Get the most from credit cards

The Christmas season is here and persons will be spending above the normal levels in the earlier part of the year. The use of Credit cards will rise sharply and many will feel the pain of their spending when they face credit card payment in the first two months of 2022, yet there are ways to have your cake and eat it when it comes to the use of credit cards if some simple rules are followed.Stacked Credit Cards Stock Photo - Download Image Now - iStock
Credit cards are extremely useful if managed properly, but the number of Jamaicans with credit cards is relatively small, with just under four hundred thousand according to data from the Bank of Jamaica. The same data shows debit cards numbering 4.34 million. Many persons seem to fear using credit cards that carry extremely high interest rates and penalties for missed payments. A number of persons have gotten into financial difficulties because of how they misuse them or just fail to manage them well.
How many persons know how to use these instruments to their advantage, with the possibility of nearly two months interest free credit.
Individuals should get to know all the terms of each card they hold. These include interest rates applicable, the date that interest will start to accrue if the amounts incurred are not paid within the time frame the statement indicates. Know the dates when statements are cut off as this can allow one to max out on the credit received without incurring charges. Both dates are shown on monthly statements but may vary from one statement to another. While the payment date will vary by a few days from month to month the date statements are printed are usually fixed. This latter date is most important if cardholders are to get the most out of their cards.

NCB Financial Montego Bay branch

Credit cards should be used to avoid paying the prohibited high interest rates. Rule one, do not use the cards unless the user knows where money will come from when the payment is due so it can be paid in full and on time thus avoiding the heavy interest cost.
Do not be lulled into paying just 10 percent per month that the banks entice cardholders to do, if you don’t pay in full when due there will be unnecessary expensive interest charges to bear. Get a regular bank loan instead. Remember that banks loan cost about 80 percent less than credit card interest.
The dates for the statement is of focal point for when the card is to be used. A few days before the cutoff date and the credit received is cut sharply to a few days compared to using them the day after the statements are printed. Where there is more than one card, alternate them to use the one that has the longest time to go before the cut off for printing statements, with the other to be used after the next cut off time. This way users will max out on the credit terms and save cash.

A card cut off for printing is say the 20th of the month, if the card is used on the following day a payment would not be due until the middle of the second month following the use of the card. Say the bank cuts off transactions and prints the statement on December 20 and the cardholder effects a charge on the 21st, payment will not due until mid-February resulting in almost two months of interest free credit. If the cardholder incurred the charge on the 20th, that amount would appear on the next statement normally due for payment by January next year, one full month ahead of a charge that was incurred just one day later.
If persons have the option to put off paying a bill before the statement date or a few days after the statement date such action will afford them one more month of interest free debt.

An indispensable tool for all investors

The PE ratio is one of the most popular and valuable tools used by investors to assess the value of a stock, allowing them to make appropriate investment decisions. Every investor should understand this simple measure. If they do, they will make better investment decisions, but not all PE ratios are equal and the differences should be noted when using them to make investment decisions.
“The PE Ratio is a measure used in computing appropriate stock values, averages 16 based on ICInsider.com’s forecast of 2021-22 earnings.”  Readers of ICInsider.com’s daily Jamaican stock market reports will be familiar with the above quote.
What is the reason to quote this daily? PEs help investors determine if they value stocks appropriately by comparing the value of one stock against another and the overall market value.
The PE ratio is the number of years it takes for investors to get back their money based on the profit made by a company, ignoring growth in profits. At the close of trading on Wednesday, Main Market stocks were trading at an average of around 15.8, which is equal to the amount of money invested in each stock that would be repaid within 15.8 years based on this year’s profit and assuming the profit would be constant for the next 15.8 years.
On the surface, stocks with high PE ratios take longer to deliver returns than those with lower PEs, all things being equal. Globally, stocks with high PEs have high growth rates, resulting in a higher level of an annual increase in profit than stocks with lower PEs. The rationale is that if profits are going fast, the accumulated gains will reduce the payback period.
Investors can find the PE ratio for each stock on the daily report of Jamaica Stock Exchange stocks quotation charts included in the markets’ reports. The charts carry projected earnings for each company and the PE ratio for each stock, based on ICInsider.com computations. From these charts, investors can easily see the stocks that are expensive and those that are not. A company with profits growing at 10 percent per annum will have profit doubling in 7.2 years. A company that has profits growing at 20 percent per annum will double its earnings in 3.6 years, which should carry a higher PE ratio than the former.
Don’t follow the crowd. Pay attention to facts, not fads. The general rule; buy stocks with low PEs and stay away from those with high PEs and monitor them regularly to see if there are significant changes that may warrant changes in an investment.
While many investors get attracted to cheaper priced stocks believing they can double easier than high priced ones, they often ignore the main feature that determines cheapness and, therefore, the ability to make more profitable trades.
A significant and most crucial issue is the makeup of the profits used in computing the PEs, are they based on earnings from continuing operations or not? Not all PEs are equal and investors need to find out periods used to calculate the PE ratio and the quality of earnings used in the composition. PEs may be based on historical profits, trailing four quarters, current year’s or based on future earnings. Why is this important? Many companies have onetime income or expenses that are not likely to repeat consistently in the future. In such cases, it is vital to strip earnings of the onetime items to determine earnings from continuing operations. If reported profits are not adjusted for these items, the stock may be considered undervalued or overvalued and lead investors and lead to wrong investment decisions.
The usual procedure is to buy when PE are low and sell when high. Patience is required as stocks tend to take time to fully valuation, especially when they have fallen out of favour.

