or you can invest your time in a relationship. Just as you do each of these with the expectation that something good will come of it, when you invest your savings in a stock, bond, or mutual fund, you do so because you think its value will appreciate over time. • Investing money is putting that money into some form of "security" - a fancy word for anything that is "secured" by some assets. Stocks, bonds, mutual funds, certificates of deposit - all of these are types of securities. As with anything else, there are many different approaches to investing. Some of these you've probably seen on late-night TV. A well-dressed, wildly positive (though somewhat whiny) young man sits lazily waving palm fronds and shakes his head over how incredibly easy it is to amass vast wealth - in no time at all! BUT you need to spend to be able to get..

11. Planning & Setting Goals… • Investing is like a long car trip. There's a lot of planning that goes into it. • How long is the trip? (What is your investing "time horizon"?) • What should you pack? (What type of investments will you make?) • How much gas will you need? (How much money will you need to reach your goals?) • Will you need to stop along the way? (Do you have short-term financial needs?) • How long do you plan on staying? (Will you need to live off the investment in later years?) • Running out of gas, stopping frequently to visit restrooms, and driving without sleep (this is the last of the travel analogy, we promise) can ruin your trip. So can saving too little money, investing erratically, or doing nothing at all. • You must answer the following questions before you can successfully set about your savings/investing journey: • What are your goals? Is this money for retirement? A down payment on a house? Your child's education? A second home? Income to live on in the proverbial Golden Years? • How much money can you devote to a regular investing plan? • Don't let yourself get away with fuzzy answers, either. In the end, investing is a lot of numbers. You need to get used to that, and quickly. As a matter of fact, it can be quite liberating. You can see exactly what you need to get to your destination, and can be accountable to yourself along the way. Ask yourself some more pointed questions: • How much will college cost when my child needs to go? • How much yearly income is reasonable for retirement?

12. TIME IS ON YOUR SIDE…American Example… • To help put this into context, let's look at how various types of investments have performed historically. Bonds and stocks are the two major asset classes that have been used by investors over the past century. Knowing the total returns on each of these, and their associated volatility, is crucial to deciding where you should put your money. • Putting your money into cash reserves - U.S. Treasury bills, or more recently, money market funds - has yielded roughly 4.2% per year during this century, according to Global Financial Data. While this may not seem like a lot today, it is important to remember that for most of this century, inflation was nonexistent, making a 4.2% average annual return attractive until the 1960s. Though it is interesting that cash reserves have outperformed bonds this century, if one expands the time frame back to 1802, cash returns trail the return of bonds, and during the 1980s and 1990s, cash reserves have consistently trailed bond returns. • Long-term government bonds have returned around 4.0% per year since 1900; surprisingly, they're not that superior to short-term bonds. The best decade for bonds in the past century was the 1980s, when bonds returned 13.81% annually. The worst was the 1950s, when bonds lost -3.75%. Had you invested $1 in long-term bonds in 1900, you would have about $50 today. • Stocks have also been very good to investors. Overall, stocks have returned an average of 9.8% per year since 1900 - quite a bit higher than bonds. Surprisingly, the range of the returns for stocks is not that much larger than the range for bonds over the same period. According to Global Financial Data, the worst return in one decade was the 1930s, when stocks declined 0.17% per year, including dividends. The best decades have been the 1950s, when stocks increased by 18.23% annually; the 1980s, when stocks increased by 16.64% annually; and the 1990s, during which stocks have increased by 17.3% annually. Had you put $1 into stocks in 1900, you would have over $10,000 today.

