Scotia Equity Fund tops at 39%

Scotia Investments Capital growth Fund tops in last 12 months.

Getting the best out of one’s investment requires regular reviews and sometimes changes to what we may consider prime holdings. A look at some of the high flying Jamaica Stock Exchange listings this year, tells the story pretty well.
The prices of many rose to exceedingly high valuations, on the back of strong buying, only to see prices fall back later with selling exceeding buying, as investors who bought low, offloaded their holdings, booking profit in the process.
That many may go on to recover losses incurred as a result of buying close to or near the top. In a number of cases, it may take quite some time to recover fully, while other opportunities to profit may go by. The Jamaica Stock Exchange share traded at $13.50 but now trades at $7 or Cargo Handlers trading at a high of $30, and is now at $16 and could fall some more with the price still seeming to be about 50 percent too high. Getting back to the top for these two will be challenging in the short term.
What then is happening to securities that move in a more mild-mannered than stocks but better than money market instruments? Unit trusts are a pooled investment vehicle that are managed by experienced persons.
Many persons only want to know that their investment grow at a reasonable pace and not so much on the rate of return, that will not be good stewardship of their resources. Investors should review their portfolio at least once per year and make changes where needed.
A close look at the Unit Trust bi weekly report that are published in the Jamaica Observer and Jamaica’s Daily Gleaner is revealing. Not all stocks are alike so it is with the pooled Unit Trust investment funds.
The performance of the Unit Trust funds vary from one to another. The equity based growth funds varied from 39 percent growth in case of Scotia Investments Premium Growth Fund, to a low of 28.47 percent for Sagicor Sigma Equity Fund for the last 12 months to date. Coming second, is Barita Investments Capital Growth with 34.55 percent. For 2017 to June 22, NCB Capital Markets equity fund delivered 29 percent for the last 12 months, but is the leading equity linked Unit Trust funds with gains of 21 percent, Scotia Investments Premium Growth Fund, is just behind, at 20.4 percent, edging out Barita Investments with 19.7 percent. JMMB Fund Managers landed 31 percent for the last 12 months and 18.9 percent since January with their Income and Growth Fund.
Sagicor and VM Unit Trust lag in the equity category, while Barita Investments FX Growth Portfolio fell 10 percent for the last 12 months and 5.7 percent since 2017 and the real estate fund, slipped 3 percent for the last 12 months and 5.7 percent for 2017 to date.
Returns on money market funds have been much more competitive with returns mostly around 5 percent annualized.

The Exuberant 10

The JSE stock traded at an outlandish $13.50 & dropped 47% since.

It is not nice to watch one’s investment lose value while others grow delivering big gains at the same time. Many investors plunge into investments that will result in just that happening, as they err and refuse to let go and reinvest, to recover their loss, from gains elsewhere.
A look back at prices in 2005, reveals shocking results of costly ill-timed investments. In June 2005, investors in a bout of excess exuberance, pushed Mayberry Investments to $8.40 from a listed price of $5.05, weeks after it listed on the Jamaica Stock Exchange, 12 years later it is still to reach back to that level. That is a huge blow to investors who held on to the shares from then.
The sad thing is that many investors who wanted to sell could not, as attempts were made to control the price from a big drop as selling started to overwhelm buying a few days after nearly 40 million shares were traded around the $7-8 level. Mayberry is an outstanding example of investors making huge errors based on inadequate information and paying dearly for it.
But Mayberry’s stock is not the only one that investors underwent a long period of suffering from, they have a number of top notch companies as their friends that that performed poorly until fairly recently. Scotia Group was pushed to $33.50 in March 2005 based on results that were not sustainable as the bank benefited by a poor decision of the Central Bank to push interest rates on CDS paying interest at elevated levels for about two to three years. The banks of course made a killing when rates fell back. Added to that, Scotia effected a stock split that sent the stock flying. Well it was not until late 2016 that the price exceeded the 2005 high. JMMB Group’s shareholders saw the price of the stock peaking at $22 in April 2004 only to see it fall away and not getting back to that level until recently this year. That is not great for a stock that is not a great dividend payer.
Grace Kennedy hit a high of $123 (Now $41 after stock split in 2016), in January 2005, it has taken nearly 12 years to recover the loss and it has still not delivered much more in gains since its full recovery.
Markets tend to repeat past behaviors, over and over but sometimes they take a break from the norm. PE ratios are the end product of investors’ perception of values for stocks. There are other measures but the PE is the most widely used. When PEs are pushed well beyond where the majority of investors thing the value ought to be, they induce added buying or selling. Investors who buy when the market has pushed valuation well above what is considered the norm, usually pay a steep price for so doing. The 2005 examples are cases in point. An accepted concept is that the PE ratio should be line with profit growth. One year’s growth cannot be used by itself but investors have to try and determine that themselves.
Most of the stocks in the IC Insider’s Exuberant 10, were pushed in 2017 by excessive enthusiasm and in some cases wrong information. Stock splits helped to fuel some of the excess as well. The attached table shows the stocks that were pushed well above their appropriate values and the levels of correction since. Some may fall even more than their latest price as they can be considered overvalued based on known earnings for the current period. A few that are not on the list could see a decent fall as well, included in this latter list are Knutsford Express and Kingston Properties.