Virtues & pitfalls of OPAs & stock splits

A reader of IC Insider.com asks the following question. In general, based on what l have read, listed companies can raise capital faster than getting a loan. I think there is a risk for the company that the Additional Public Offer (APO) can be undersubscribed. What are other ways APOs may hurt the company?
An APO is just like an IPO but it is usually better as the former is already listed and has followers and a wide number of shareholders who are familiar with the company’s history of management and financial wellbeing.
Shares issued to the public can be undersubscribed if the pricing is out of line with investors’ expectations or if market conditions change adversely after the issue opens. Bear in mind that the management and their Broker would get a sense from the market whether the issue will be taken up or not.  Brokers will usually do roadshows to pitch an issue or get feedback from their clients before pricing and going to market with the issue. At least with an APO, the market has already determined the value investors place on the company so pricing is easier than for an IPO that has to be priced off the indicative market valuation.
One more question? if there’s a stock split after an APO ( thinking of PanJam), might it be better to buy shares after the APO as they could buy more shares for less money, is my understanding correct?
Stock splits tend to cause the stock price to rise because the news of the split and the lower share price stimulate short-term interest and if investors wait until after the split they are likely to pay more for the stock in real terms. In the case of PanJam buying in the APO could be the best bet. It, however, depends on the timing of the split as well as that of the APO. The odds are that the split would take place before the APO and if history is anything to go by the stock price will rise and result in a higher APO price than the price before the split. Buying the stock now before the announced stock split may be the better move.

The big Junior Market rally ahead

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Investors can trade shares either by using fundamental analysis, the more common method, or technical analysis. Both have their place, but technical analysis informs investors ahead of significant market moves and thus reduces the time one has to buy or sell a stock.

The triangular formation is shown by the black and golden lines.


The Junior Market suffered a sizable fall from its peak of 3,436 points in September last year to Mid-March and bounced sharply in the first two weeks in April, then retreated until-Mid May from which it started a rebound.
The market was recently in a triangular formation and is breaking higher as the formation suggests. Ascending triangle patterns are bullish, meaning that they indicate that a security’s price is likely to climb higher as the pattern completes itself. Two trendlines form the pattern, the first is flat along the top of the triangle and acts as a resistance point which—after price successfully breaks above it—signals the resumption or beginning of an uptrend. The second the bottom trendline of the triangle that shows price support—is a line of ascension formed by a series of higher lows. It is this configuration, formed by higher lows that forms the triangle and gives it a bullish characterization as each time sellers attempt to push prices lower, they are increasingly less successful.
The Junior Market has broken to the upside of the triangle, an indication of the rising market ahead. A critical factor behind this is the low PE ratio for Junior Market stocks at 9.3 versus Main market stocks of 15 as well as the fact that the average PE of Junior Market stocks had reached 15 times 2019 earnings.

Wigton price dreamers

Wigton stock price could top out soon.

“Buy now, Ride the $3 wave”. That’s a stunning advice by an online stock market investor to another, regarding the likely performance of the Wigton Windfarm stock after trading, on the first day of listing.
Wigton shares closed trading on the Jamaica Stock Exchange on Friday at 83 cents, with a PE of 14, placing the value in the upper half of the most valued main market stocks. The premium over net asset value, another measure of valuation, is 291 percent above the net asset value. Few stocks in the main market are selling at such a premium.  At $3, the stock would trade at a stunningly high PE ratio of 50 times 2019 and 2020 earnings. The only main market stock close to that valuation is Kingston Wharves (KW) at 35 times 2019 earnings and that is coming down from more than 50 times 2018 earnings in 2018, when investors traded it at $85, now it’s trading around $70 even as profit for 2019 is up in the first quarter of this year.
Unlike KW, that has less than 10 percent of the shareholding amounting to a few million units, that trade, Wigton has billion of shares that will trade. The high liquidity of Wigton shares almost ensures that the stock will not become overvalued and if so, will not remain that way for a prolonged period.
The bulk of investors who would be buying the vast quantity are more professional than not and are versed on the valuation levels of stocks. Accordingly, they are unlikely to be buying a stock that has doubtful expansion credentials at an inflated value. The most popular valuation tool, the PE ratio does not support a price much higher than $1.20, with EPS of 6 cents per share. A price of $1.20 equates to a relatively high PE ratio of 20. Only a few stocks are valued close to this multiple and many of them have prospects for profits to grow. Wigton has no immediate prospects for growth in earnings, pricing it at 20 times EPS would, therefore, be unwise. The market will speak but the heavy selling on Friday is more in line with the thinking that the top is not far off. Investors who buy shares above the accepted market norm will likely get crushed unless they have a long term investment horizon on their minds. PE ratios are there to give a sense of appropriate values. When investors try to break away from where the bulk of investments funds place the value of a stock at, they usually end up regretting the move.
In the investment world staying close to the crowd with pricing is a prudent investment practice that tends to be less costly than trying to predict lofty heights for a stock to reach.