13. Determining your Investment Style… • What kind of investor are you? Are you a swing-for-the-fences type, or are you content hitting singles and doubles, racking up slow and steady gains? Or do you prefer to sit in the stands, chatting with your companions and occasionally cheering your home team on? • Before you start investing, you should determine your investment style. There are three major variables in figuring out your investment style - your risk tolerance, the amount of time you can dedicate to investing and if you will be willing to pay for a portfolio manager to see your investment grow • Risk. How comfortable will you be if you invest in something in which the price changes every day - sometimes not the way you want it to change? There are various degrees of risk across the investment spectrum, from government bonds, which are considered risk-free as they are guaranteed by the government, to commodities and options, where you can and often do lose all of your money. • You need to consider how comfortable you will be seeing your investment decrease in the near term while you wait for it to increase over the long term. Although stocks have historically increased in price over the past two centuries, there have been some pretty bad periods. Without counting dividends, your equity investments could have lost almost 80% of their value had you bought stocks at the high in 1929 before the crash. You could have lost 40% had you bought at the high in 1972. Heck, in October of 1987 the Dow decreased 25% - in just one day! The important thing to remember about stocks, though, is that you don't lose anything until you sell them. For example, if you didn't panic and sell your stocks in October of 1987, you did quite nicely as the market rebounded in subsequent years. That's why, when you're investing in the stock market, you need to think long-term. Don't invest any money in stocks that you'll need in the short term. • Government bonds provide guaranteed returns, and bank savings accounts are insured by the Central Depository Protection Fund [DPF] . For stock investing, there is no similar guarantee or insurance that the ride will be smooth or that every investment will make you money, but if you buy good businesses and hold for the long term AND OR circulate the funds with precision in various stocks, with the help of a portfolio manager, the odds are in your favor. Just remember that the safest road isn't always the best one. At Hidalgo Group, we believe that the biggest risk is not taking enough risk, meaning not investing enough in stocks. • It should also be said that you can learn to increase your risk tolerance for investing in stocks. Once you see the kind of returns you can generate over time, you'll come to realize that it really doesn't matter if your stock drops or rises over the course of a few hours or days or weeks or even months. It may be fun to check your stock prices (and it's so easy on the Internet!) but it doesn't mean much over the long term.

14. Investment Style cont;d • Time. Speaking of the long term, time is another important element of your investing profile. How much time do you want to spend on investing? How active do you want to be in the management of your money? Do you want to spend 15 minutes a year on it? Then maybe you should consider hiring the services of the portfolio manager, who will watch over your investment like a hen watches over her eggs till they hatch well. We at Hidalgo believe we are ready to invest your capital in the equity market and watch it grow.

15. Analyzing Stocks… • Introduction • Investing, like most other things, requires that you have a general philosophy about how to do things in order to avoid careless errors. Would you make a soufflé without a recipe? Would you play cello in the London Philharmonic Orchestra without sheet music? Would you aim a shuffleboard disk without figuring out whether you're trying to knock off your own color or your opponent's? We hope not. And while investing is not nearly as difficult as these other challenges (especially the soufflé), you certainly need a considered plan before investing your hard-earned savings. • Fundamental Analysis - Buying a Business (Value, Growth, Income, GARP, Quality) • Many people rightly believe that when you buy a share of stock you are buying a proportional share in a business. As a consequence, to figure out how much the stock is worth, you should determine how much the business is worth. Investors generally do this by assessing the company's financials in terms of per-share values in order to calculate how much the proportional share of the business is worth. This is known as "fundamental" analysis by some, and most who use it view it as the only kind of rational stock analysis. • Although analyzing a business might seem like a straightforward activity, there are many flavors of fundamental analysis. Investors often create oppositions and subcategories in order to better understand their specific investing philosophy. In the end, most investors come up with an approach that is a blend of a number of different approaches. Many of the distinctions are more academic inventions than actual practical differences. For instance, value and growth have been codified by economists who study the stock market even though market practitioners do not find these labels to be quite as useful. In the following descriptions, we will focus on what most investors mean when they use these labels, although you always have to be careful to double-check what someone using them really means. • Value. A cynic, as the saying goes, is someone who knows the price of everything and the value of nothing. An investor's purpose, though, should be to know both the price and the value of a company's stock. The goal of the value investor is to purchase companies at a large discount to their intrinsic value - what the business would be worth if it were sold tomorrow. In a sense, all investors are "value" investors - they want to buy a stock that is worth more than what they paid. Typically those who describe themselves as value investors are focused on the liquidation value of a company, or what it might be worth if all of its assets were sold tomorrow. However, value can be a very confusing label as the idea of intrinsic value is not specifically limited to the notion of liquidation value. Novices should understand that although most value investors believe in certain things, not all who use the word "value" mean the same thing.