NCB & Berger could break out soon

NCB Financial Group’s shares looks like they could break into the $70 range soon.

In a shortened trading week on the Jamaica Stock Exchange, only one of the TOP 10 listings dropped out with Lasco Financial rising in price and gave way to just inch in Caribbean Flavours at 10th spot. For the coming week, NCB Financial Group is worth watching, with supply and demand at the close of the past week suggesting that the price could break into the $70 range before long.
is another stock worth watching with IC Insider.com upgrading earnings for the 2018 fiscal year starting April, to $1.90 from $1.60 previously used and 2017 earnings to $1.30 from $1.10. Berger ended the previous week with a last sale price of $12.20 but moved up by the end of the week to $14, closing with an offer of 1,453 units at $15 while 22,600 units are on the bid at $13.55.
The average PE ratio of both markets are currently at an average of 12, based on this year’s estimated. At the close of the markets on Thursday, IC Insider.com’s TOP 10 Junior Market stocks continue to trade at an average discount of just under 40 percent to the Junior Market average, those in the main market are trading just below 50 percent discount, leaving several stocks with good room for growth for the rest of the year.
Release of 2017 first quarter results will be important in determining if the steep price discount will continue for much longer, or whether the historical May syndrome of reduced market interest came early this year and last until summer or after, similar to 2016.
Overall bid volumes for junior market stocks remained low at the close of the past week continuing the low levels at the close of the week before.
Caribbean Cement continues to trade with a heavy downside bias notwithstanding the rise in price for the week to $32, with last year’s first quarter results dated April 20, this year’s results could be out in the coming week and provide direction for the stock. JMMB Group’s buying interest is at $18.10 for 2,073 units on the bid and 409,862 units offered at $18.40, NCB Financial Group traded on Thursday at a new record high of $66.90 before pulling back to $65 at the close, supply seems low and could help the price move up ahead of second quarter results, that should be out before month end. The stock also traded at a new high in Trinidad this past week. Pulse Investments has offers to sell 245,639 units at $8 with buying at $7 for 1,000 shares, the same as for the prior week. Radio Jamaica bid is at $1.60 to buy 279,561 units with 100,940 units on offer at $1.75 and Scotia Investments closed the week with only 550 units on the bid to buy at $37 and 4,180 units offered at $39.40.

Non-dividend stocks as investments?

The payment of dividends is only one element to consider in investing in stocks. Investing companies that do not pay dividends should not matter seriously, in the short.
This is true if companies are using the profits to grow the business.
Capital gain is the most important return investors look for in buying stocks. In the long run stocks that don’t pay dividends tend to grow faster than most, but ultimately they will make dividend payments to their shareholders, thus increasing the return on investment.
The most important factor in buying stocks is whether their values are relatively low enough to make for a profitable investment down the road. At the same time, investors should not only look at a company by itself and compare the likely growth with other stocks, with the ones showing the greatest potential being invested in.
If income is the main objective, then investors would need to look to those stocks paying the h level of dividends relative to the stock price.

