Trading was halted in five Junior Market stocks this morning as a result of the stock exchange circuit breaker although, all are halted at prices they frequently traded at in recent weeks.
Caribbean Assurance Brokers was frozen at $2.95, the stock traded at that price on Monday, Consolidated Bakeries was frozen at $1.53, iCreate is frozen as the price dropped to 75 cents, Jetcon Corporation freeze took place at $1.08 and KLE Group at $2.30 from $3.10 on Monday but it traded as low as $2 on the 25th of the month. None of the stocks traded outside the recent range, so what is the Stock Exchange preventing these stocks and many others from trading freely as there is no information that is not already known to the market.
Leaders are supposed to lead as such when things they control is no longer meaningful, they should adjust them, the leaders at the helm of the Jamaica Stock Exchange don’t seem to get it.
Stock exchanges are markets that allow companies to raise capital and owners of shares to give a reasonable view that if they want to sell their stock there is an organised market to do so. Today’s modern stock markets are listed companies and the frequency of trading allows them to make money.
Some years ago, in response to the global market sharp decline, several stock exchanges put in place a circuit breaker rule that resulted in a halt to trading if a stock or the market moved too fast in a session. The JSE put one in place and modified it a few years ago. The rule has not done anything to protect investors since its introduction. In fact, it made investors worse off as they are prevented for traded stocks during the hour of halting of trading that takes place.
Abolish the useless circuit breaker rule
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.
Can the JSE say who is Marcus Jeffrey La Rode?
The Jamaica Stock Exchange has some questions to answer and some serious work to do, based on information gleaned by ICinsider.com. Who is MARCUS JEFFREY LA RODE, with an address of LUM TACK HILL who is said to be the Holder of account starting with TTCD etc.?
The Jamaica Stock Exchange subsidiary
Why is this name appearing on a legitimate account that does not belong to the name now appearing on the investments account statement, and is the JSE aware of such developments in its system resulting in a name change? The other question is, what is the system in place to ensure that investors’ accounts are not tampered with and if that were to happen, what is the procedure to detect same and correct it. The JSCD has stopped sending statements to investors, while this publication understands that the FSC requires brokers to send out periodic statements of accounts to their clients.
Carib Cement at $147
Jamaica’s sole cement producer Caribbean Cement hit a record high of $147.12 in today’s early trading and was suspended after the JSE circuit breaker was triggered. The stock, which closed on Thursday at $112, has risen 31 percent for the day.
Barita Investments closed yesterday at $108.09 and is down to $102.30 after trading 298,424 units. Also on the move is QWI Investments that traded up to 90 cents after the block of 23 million shares on offer were removed.
There are only four offers for cement on the board, with the lowest at $147; the bids are not strong with all at $105 or below but for a small amount of 99 units at $146.12.
The markets are up in early trading on the first day of October, with the All Jamaican Composite Index now at 460,323.71, up from 456,691.93 at the close of September. The Junior Market Index is at 3,316.21, up from 3,296.35 on Thursday. Jamaican Teas shares that were in strong demand on Thursday traded at $4.50 after 1.68 million shares were traded.
The big winners from tourism rebound
Jamaica tourism arrival numbers are approaching 80 percent of the 2019 figures. That is good news for the country, workers in the industry, and businesses close to the hotel areas and has major implications for listed companies.
Caribbean Producers back in TOP 10
Recent data of inward bound passengers through the country’s international airports suggest that tourist arrivals for 2021 will be robust and at levels that far surpass that of 2020. Not only will the numbers exceed that of 2020, but the most lucrative period of December to April when visitor arrival numbers are some of the best monthly patronages, but the rates paid to visit are at the highest for the year.
The rebound means more revenues for the government, more foreign exchange earnings for the country, more wages paid to workers and more income for persons and companies providing goods and services to the sector.
The big winners for listed companies are Caribbean Producers, a major supplier of goods to sector in Jamaica and St Lucia. Everything Fresh is also a significant supplier to the sector in Jamaica and should see a rise in sales, Express Catering generates all its income from the industry, with its locations within the Sangster International Airport and Dolphin Cove with its attractions being a big draw for tourists.
Dolphin Cove
Others to benefit to a lesser degree are GraceKennedy, Wisynco, Jamaica Broilers, Knutsford Express and Fontana, the latter, with stores in Ocho Rios and Montego that sell to the visitors.
The rebound has significant implications for the foreign exchange market in 2022. In 2019, the tourism sector earned around $3 billion and just $1 billion in 2020. A return to 2019 visitor arrival number should see another $2 billion gross generated by the country than for 2020 and 2021, along with the billion increase in remittances since 2019 if maintained into 2022, should result in one of the most buoyant foreign exchange environment for the county.
Junior Market 64 points tumble
The Jamaica Stock Exchange Junior Market suffered a big reversal in the market index, pushing it down 64 points in early trading to 3,223.96 from the close on Tuesday at 3,287.50, with the fall of Express Catering from $5 close Tuesday to $3.65 this morning that led to an automatic freeze in the stock at 9.35 am.
At 10:30 am, the junior market index moved up to 3,235.59 points. Medical Disposables rose from $4.70 at the close on Tuesday to $5.25 as investors responded positively to 10 cents per share earnings in the June quarter versus a loss in 2020. The All Jamaican Composite Index trades at 458,039.67, up from 457,385.71 at the close on Tuesday. Guardian Holdings fell to $615 during the trading session, the lowest pointy since listing this year.