16. Analyzing Stocks cont;d • The person viewed as providing the foundation for modern value investing is Benjamin Graham, whose 1934 book Security Analysis (co-written with David Dodd) is still widely used today. Other investors viewed as serious practitioners of the value approach include Sir John Templeton and Michael Price. These value investors tend to have very strict, absolute rules governing how they purchase a company's stock. These rules are usually based on relationships between the current market price of the company and certain business fundamentals. Some examples include: • Price/earnings ratios (P/E) below a certain absolute limit • Dividend yields above a certain absolute limit • Book value per share at a certain level relative to the share price • Total sales at a certain level relative to the company's market capitalization, or market value • Growth. Growth investing is the idea that you should buy stock in companies whose potential for growth in sales and earnings is excellent. Growth investors tend to focus more on the company's value as an ongoing concern. Many plan to hold these stocks for long periods of time, although this is not always the case. At a certain point, "growth" as a label is as dysfunctional as "value," given that very few people want to buy companies that are not growing. The concept of growth investing crystallized in the 1940s and the 1950s with the work of T. Rowe Price, who founded the mutual fund company of the same name, and Phil Fisher, who wrote one of the most significant investment books ever written, Common Stocks and Uncommon Profits. • Growth investors look at the underlying quality of the business and the rate at which it is growing in order to analyze whether to buy it. Excited by new companies, new industries, and new markets, growth investors normally buy companies that they believe are capable of increasing sales, earnings, and other important business metrics by a minimum amount each year. Growth is often discussed in opposition to value, but sometimes the lines between the two approaches become quite fuzzy in practice. • Income. Although today common stocks are widely purchased by people who expect the shares to increase in value, there are still many people who buy stocks primarily because of the stream of dividends they generate. Called income investors, these individuals often entirely forego companies whose shares have the possibility of capital appreciation for high-yielding dividend-paying companies in slow-growth industries. These investors focus on companies that pay high dividends like utilities and real estate investment trusts (REITs), although many times they may invest in companies undergoing significant business problems whose share prices have sunk so low that the dividend yield is consequently very high.

17. GARP… • GARP. GARP, aside from being the name of the title character to John Irving's The World According to Garp, is an acronym for growth at a reasonable price. The world according to GARP investors combines the value and growth approaches and adds a numerical slant. Practitioners look for companies with solid growth prospects and current share prices that do not reflect the intrinsic value of the business, getting a "double play" as earnings increase and the price/earnings (P/E) ratios at which those earnings are valued increase as well. Peter Lynch, who may be familiar to you through his starring role in Fidelity Investments commercials with Lily Tomlin and Don Rickles, is GARP's most famous practitioner. • One of the most common GARP approaches is to buy stocks when the P/E ratio is lower than the rate at which earnings per share can grow in the future. As the company's earnings per share grow, the P/E of the company will fall if the share price remains constant. Since fast-growing companies normally can sustain high P/Es, the GARP investor is buying a company that will be cheap tomorrow if the growth occurs as expected. If the growth does not come, however, the GARP investor's perceived bargain can disappear very quickly. • Because GARP presents so many opportunities to focus just on numbers instead of looking at the business, many GARP approaches, like the nearly ubiquitous PEG ratio and Jim O'Shaughnessy's work in What Works on Wall Street are really hybrids of fundamental analysis and another type of analysis -- quantitative analysis.