Carib Cement bad news say buy

CCC GteJamaica’s sole cement manufacturing company Caribbean Cement, reported a fall in profit from $621 million in the June quarter of 2015 down to only $221 million and for the six months to June $1.05 billion versus $869 million.
Investors seemed to have focused more on the fall in the quarter than on the details of the results and the clear message sent by them. As a result, the stock was sold down to $19.25 from $23 the prior day, with very few buyers at the close, but investors who sold were making a bad decision. This is a classic case of bad news is indeed good news. For one, revenues climbed 9.6 percent in the quarter and 10.3 percent for the half-year but local sales of cement are up a very strong 27 percent. “Despite a reduction in export cement and clinker volumes by 8 percent and 77 percent respectively, total revenue increased by $777 million. This was mainly due to an increase in domestic cement volumes by 27 percent arising from increased projects and strong retail demand. Improvements in operational efficiencies, effective control of fixed costs, lower financing costs and lower energy costs, contributed to the improvement in earnings before interest, tax, depreciation, amortisation, manpower restructuring costs,” the directors’ report to shareholders stated.
CCC fact - 14Importantly, the cement company took a charge for manpower restructuring, amounting to $421 million, a huge positive development and augurs well for improved profit margin and increased profits going forward. In addition there is a charge for excess inventory amounting to $400 million, this is one off and therefore unlikely to recur. Stripped of these costs, earnings would be up by 63 percent to $1.16 million before tax compared to $708 million in 2015 that includes one off income of $168 million for the quarter and pretax profit of $2.1 billion versus $996 million in 2015.
Not only will the cost for redundancy not recur for the current set of staff being severed, it should results in savings in a year, in the region of the sum expended.
During the twelve months to June, the company repaid Trinidad Cement, its parent, loans and other debt $1.6 billion leaving only $556 million more to be paid. Cash funds were left at $788 million after more than $600 million was added to fixed assets since June 2015. At the pace profits are coming in the accumulated deficit of $4.6 billion will be wiped out in 2017.
IC Insider’s forecast for full years earning form normal operations is $4.75 which excludes the one off cost leaving the stock strongly in the buy column. The stock is listed on the main market of the Jamaica Stock exchange and closed at $22 on Friday.

Lasco companies batter US$ investment

Lasco Distributors closed at a new high on Thursday of $4

Lasco Distributors closed at a new high on Thursday of $4

On June 9, 2014, a reader wrote in with the question, “I respect your learned opinion and analysis in financial matters. In this regard, kindly advise if possible as to your views on Lasco Financial, Distributors and Manufacture. Do you believe that these stocks are likely to perform well in the short, medium and/or long-term.
The prices have declined compared to when I bought them and I am concerned about the potential for further decline as the dollar continues to devalue. Should I just cut my losses and sell and convert to FX.”
The prices on June 6 last year were as follows – it took J$111.37 to buy US$1 and now its roughly $120, an increase of just 7.7 percent. Lasco Distributors traded at $1.32 then and is now at $4 for a gain of 203 percent, Lasco Financial Services traded on June 6th last year at $1.15 and gained 156 percent to trade at $2.95 on Friday last week and Lasco Manufacturing was at $1 in June 2014 and has gained 180 percent up to Friday last. It is clear from the above which investment was the better one to have made. Those stock while doing very well have not been the best performing on the local market since then. Cable & Wireless traded at 29 cents in the 2014 period and last traded at $1.05 a 262 percent gain, Desnoes & Geddes was priced at $4.25 and is now at $30, the Jamaica Stock Exchange was then priced at $1.95 and has increase by 464 percent and Caribbean Cream moved from 75 cents to $4.35 for a gain of 480 percent.
IC Insider’s response, thanks for your enquiry. As you will see our BUY RATED list contains these three stocks. Here are our views. First off the local stock market tends to go down around May until last June or July. This is not cast in stone, just a tendency. One reason for it is that investors get the full information as to what companies did last fiscal year and a glimpse for the new-year. In the case of the three Lasco companies they have just reported their full year results. The distributorship earning is the most encouraging of the three and looks like it will probably do better than the other three in the short to medium term. It will also benefit from the Salada Foods distribution which started this year, as well as from increased production to come from the expanded Lasco Manufacturing company’s operation. The information suggest that the next set of results should possibly show growth over that of 2013.
Lasco Financial seems poised for good things, but big marketing spend last fiscal year kept profits down as they went for more market share. It does look as if they will be spending on the world cup promotions which could build business, but may also keep profits pressured somewhat for a while.
Lasco Manufacturing seems cheap at $1 bearing in mind the impact that the factory expansion is likely to have on both sales and profits ultimately. Short term they will have to pick up interest cost and depreciation on the completed factory but will enjoy cost savings and ultimately increased profits.
One need to be careful of converting to foreign exchange at this stage, as the big move in the FX trade could be over. You may have to hold the stocks for a while but the investment could pay off in the medium term, more so in the case of financial and distributorship, during 2014. We would want to see he Q1 results for Manufacturing before jumping.
It is our view that the market overall, is undervalued but investors will need to be patient and the payoff is likely to huge for those who wait, the gains to be reaped elsewhere is not likely to be all that great, to cause one to jump and possibly miss the gains in the local market that is ahead.

What is a Unit Trust?

