Change in ICTOP10 picks

Mid-year results are now flowing unlike anything seen in the local market in recent years. Most companies reported gains in revenues and profits, but investors’ interest seems lukewarm in the aftermath of the results, even as interest in ICTOP10 number 1 stock, Radio Jamaica (RJR) continues to be robust as more investors turn their eyes to what is a major turnaround in fortunes.
GraceKennedy reported continued strong numbers, showing improvement in revenues and profit, so too did Caribbean Cement and Berger Paints. Investors don’t seem to buy into Berger’s major change in operations and the implication for profit from the major surge in revenues. Based on the six months numbers, the company’s earnings for 2021 is upgraded to $2 per share. All three Lasco companies reported improved revenues and profit for the June Quarter, but the stocks are stuck at prerelease prices.
Investors should ignore the lukewarm response now and accumulate some of these stocks to profit from later in the year when the inevitable buying comes in for them. Access Financial reported improved results for the June quarter after reporting modest gains in lending. NCB Financial also released results but the details suggest caution, with the performance being helped by onetime income or cost reduction. Jamaica Stock Exchange reported improved June quarter numbers, but improvement is not strong enough to justify the current price the stock trades at.
Sterling Investments returns to the TOP10 Main Market listing, after replacing Scotia Group that recorded a rise in its price from last weeks’ $38.75 to $42 at the close of trading on Friday. There are no changes in or out of the Junior Market list.
The top three stocks in the Junior Market, continue, with Elite Diagnostic, followed by Caribbean Assurance Brokers and Medical Disposables, with the potential to gain between 221 percent and 287 percent compared to 237 and 291 percent, last week. The top three Main Market stocks are Radio Jamaica in the number one spot, followed by JMMB Group and Guardian Holdings, with expected gains of 184 to 296 percent, versus last weeks’ 183 to 292 percent.
This past week the average gains projected for the Junior Market, moved up from 202 percent last week, back to 207 percent and Main Market stocks moved to 173 percent from 164 percent.
The Junior Market closed the week with an average PE 13.3 based on ICInsider.com’s 2021-22 earnings and currently trades well below the target of 20 as well as the recent historical average of 17, for the period to March this year based on 2020 earnings.
The JSE Main Market ended the week with an overall PE of 16.4, a little distance from the 19 the market ended at in March, suggesting just a 17 percent rise at a PE of 19 and 23 percent at a PE of 20 from now to March 2022. The Main Market TOP 10 trades at a PE of 7.6 or 46 percent of the PE of that market, well off the potential of 20.
For the Junior Market to trade at the historical average, the PE Ratio would have to rise 28 percent and requires a rise of 50 percent to reach the targeted PE of 20 by March 2022. Main Market stocks would have to rise by 17 percent to hit a PE of 19 and 23 percent to get to the target of 20. The Junior Market Top 10 stocks average PE is a mere 6.7, just 50 percent of the market average, indicating substantial gains ahead.
The TOP10 stocks are not always the best stocks in the market but ones that are most likely to be the best winners within a fifteen months period. IC ranked stocks to filter out the big winners, allowing investors to focus on potentially big winners and help to keep out emotional attachments to stocks.
 IC TOP10 stocks are likely to deliver the best returns up to March 2022 and ranked in order of potential gains, based on likely increase for each company, taking into account the earnings and PE ratios for the current fiscal year. Expected values will change as stock prices fluctuate and result in movements in and out of the lists weekly. Revisions to earnings per share are ongoing, based on receipt of new information.

Persons who compiled this report may have an interest in securities commented on in this report.

 

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