18. Quality… • Quality. Most investors today use a hybrid of value, growth, and GARP approaches. These investors are looking for high-quality businesses selling for "reasonable" prices. Although they do not have any shorthand rules for what kind of numerical relationships there should be between the share price and business fundamentals, they do share a similar philosophy of looking at the company's valuation and at the inherent quality of the company as measured both quantitatively by concepts like Return on Equity (ROE) and qualitatively by the competence of management. Many of them describe themselves as value investors, although they concentrate much more on the value of the company as an ongoing concern rather than on liquidation value. • Warren Buffett of Berkshire Hathaway is probably the most famous practitioner of this approach. He studied under Benjamin Graham at Columbia Business School but was eventually swayed by his partner, Charlie Munger, to also pay attention to Phil Fisher's message of growth and quality. • Arguments Against Fundamental Analysis. Those who do not use fundamental analysis have two major arguments against it. The first is that they believe that this type of investing is based on exactly the kind of information that all major participants in publicly traded markets already know, so therefore it can provide no real advantage. If you cannot get a leg up by doing all of this fundamental work understanding the business, why bother? The second is that much of the fundamental information is "fuzzy" or "squishy," meaning that it is often up to the person looking at it to interpret its significance. Although gifted individuals can succeed, this group reasons, the average person would be better served by not paying attention to this kind of information.

19. Quantitative Analysis • Quantitative Analysis - Buying the Numbers • Pure quantitative analysts look only at numbers with almost no regard for the underlying business. The more you find yourself talking about numbers, the more likely you are to be using a purely quantitative approach. Although even fundamental analysis requires some numerical inputs, the primary concern is always the underlying business, focusing on things like management's expertise, the competitive environment, the market potential for new products, and the like. Quantitative analysts view these things as subjective judgments, and instead focus on the incontrovertible objective data that can be analyzed. • One of the principal minds behind fundamental analysis, Benjamin Graham, was also one of the original proponents of this trend. While running the Graham-Newman partnership, Graham exhorted his analysts to never talk to management when analyzing a company and focus completely on the numbers, as management could always lead one astray. • In recent years as computers have been used to do a lot of number crunching, many "quants," as they like to call themselves, have gone completely native and will only buy and sell companies on a purely quantitative basis, without regard for the actual business or the current valuation - a radical departure from fundamental analysis. "Quants" will often mix in ideas like a stock's relative strength, a measure of how well the stock has performed relative to the market as a whole. Many investors believe that if they just find the right kinds of numbers, they can always find winning investments. D. E. Shaw is widely viewed as the current King of the Quants, using sophisticated mathematical algorithms to find minute price discrepancies in the markets. His partnership sometimes accounts for as much as 50% of the trading volume on the New York Stock Exchange in a single day.

20. Company size… • Company Size. Some investors purposefully narrow their range of investments to only companies of a certain size, measured either by market capitalization or by revenues. The most common way to do this is to break up companies by market capitalization and call them micro-caps, small-caps, mid-caps, and large-caps, with "cap" being short for "capitalization." Different-size companies have shown different returns over time, with the returns being higher the smaller the company. Others believe that because a company's market capitalization is as much a factor of the market's excitement about the company as it is the size, revenues are a much better way to break up the company universe. Although there is no set breakdown used by all investors, most distinctions look something like this: • MICRO - $100 million or lessSMALL - $100 million to $500 millionMID - $500 million to $5 billionLARGE - $5 billion or more • The majority of publicly traded companies fall in the micro or small categories. Some statisticians believe that the perceived outperformance of these smaller companies may have more to do with "survivor" bias than actual superiority, as many of the databases used to do this performance testing routinely expunged bankrupt companies until pretty recently. Since smaller companies have higher rates of bankruptcy, excluding this factor helps "juice" up their historical returns as a result. However, this factor is still being debated.

21. Screen-Based Investing… • Screen-Based Investing. Many quantitative analysts use "screens" to select their investments, meaning that they use a number of quantitative criteria and examine only the companies that meet these criteria. As the use of computers has become widespread, this approach has increased in popularity because it is easy to do. Screens can look at any number of factors about a company's business or its stock over many time periods. • While some investors use screens to generate ideas and then apply fundamental analysis to assess those specific ideas, others view screens as "mechanical models" and buy and sell purely based on what comes up on the screen. These investors claim that using the screen removes emotions from the investing process. (Those who do not use screens would counter that using a screen mechanically also removes most of the intelligence from the process.) One of the proponents of using screens as a starting point is Eric Ryback, and one of the most famous advocates of screens as a mechanical system is James O'Shaughnessy.