Jamaica Unit Trust started the first unit trusts in Jamaica

Jamaica Unit Trust started the first unit trusts in Jamaica

Jamaican investors have been blessed with an array of investment opportunities right here in Jamaica, that they can make superior returns from. They just need to know where to look. An easy way, is to leave the choices up to professional managers to make the individual investment decisions.
The investment choices are many, some are quite simple to invest in while others required skills developed over time. For example the stock market may well be the market that delivers the highest returns, but investing successfully in stocks, requires knowledge about the workings of the market as well as a good assessment of the company to invest in as well as learning when to get in and out of a stock. On the other hand investing in Unit Trusts requires little knowledge of the assets the funds invest in, as the reliance should be placed on the management of these funds. In this regard the pass success over time is often a good indicator to be followed when investing in these funds.
An equity linked unit trusts are ideal for persons who want higher returns that the stock market offers without the having to do all the work in identifying the best stocks and the most opportune time to trade stocks, the same applies to fixed interest instruments.
What is a unit trust? Unit Trusts pool funds from numerous investors to invest in a variety of securities. The Trusts are governed by statutory regulations and their own trust deeds which set out the powers and limitations of the management of the funds. One major feature of unit trust is that of diversification of investments especially in the equities. This factor may reduce the growth potential of such funds but it acts as a great protection for investors. Local unit trust prices are quoted daily and are published in newspapers twice per week. The managers of these funds charge a fee for their services which is either taken out at the time of investment as well as an ongoing fee based on the size of the funds.
Upon till a few years ago, there are two main funds managed by fund managers these are equity or money market based. Fees can eat into the returns of investors especially in the case of money market funds. Recently, more funds were added, to include, real estate, foreign exchange and venture capital.
Returns on the money market funds should hover around rates paid on fixed interest securities less the fees the managers get.
When choosing funds to invest in, past performance can be a good guide but not always. Recent top performing funds could be the ones to look at first but it may be useful to look at a longer term period say the last 5 years to see how consistent management has been in delivering the returns. It is useful to determine what financial assets are in the fund at the time that investment is contemplated to see if they are appropriate.
Who are the persons behind the management decisions is the most important. An investment committee that makes decisions as opposed to an individual can make a big difference. Committees respond slowly to changes in market sentiments while individuals can move more swiftly but a committee may well protect against bad decisions. Size can make a difference in performance. A big fund is less nimble than a smaller one.

NCB whips Alibaba in stock gains

NCB stock beat Alibaba street and lane

NCB stock beat Alibaba street and lane

One aspect of successful investment is not to go after every fad that’s out there. Since the US stock market bottomed after the 2007 collapse and started moving up and the FED kept pushing interest rates lower, the rage has been the gains to be made in this market.
But investors ought to note some elements of successful investments. Markets don’t go up or down for ever. The role interest rate plays in market movement don’t seem to be fully appreciated by many. This applies to real estate, stocks and bond investing alike.
Some feel that Jamaican real estate is cheap, because of crime but that is only a fraction of truth. The undervaluation is tied to high interest rates that require a higher rate of return on investment to compensate, hence a lower valuation of properties. The US stock market has been fueled a great deal by super low interest rates, not unlike what happened in the real estate boom prior to the fall in 2007.alibaba
When rates start reversing there is going to be some shake out. Rising interest rates and uncertainty drove down stocks value in Jamaica since 2013. Last year Interest rates started to fall and the local stock market started to respond by June last year, slowly at first, but it gradually gathered momentum and by October really started to move up and cumulating in a rise of 36 percent in the main market stocks since.
Jamaica has undergone a very long bear market, possibly the longest in history, having peaked in 2005, but more so since 2009, when the market fell in response to higher local interest rates. It was the sort of market that causes some investors to want to give up. On the other hand the US market gave the impression that one cannot go wrong by investing therein. The chart below tells why one should be careful when entering markets after several years of strong gains and to focus on investing in stocks that are severely undervalued instead. The payout in one, is highly risky and there are huge payoff for investing in undervalued ones. Its will just be a matter of time for the break out to take place.
Around November last year, an investors sold out National Commercial Bank shares to invest in the newest investing fad at the time – Alibaba. NCB alibaba Grph 2015At the time Alibaba was around US$100 and NCB was sold around J$17. The chart below tells how wrong the investor was. NCB shot up 79 percent in Jamaican Dollar terms. Dividends payable adds to the NCB returns less the effect of devaluation of the Jamaican dollar which still leaves a huge gain. On the other hand, Alibaba is now at US$81 and looks like it may well head lower while NCB is definitely heading higher. the details above indicates that all that glitters is not gold, but it indicates how tough a lesion some investors have to learn to make money.

