Trading closed on Thursday with the volume and value of stocks traded rising modestly over Wednesday’s levels and led the Market Index into a decline of 15.53 points to 3,317.13 at the close of the Junior Market of the Jamaica Stock Exchange.
Trading ended with 38 active securities compared to 37 on Wednesday, with 12 rising, 18 declining and eight finishing unchanged.
The PE Ratio, a measure used to compute appropriate stock values, averages 11.5 based on ICInsider.com’s 2021-22 earnings forecast.
A total of 5,648,917 shares traded for $14,145,296 compared to 5,553,859 units at $12,475,514 on Wednesday. Future Energy Source led trading for a second consecutive day with 56.6 percent of total volume for an exchange of 3.2 million shares, followed by Lumber Depot with 9.9 percent for 558,375 units and Derrimon Trading 7.2 percent after trading 406,445 units.
Trading averaged 148,656 units at $372,245 from 150,104 at $337,176 on Wednesday, while trading month to date averages 149,370 units at $354,944. August closed with an average of 464,471 units at $1,258,652.
Investor’s Choice bid-offer indicator shows six stocks ending with bids higher than their last selling prices and three with lower offers.
At the close, AMG Packaging lost 6 cents to close at $1.60,, trading 4,101 shares, Blue Power rose 20 cents to $3.30 in an exchange of 300 stocks, CAC 2000 slipped 20 cents to $9.30 in trading 10,868 stock units. Cargo Handlers lost 20 cents to end at $8.15 with 3,065 units changing hands, Caribbean Cream popped 60 cents to $6 in trading 925 stock units, Caribbean Flavours rallied 7 cents to $1.98 after exchanging 20,494 units. Express Catering popped 32 cents to $5.72 with a transfer of 3,007 stock units. Future Energy Source shed 23 cents to $2.20 with 3,195,686 shares crossing the exchange, Honey Bun gained 20 cents to close at $9.20 in exchanging 114,740 units, Indies Pharma declined 26 cents to $3.43 after an exchange of 5,000 stocks. Jamaican Teas fell 29 cents to $3.60 in transferring 36,859 shares, Jetcon Corporation lost 6 cents to finish at 99 cents in switching ownership of 122,699 stocks, Lasco Manufacturing gained 10 cents to end at $5 in an exchange of 4,505 stock units, Limners and Bards shed 24 cents to close at $3.50 with 121,200 units crossing the market. Mailpac Group declined 20 cents to $3.60 with the swapping of 145,936 stock units, Medical Disposables rallied 11 cents to $4.65 in trading 10,047 units, Paramount Trading lost 15 cents to close at $1 with 5,000 shares changing hands, SSL Venture gained 13 cents in ending at 77 cents with 28,050 stock units crossing the market. Stationery and Office Supplies fell 75 cents to $6.45 in trading 300 stocks, Tropical Battery rose 5 cents to $1.40 with 275,806 units clearing the market and tTech fell 42 cents to $4.37, finishing with a transfer of 1,049 shares.
Prices of securities trading are those for the last transaction of each stock unless otherwise stated.
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?
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.
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.
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.