22. Momentum… • Momentum. Momentum investors look for companies that are not just doing well, but that are flying high enough to get nose bleeds. "Well" is defined as either relative to what investors were expecting or relative to all public companies as a whole. Momentum companies often routinely beat analyst estimates for earnings per share or revenues or have high quarterly and annual earnings and sales growth relative to all other companies, particularly when the rate of this growth is increasing every quarter. This kind of growth is viewed as a sign that things are really, really good for the company. High relative strength is often a category in momentum screens, as these investors want to buy stocks that have outperformed all other stocks over the past few months.

23. Arguments against… • Arguments Against Quantitative Analysis. Because quantitative analysis hinges on screens that anyone can use, as computing horsepower becomes cheaper and cheaper many of the pricing inefficiencies quantitative analysis finds are wiped out soon after they are discovered. If a particular screen has generated 40% returns per year and becomes widely known, and if lots of money flows into the companies that the screen identifies, the returns will start to suffer. • As "fuzzy" as fundamental analysis might be, there are often times that knowing even a little about the company you are buying can help a lot. For instance, if you are using a high-relative-strength screen, you should always check and see if the companies you find have risen in price because of a merger or an acquisition. If this is the case, then the price will probably stay right where it is, even if the "screen" you used to pick this company has generated high annual returns in the past.

24. Technical Analysis… • Technical Analysis - Buying the Chart • What would you do if you truly believed that all information about publicly traded companies was efficiently distributed and that nobody could get an edge on anyone else by either understanding the business or analyzing the numbers? You might consider simply giving up on beating the market's returns by buying an index fund. Some investors have taken an alternate route, attempting to create a set of tools that might tell them what other investors thought about a stock at any given time, particularly looking for the footprints of large institutional investors that tend to cause the most extreme price changes. Investors who focus on this kind of psychological information call themselves technical analysts and believe that charts can sometimes provide insight into the psychology surrounding a stock. Although there are plenty of pure chartists, some investors just use charts to time investments after looking at them from a fundamental or quantitative perspective.

25. Arguments Against… • Arguments Against Technical Analysis. Technical analysis assumes that certain chart formations can indicate market psychology about either an individual stock or the market as a whole at key points. However, most of the statistical work done by academics to determine whether the chart patterns are actually predictive has been inconclusive at best, as detailed in Burton Malkiel's A Random Walk Down Wall Street. Much of the faith in technical analysis hinges on anecdotal experience, not any kind of long-term statistical evidence, unlike certain quantitative and fundamental methodologies that have been shown in many instances to be pretty predictive. Critics of technical analysis feel that it is basically as useful as reading tea leaves.

26. Trading - Doing What Works… • Trading - Doing What Works • As trading commissions have fallen and more and more people have gained access to instantaneous data about stock prices, trading has become more and more popular, and very likely much too popular, somewhat like Madonna or Beanie Babies. Traders normally use a hodgepodge of fundamental, quantitative, and technical techniques with a short-term orientation. Trading tends to be a highly charged experience where one looks to make a few % points from each trade. Although widespread, trading is far from a systematized, philosophical body of knowledge that is easily explained in a few paragraphs. • Many novice investors, lulled by the apparently easy casino-like gains possible in trading, tend to lose a lot of money before they realize that when there are thousands of other traders out there looking for the same things, it is often those who are fastest, have the most experience, and own the best equipment that make money - normally not the people just starting out. All traders emphasize that successful trading requires careful attention, discipline, and a lot of work, so anyone who thinks that he can use a Quotrek in between meetings to make a fortune might want to reconsider.