Lasco shares sell & buy FX or hold

Lasco cambioOn June 9, a reader wrote in with the question, “I respect your learned opinion and analysis in financial matters. In this regard, kindly advise if possible as to your views on Lasco Financial, Distributors and Manufacture. Do you believe that these stocks are likely to perform well in the short, medium and/or long-term. The prices have declined compared to when I bought them and I am concerned about the potential for further decline as the dollar continues to devalue. Should I just cut my losses and sell and convert to FX.”
Our response back then, thanks for your enquiry. As you will see our BUY RATED list contains these three stocks. Here are our views. First off the local stock market tends to go down around May until last June or July. This is not cast in stone, just a tendency. One reason for it is that investors get the full information as to what companies did last fiscal year and a glimpse for the new-year. In the case of the three Lasco companies they have just reported their full year results. The distributorship earning is the most encouraging of the three and looks like it will probably do better than the other three in the short to medium term. It will also benefit from the Salada Foods distribution which started this year, as well as from increased production to come from the expanded Lasco Manufacturing Company’s operation. The information suggest that the next set of results should possibly show growth over that of 2013.
Lasco Financial seems poised for good things but big marketing spend last fiscal year kept profits down as they went for more market share. It does look as if they will be spending on the world cup promotions which could build business, but may also keep profits pressured somewhat for a while.
Lasco Manufacturing seems cheap at $1 bearing in mind the impact that the factory expansion is likely to have on both sales and profits ultimately. Short term they will have to pick up interest cost and depreciation on the completed factory but will enjoy cost savings and ultimately increased profits.
US$ 100At this stage one need to be careful of converting to foreign exchange , as the big move in the FX trade could be over. You may have to hold the stocks for a while but I would think that the investment will pay off in the medium term, more so in the case of financial and distributorship, during 2014. I would want to see he Q1 results for Manufacturing before jumping.
It is my view that the market overall, is undervalued but investors will need to be patient and the payoff is likely to huge for those who wait, the gains to be reaped elsewhere is not likely to be all that great, to cause one to jump and possibly miss the gains in the local market that is ahead.

Why Dividend matters

Investing in stocks is not only for those big capital gains that create excitement for many investors. Dividends are an important part of the investment returns, but are often underestimated. They carry additional message, than the pure pay out of profits to shareholders. Dividends provide cash flow while one waits on a stock to increase in value. Stock prices move up and down over time.
Div cert 2014-09-23 001Because of such movements and that sometimes, good companies have bad patches, when profits fail to grow much and can hold the stock price down for long periods, investor can just collect dividends while waiting on the return to stock price growth. Look at the example quoted below, while the stock price gained nearly 700 percent, since the end of 1993, the dividends have grown by over 2,000 percent in the same period. The exciting thing is that investors got paid every year since 1993. The amount accumulated over that time is large, amounting to $23.58 cents per share or more than the increase in the stock price.
Best Signal| The level of payment or future payments, may well be the best signal that investors will get from within a company that the stock price is set for upward movement. Dividend yields on stocks usually fall well below the interest paid on government paper. History dictates that yields usually return to their norm over time. We can use the level of present or future dividends as a predictor of stock prices. At the heights of the stock market in Jamaica, dividends yields fell to round two percent on average. Yields currently are 7% for many stocks, in the case of Carreras well over 10 percent, suggesting huge gains ahead for stocks, not taking the sharp fall in interest rates, locally into consideration from high teens.
High priced stocks| New investors should not be afraid of what some persons will regard as expensive or high priced stocks, if they have the qualities to rise in value above lower priced stocks. The absolute price of a stock is not determinant, if an investment in it is warranted or not.
History confirms that a good dividend policy will provide an attractive rate of return on original investment over time. A very good example is bank of Scotia Group. In 1993 they paid out $220 million or fifteen cents per share but paid out $4.98 billion or $1.60 as dividends, this fiscal year. The stock price at the end of 1993 was just over $3 and is at $20 now and yet the stock is undervalued presently. Those returns happened during one of the most turbulent periods, in the local capital market.
AFS graph of EPS 9-14Useful indicators| Some useful indicators to follow are, financial results, one wants to see a nicely rising trajectory of earnings. Take the chart of Access earnings and revenues this is a excellent example of the picture an investor ought to be looking for. It is not surprising that the stock price of Access has done so well since it was listed.
Information such as major expansion, could mean increased sales and with that profits ahead. Developments within the economy, lower interest rates are major factors that influence the movement of stock prices. An increased dividend payment is another good indicator that things will be better going forward, as companies are unlikely to increase dividends, if profits are not growing.