Timely data critical for proper market functioning
Persons running the financial market seem not to understand the import of data to the proper functioning of the Jamaica market.
The Jamaica Stock Exchange has granted 45 days extension for companies to file their audited financial statements for 2021 to July 14, 2021. The extension assists management and auditors in managing the execution of audits at a challenging time and that may be fine, but what about the users of the reports?
While that can be appreciated, insufficient thought has gone into the decision. The companies and auditors are not the only persons to be accommodated in this issue. Investors need timely information to make decisions. Management of the companies are clearly not concerned about their shareholders either and the Jamaica Stock Exchange seems to care even less even though they will state otherwise.
This publication wonders why could the decision to extend the time by 45 days not have required the companies concerned to file interim results to obtain the extension, that way investors would be in a far better position than having to wait more than three months to get up to date position on the finances of such companies.
After all, minority shareholders have rights too and deserve better than what they are getting.
JSE Main Market jumps 7,426 points
Jamaica Stock Exchange Main Market All Jamaican Composite Index has shot up 7,426.02 points at the opening of trading on Monday with the index hitting 480,813.71 up from Friday’s close of 473,387.69.
The index has since slipped back to 477,682.72, after 20 minutes of trading.
Caribbean Cement is down to $90.89 from $94.14 on Friday. Grace Kennedy is trading at $100 up marginally from Friday’s close. JMMB Group trades up at $40 from $38.43 on Friday. MPC Energy Fund has jumped to $149 from $117.
The Junior Market Index was down slightly at the opening at 3,365.79 points from 3,367.03 at the close on Friday but has since inched up to 3,371.39 after 12 minutes of the opening of trading.
Junior Market at highest level since 2019
The Jamaica Stock Exchange Junior Market is trading at the highest point in over 18 months when the market index crossed into the 3,400 points mark and hitting a high for the early morning at 3404.24, helped by Tropical Battery that traded at a record high of $1.50.
The move pushes the Junior Market up, as it has now decisively broken through the resistance point around 3,300 level.
The previous high was recorded on December 16, 2019, when the market closed at 3,412.43.
The Main Market is up 464,059.44 from 462,144.64 points at the close on Monday, With Grace Kennedy trading at a record high of $100.
Wigton price collapses
Wigton Windfarms’ shares traded below the IPO price of 50 cents on Friday as attempts to shield the price from falling after announcing a drop in revenues is finally giving way to selling pressure. The Wigton syndrome continues to plaque the Jamaica Stock market with irrational behavior of investors to be seen in the prices of many stocks.
Wigton traded nearly 90% of shares on Thursday.
On August 25, investors bought 5 million shares of Future Energy, up to $2.85 and for the next two trading day’s they just over 10 million units up to $3.29, with 15 million shares trading on the 30th at an average of $2.96. The stock is now trading at $2.04, with a PE ratio of 16, to be one of the more highly priced Junior Market stocks. What is happening here, when viewed against stocks with much lower PEs and good growth prospects?
There are thousands of new investors in the market brought on by several new listings on the market, with most listings creating good returns in a relatively short time for early investors.
Radio Jamaica another stock that traded as high as $4.65 on August 25, traded on Friday at $3.11 at a PE ratio of 7. Salada Foods continues to trade around the $7 region at a PE ratio of 43 times current year’s earnings. Wigton Windfarms that investors were not informed until late last year that the contract for their number 2 turbine provide for a reduction in rates for the supplying of electricity to JPS, belatedly traded down to 46 cents on Friday with few bids left in the system, and now trades at a PE of 12.5.
The stock market is a wonderful creation that has helped to enrich participants over the years, like any endeavor the more time spent studying and understanding it the better off those investors will be.
In the past, investors and scholars developed systems and methods to act as a guide to better investment decisions and thus reduce the love or dislike for a stock or other types of investments and thus reduce emotional decisions.
Technical analysis is a very useful tool used in the investment arena that carries coded messages for persons who understand them. They help investors to avoid excessive behavior in markets and telegraph future trends by using past market movements as the base.
The recent price movements for Radio Jamaica and Fesco show them breaking out of a channel that goes back for months, both companies released results that were price movers and both broke out, with the market not fully there as yet as prices moved too far too fast as such prices pulled back.
A few months after Wigton shares were listed in 2019, ICINsider.com wrote a piece to help investors better understand stock market behavior and prevent losses in the market. The piece captioned “Wigton price dreamers” was published in May of 2019. In light of the irrational trading in Fesco and Salada shares, elements of the article are highlighted below.
Salada Foods traded at a all-time high of $18 on Tuesday.
“Buy now, Ride the $3 wave”. That is the advice of one online investor to another, regarding the likely performance of the Wigton Windfarm stock after trading, on the first day of listing 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. 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 when it traded at $85.
Unlike KW, which has less than 10 percent of the shareholding that will trade, amounting to a few million units, Wigton has billion of shares that will trade. The high liquidity of the shares almost ensures that they will not become overvalued.
Most investors who would be big buyers are more professional and are versed in 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 60 cents per share. A price of $1.20 equates to a 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 when it first traded 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.
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 stocks to reach.
PE ratios are there to give a sense of appropriate values, when investors try to break away from where the bulk of investors place a value of a stock, they usually end up regret the move.