27. Aspect of Trading… • Arguments Against Trading. Trading is clearly a time-consuming adventure. Although there are a number of very famous and successful traders, many individuals ignore the fact that these traders are well equipped to trade and have all day to do so. Given the time and effort most successful traders put into their trading, the potential for amateurs to reap the same rewards with less effort and fewer resources is very low. With so much money competing in the one-day to one-year investment time-frame, an individual with a minimal amount of time will probably be more successful finding businesses to own for the long term and not trying to engage in high-octane, almost gambling-like behavior

28. The Hidalgo’s Glossary… • Book Value. The current value of an asset on a company's balance sheet according to its accounting conventions. The shareholders' equity on a company's balance sheet is the book value for that entire company. Many times when investors refer to book value, they actually mean book value per share, which is the shareholder's equity (or book value) divided by the number of shares outstanding. As the book value is theoretically what a company could be sold for (liquidation value), this book value number is sometimes used as a rough guide as to whether or not the shares are undervalued. • Capital Appreciation. One of the two components of total return, capital appreciation is how much the underlying value of a security has increased. If you bought a stock at $10 and it has risen to $13, you have enjoyed a 30% return from the appreciation of the original capital you invested. Dividend yield is the other component of total return. • Dividend Yield. A ratio of a company's annual cash dividends divided by its current stock price expressed in the form of a%age. To get the expected annual cash dividend payment, take the next expected quarterly dividend payment and multiply that by four. For instance, if a $10 stock is expected to pay a 25 cent quarterly dividend next quarter, you just multiple 25 cents by 4 to get $1 and then divide this by $10 to get a dividend yield of 10%. • Dividend Yield = Ann. Div. P rice= $0.25* 4 $ 10= 0.10 = 10% • Many newspapers and online quote services will include dividend yield as one of the variables. If you are uncertain whether the current quoted dividend yield reflects a recent increase in the dividend a company may have made, you can call the company and ask them what the dividend per share they expect to pay next quarter will be.

29. EPS… • Earnings Per Share (EPS). Earnings, also known as net income or net profit, is the money that is left over after a company pays all of its bills. For many investors, earnings are the most important factor in analyzing a company. To allow for apples-to-apples comparisons, those who look at earnings use earnings per share (EPS). • You calculate the earnings per share by dividing the dollar amount of the earnings a company reports over the past 12 months by the number of shares it currently has outstanding. Thus, if XYZ Corp. has 1 million shares outstanding and has earned $1 million in the past 12 months, it has an EPS of $1.00. • $1,000,000, 1,000,000 shares= $1.00 in earnings per share (EPS)

30. Market Cap… • Market Capitalization. The current market value of all of a company's shares outstanding. To calculate market value, you take the number of shares outstanding and multiply them by the current price of each share. You can find information about shares outstanding from the company's last quarterly report or any online quote service. • For instance, if a company has 10 million shares outstanding and trades at $13 per share, the market capitalization is $130 million. • Market Cap.= Shares Outstanding* Share Price=10 million * $13 = $130 million

31. P/E… • Price/Earnings Ratio (P/E). Earnings per share alone mean absolutely nothing. In order to get a sense of how expensive or cheap a stock is, you have to look at those earnings relative to the stock price. To do this, most investors employ the price/earnings (P/E) ratio. The P/E ratio takes the stock price and divides it by the last four quarters' worth of earnings. If XYZ Corp. is currently trading at $15 a share with $1.00 of earnings per share (EPS), it would have a P/E of 15. • $15 share price $ 1.00 in trailing EPS= 15 P/E

32. Relative Strength… • Relative strength, also known as relative price strength, rates the performance of a stock versus the performance of the market as a whole over a given time period. The rating system gives a numerical grade to the performance of a stock over a given period, normally the past 12 months. Thus, relative strength is a momentum indicator. • The most popular form of relative strength ratings are those published in Investor's Business Daily, which go from 1 to 99. A relative strength of 95, for example, indicates a wonderful stock, one that has outperformed 95% of all other Kenyan stocks over the past year.i.e BBK, Equity. However, given that relative strength is only a mathematical relationship between the stock's performance and an index's performance, many others have created their own relative strength measures.