 

How do I invest in stocks?

Persons interested in investing in stocks should open an account at a brokerage company so they can start investing when they decide to take the plunge.
Stocks are not like fixed interest securities where the returns are usually known, up front. Put another way, there are no guarantees about the returns on stock market investments, that is a negative. History shows it to be a huge positive with no limit to possible gains. The basic principle is to find companies that are likely to increase profit going forward. This is most important, as profit are the main reasons why investors buy a stock, as it increases the value of a company.
Buy stocks with low price earnings (PE) ratio relative to the rest of the market. What does this mean? Listed companies are required to report profit and show the amount of profit earned per share (EPS). EPS is the profit for each issued share. In simple terms, the EPS is arrived at by dividing the profit by the total issued shares. This figure by itself does not mean much, but it allows for the computation of one of the most important and used investment tools, the PE ratio. PE is the price of the stock on the stock exchange divided by EPS.
Do not buy stocks because the price is low in monetary terms. Instead, have laser like focus on stocks with lower PE ratios. Sometimes when persons buy shares, also called stocks, they may see quick gains, as may happen with the Wigton Windfarm initial public offer (IPO) issue that is now on the Market. More often, investors will not see any gains for months but then may do so with the passage of several months, if the company reports increased profit. Effectively, if one buys stocks of good quality companies they will usually grow in value.
A good quality company is one that has consistent growth in earnings over a number of years, with few if any decline. There is more to it than the above, but these are a few basics. New investors are well advised to start small until they get a better feel of the market. Yes, you can start with $10,000, but $25,000 may be better.
Investors can find the earnings per share EPS and PE ratios for each local stock, on the stock market trading chart shown daily and included in the Junior and Main market reports. The key to using them is to find those stocks with the lowest PE ratios and get more information on them. This website analyses the companies on an ongoing basis to provide relevant investment information for investors.
When investing try to have about five different companies. Some companies to consider investing in now are: Wisynco, NCB, Fontana, General Accident and Wigton

Use PE ratio to make big bucks

Investors can improve return on their stock market investment by just following one critical measure, the PE ratios of stocks. Buy low PE ratio stocks and sell those that are too high relative historical norm that almost a sure recipe for making good money in the stock market.
An important factor worth noting is that the PE ratios based on 2018 earnings are well ahead of those for 2019 earnings. The average PE of stocks listed on the Jamaica Stock Exchange based on 2018 earnings is just under 19 times, reflecting valuation as high as 60 times 2018 earnings, with some with PEs in single digits.
The Junior Market boast average PEs around of 17, while the main market is at 19.5. The Junior Market typical PE hoovers around 16 while that of the main market is around 15, all based on 2018 earnings. The typical PE is where a large number of stocks are clustered.
While many investors see stocks as cheap, based on price, that is not the basis of investing in a stock. The focus on the PE is most critical. It is the tool used by most investors to determine if a stock is worth having or not. Many individual investors consider NCB Financial as expensive at

Chart showing falling interest rates & rising PE ratio of the Jamaica Stock Market.

$145, but with a PE ratio of less than 10 times 2019 earnings, suggest otherwise. PEs based on current year’s estimated earnings, are just 10 for the Junior Market and 14 for the main market, with the typical average of 12 for the main market. Should economic factors remain relatively stable, as they current are in Jamaica, as well as globally, the PEs based on 2018 earnings, are indicative of good gains in stock prices in 2019. The above would equate to the junior stock posting gains of 60 percent by next year March and the main market 25 percent.
Investors can compare, the current PE based on 2019 estimated earnings of each stock against the typical ones based on 2018, to get a picture of which ones are likely to gain strongly this year. IC Insider.com daily stock market report charts carry projected earnings and current PE for each stock that investors can use as their tool for identifying stocks with above average potential gains.

What are right issues?