33. Gloss…cont;d… • Revenues. Also known as sales, revenues are how much the company has sold over a given period. Annual revenues would be the sales for a given year, whereas quarterly revenues would be the sales for a given quarter. • Sales. Also known as revenues, sales are literally how much the company has sold over a given period. Annual sales would be the sales for a given year, whereas quarterly sales would be the sales for a given quarter. • Utilities. A business that provides a service essential to almost everyone is called a utility. These businesses are almost always under some form of regulation by the government and normally have a monopoly position in a certain region. Electric companies, natural gas providers, and local phone companies are often referred to as utilities. • Volume. The number of shares traded on a given day is known as the volume. Many investors look at volume over a month or a year to come up with average daily volume. Market watchers will say a company has traded at a certain number of times the average daily volume, giving the investor a sense of how active the stock was on a certain day relative to previous days. When major news is announced, a stock can trade as much as 20 or 30 times its average daily volume, particularly if the average daily volume is very low. • The average number of shares traded gives an investor an idea of a company's liquidity - how easy it is to buy and sell a particular stock. Highly liquid stocks trade easily in large batches with low transaction costs. Illiquid stocks trade infrequently and large sales often cause the price to rise or fall dramatically. Illiquid stocks on the NSE also tend to carry the largest spreads, the difference between the buying price and the selling price.

34. Trust your Portfolio Manager…in times of the bear market… • HGC.

35. HIDALGO’S ADAGE… • …"Buy at the time of maximum pessimism and Sell at the time of maximum optimism" …The scenario of the big man and the small fellow.

36. Why INVEST with HIDALGO… • A company dedicated to excellence and the decoding of the Kenyan Financial and Equity markets, • Has a team of professionals in the fields of law, finance, strategic planning and media. • Hidalgo believes in telling you as it is, cutting through all the information overload and telling you the basic factor:- the odds are with you or not. • We at Hidalgo believe that our Portfolio management strategies, research and data analysis techniques are different from the every day data analysis & management that you do receive from other companies.

37. How Hidalgo Works… • Earning from your investment in the equity market is three fold:- • The dividend aspect every once a year… • The aspect of speculation on every settlement day… • The aspect of the Initial Public Offers [IPOs]…

38. Dividend Aspect… • The dividend is such an important factor in the success of many stocks that you could hardly go wrong by making an entire portfolio of companies that have raised their dividends for 10 or 20 years in a row. Companies that don't pay dividends have a sorry history of blowing the money on a string of stupid diversifications." • You can get a reliable source of income from dividends around the year. How? By buying only a handful of stocks with different payment time slots, you can space your payments so you get extra income every month throughout the year. • We at Hidalgo believe that more attention will be paid to dividends and current earnings and less to growth. By and large, companies that are paying dividends have to have earnings. They can't do that with smoke and mirrors." Jeremy Siegel, professor of finance at Wharton and author of the best-seller Stocks For the Long Run. • Earnings are very difficult to estimate; cash dividends are not. Fifty years ago, people bought stocks for dividends; they did not buy them for earnings. And one of the problems we did not have back then is earnings manipulations; they were not very important because nobody cared." • You can't always trust earnings. We saw how companies like Uchumi, Sasanet group, Enron, WorldCom and Global Crossing cooked the books. Investors were destroyed. But did you know that old stalwarts like Lucent Technologies and Xerox acted inappropriately, too? Lucent claimed an extra $600 million in revenues that it hadn't earned. Xerox announced revenues $3 billion higher than it actually generated from 1997 through 2000. Unlike a company's earnings, dividends can't be manipulated. • When the tax on capital gains was slashed from 50% to 20% in 1981, it set the stage for an expanding economy and roaring bull market. With the tax reduction on dividends put in place by the Bush administration, the same surging cycle of prosperity could be set in motion again. Investors could demand MORE companies pay dividends once they see how much extra money they'll keep in their pockets. In the Kenya scenario, tax on capital gains from the equity market are not levied, thus the stage is ready and waiting for the savvy investor to take the advantage for his benefit. • Earnings from dividends is pretty straight forward and has no manipulations at all. Get the right information from your portfolio manager and organise your capital for the investment at the right time. • Thus, talk to us at Hidalgo.

39. The Speculation Aspect… • Speculation basically means taking advantage of the current situations to your economic gain. • To be a successful speculator:- • You will need a minimum of Kshs. 50,000, to be able to break even and make some profits every settlement day, • Your dosage of risk tolerance will need to be pretty high, because a lot of money is made and lost when the market is really volatile. A good example is when the Kenyan market went on a meltdown when the news of Embakasi’s MP assassination reached the newsrooms and the stock market prices began going down that the trading process was stopped for 15 minutes. During this period, there was a lot of supply of shares on most counters and no demand. The supply glut was occasioned by the panic or fear of the retail investor’s need to sell and save his investment whilst the ‘greed’ or the smartness of the corporate investor, told him to buy large and off-set the same the next day to the same retailer but at premium prices. If the retail investor had the services of the portfolio manager, then he would have made some good profits, based on sound advice he would have been given. • As an investor in the money and equity markets, you will need the services of a portfolio manager.

40. THE IPO ASPECT… • Initial Public Offers essentially signify the transition of a particular private or family or state owned company going public through the issuance of its shares to the public at a discounted price as compared to its true market value. • One can greatly benefit twofold:- • By the purchase of the shares in the secondary market [ the already listed shares ] at lower prices because everyone else will be offloading their holdings to be able to purchase the IPO thus there will be a supply glut and no matching demand in the market thus, shares prices will drop. Purchase of these stocks is very lucrative because the price will simultaneously rise with the with the commencement of the IPO trading on the market because the demand will suddenly match the initial supply and outstrip it thus raising the price of the stocks. Precedence of previous IPO’s like Kengen, Eveready, Access Kenya have indicated and shown the price declines of various stocks prior to the offering and the immediate surge in the same once the IPO stock starts trading at the bourse. So, if one is well prepared, then you can benefit from the fluctuation in the secondary market due to the IPO and also benefit from the IPO itself once it starts trading and it attains its true market value as clearly shown by the KENGEN offering.

41. SERVICES OFFERD BY HIDALGO GROUP OF COMPANIES. • SERVICES OFFERED THROUGH HIDALGO’S PORTFOLIO MANAGEMENT:- • GOLD • SILVER • BRONZE • GOLD SERVICE:- • Requirements:- • Minimum Investment Capital of Kshs. 500,000 • Benefits:- • Weekly circulation of your funds in the equity market in stock counters with maximum returns to maximise on your returns at the behest of Hidalgo’s portfolio manager. • Free Stock Market alerts, • Free fortnight statements, • Free quarterly Hidalgo Finance Magazine, • Hidalgo Staff visit you at your office for consultations. • Charges:- • The charges levied will be for office facilitation of Kshs. 5,000 per month.

42. Services Offered cont’d. • SILVER SERVICE:- • Requirements:- • Minimum Investment Capital of Kshs. 200,000 • Benefits:- • Free Stock Market alerts, • Free fortnight statements, • Free quarterly Hidalgo Finance Magazine, • Weekly circulation of your funds in the equity market in stock counters with maximum returns to maximise on your returns, at the behest of the Hidalgo’s portfolio manager. • Charges:- • The charges levied will be for office facilitation of Kshs. 2,000 per month.

43. Services Offered cont’d… • BRONZE SERVICE:- • Requirements:- • Minimum Investment Capital of Kshs. 50,000. • Benefits:- • Free Stock Market alerts, • Free fortnight statements, • Free quarterly Hidalgo Finance Magazine, • Adequate circulation of your funds in the equity market in stock counters with maximum returns to maximise on your returns, at the behest of Hidalgo’s portfolio manager. • Charges:- • The charges levied will be for office facilitation of Kshs. 1,000 per month.

44. White Service… • WHITE SERVICE: • This kind of service will be available to all others below Kshs. 50,000, in terms of capital strength, as compared to the aforementioned services. This kind of service will not attract any benefit other than constant and productive circulation of your funds, as this will more or less be a long term kind of investment and it will attract no charges.

45. CONCLUSION… • Invest wisely, • Strategise well, • Don’t listen to hearsay from people who have not tried out what they are preventing you from doing, • Use the little you have to grow your asset base, to be able to handle your liabilities and expenses. • Spend what you have to make more. • Don’t let your liability and expense column be larger than your asset base. Yours truly, Steve Biko, C.E.O. HIDALGO GROUP OF COMPANIES.