Companies requiring additional capital may offer shares for sale to their shareholders in proportion to their existing holdings, usually at a discount to the price in the market.
Such issues initially gives existing shareholders securities called rights. Shareholders get the right to purchase new shares at a discount to the market price on a stated future date.
Rights usually, have value, the difference between the current share price and the exercise price. Until the date at which the new shares are to be purchased, shareholders can trade the rights, similar to the trading of shares. Rights may be listed on a stock exchange, in many cases, they are not, but stockbrokers can usually arrange for sale and purchase of them, nevertheless.
Rights can be renounceable or not and that is determined by the company’s shareholders usually at a general meeting. If they are non-renounceable then shareholders will not be able to transfer the rights to a third party if they do not intend to exercise them.

PE ratio most critical investment tool

The PE is the most common measure of valuing stocks and understanding it’s use is critical to successful investing. It is computed by dividing the price of a stock by the earnings for each share.
This is important since various companies have different earnings and number of issued share. Why is the measure important? Investors are buying an intangible which is future income, the PE tells how many years of profit or earnings investors have price into a company’s stock. For example, take the hottest stock around now – NCB Financial, this publication projects the group to generate earnings next year of $17.5 billion after tax or $12.50 per share. Based on the above price, the stock now sells for 12.7 times 2019 earnings. If the profit stagnates at these levels then it will take 12.5 years to recover an investment in the stock assuming all profits were paid out to shareholders.
Investors will compare this PE ratio of 12.7 with the overall market which is now at 16 as well as against other stocks. If other stocks are selling below the value of NCB then it may be better to go after those, all things being equal, they should provide a better return on investments.
While the PE is best used in the stock market it can be used in the money and real estate markets as well.

Sagicor Fund is Jamaica’s top unit trust

Sagicor Equity linked Unit Trust delivered almost 600% gain in 10 years.

Sagicor Equity Unit Trust is Jamaica’s leading unit trust equity portfolio for the past six and ten years periods. In second place is Scotia Unit Trust, followed by Barita, data compiled by IC Insider.com shows.
For the past 6 years, Sagicor delivered gains of 339 percent and 581 percent over the past 10 years with nearly three months to go for the period. Scotia Unit Trust had gains of 237 percent for the near 6 year period and 429 percent for the 10 year, period with just under three months of the period to go. Barita is third with 341 for the near ten years and 209 for the 6 years period.
The Jamaica Stock Exchange main market gained 31 percent to Friday October 12 and the Junior Market 23 percent and the year still has more than 2 months to go. At look at the unit trust performance as disclosed in Friday’s Financial Gleaner, dated October 12, shows, Barita Unit Trust leading all others with an increase of 29.77 percent followed by Victoria Mutual Fund with a return of 25.28 percent and Sagicor coming in third at 18.95 percent.

Scotia Investments Capital growth Fund tops in 2017.


With interest rates at the lowest levels on record and the increased risk for ordinary Jamaicans to invest in US dollars with two ways movement of the local currency, more persons are looking at the stock market as a viable alternative. Not everyone is equipped to buy stocks directly. Equity based unit trust schemes are useful alternatives for investors to look at if they are not comfortable with investing directly in stocks listed on the local market. These schemes invest in a variety of stocks and keep some funds liquid to be able to meet persons cashing out. This latter factor alone usually ensures that unit trust will find it tough to beat the market. But that should not be of major concern to many investors who would not be able to benefit from the power that stocks can deliver to one’s portfolio. Put another way if an individual investors decided that they are not conversant with stocks and therefore invested their funds in fixed interest securities at say 5 percent per annum but got say 20 percent from a stock fund as opposed to 30 percent from the stock market they would still be far better off than not owning some instruments that are exposed to the stock market.
One period’s performance is not the best guide to selecting a unit trust to invest in. In 2017, Scotia Premium Growth Fund recorded gains of more than 37 percent for their investors to be the number 1 performer, after rising 25 percent for 2016. The Scotia Fund, displaced Barita Capital Growth Fund, the 2016 front runner that ended at number 6 in 2017, while still delivering a 21.5 percent return, down slightly from 26.7 percent in 2016. Funds delivering good performance over longer periods are far better guide in selecting a unit trust for investment.
Over the past 5 years to 2017, no one unit Trust has been consistently the top performer. Barita has held number one spot in 2013 with 11.79 percent, they were number 2 in 2014 with 9.13 percent, three in 2015 with 51.27 percent and number one in 2016 with 22 percent but fell to 6th position in 2017 and are now number 1 in 2018. Scotia Premium Growth were no 1 in 2017, number 2 in 2016 with an increase of 26 percent, number 2 in 2015 with a 62.7 percent increase, 3 in 2014 with an increase of 8.3 percent, 3 in 2013 with a decline of 3.8 percent and are now 4 in 2018 to date. Sigma Unit Trust was number one in 2014 with a gain of 12.6 percent and in 2015 with 89 percent, number 4 in 2016 with negative 2.7 percent growth, second place in in 2017 and number 3 in 2018 so far.