The JSE Junior and Main Markets retreated in 2020, due mainly to the impact of the COVID-19 on the economy and businesses. Both markets, however, began to struggle in the final quarter of 2019 as a number of new IPOs were either issued or scheduled to be issued, thereby sapping some of the liquidity from the market.
The markets may have been due for a correction anyway, based on their history. Prior to this period, the Main Market had only risen on two other occasions equalling or exceeding six years. Surprisingly, the market went on to move higher during a period of economic turbulence, from 1978 to 1987, nine years of annual gains and again between 1996 and 2004 for another nine-year spell. On the other hand, the Junior Market, for the first time, recorded five consecutive years of increases from 2015 to 2019.
In reality, the market closed higher in each year from 2014 to 2019 for six years’ unbroken run. The JSE Main Market fell 33 percent to the low in March and the Junior Market by 37 percent. Since then, they have rebounded but not enough to take them out of the negative territory for the year.
The number of new IPOs coming to market in the past three years pulled liquidity from the Junior Market, which depends extensively on the involvement of individual investors. In 2018 and 2019, the Junior Market under-performed the Main Market, measured by way of the market indices. In 2020, both markets were down, with the Junior Market just edging out the Main Market index with a lower decline of 21 percent versus 22.6 percent. Even though 2020 was not a great year, some investors made money by buying some stocks at rock bottom prices when many investors were dumping.
The decline in the market gives some investors breathing space from the six years’ bull market and opportunities to pick up stocks at better valuations or prices than for the period up to March 2020.
The markets have been recovering since they bottomed in March with the Junior Market up 30 percent and the Main Market 16.6 percent. There are strong signals pointing to an upward move for both markets as they transitioned from a consolidating phase when investors were assessing developments in the economy and the stock market. The Golden cross technical signal for the Junior Market points to that market heading back above the 3,000 points level within months. 
The Main Market is undergoing a bullish signal with short term moving average line crossing over the medium-term Moving Average a bullish signal. The Main Market is within an ascending channel that points to the All Jamaican index heading towards the 460,000 points range.
Market valuations are reasonable with the PE ratios based on 2020 earnings at 14.7 times for the Junior Market and 17 for the Main Market, a few stocks are priced higher than the average, with many prices well below. Based on 2021 earnings, the PE ratio is an average of 9.2 for Junior Market stocks and 14.7 for the Main Market. The large difference is an indication as to where the best values can be found for investors. Adequate liquidity can be a problem for the Junior Market and many investors need to take a longer-term view in some of these companies as it is sometimes difficult to buy or sell good volume at prevailing market prices under current market conditions.
The local economy is currently down sharply, compared to 2019, but information released by Statin shows the economy picking up from the depressed June quarter, when major areas of the local economy were closed due to COVID-19. However, there are signs that the recovery has been picking up the pace and could move higher if the Coronavirus does not have any greater impact.
While the restrictions placed on economic and social activity has eased since the June quarter, it’s not business as usual in many areas. Investors still need to keep an eye on COVID-19 developments globally and any likely effects on the local economy. Barring any negative developments, stocks highly exposed to tourism, construction, banks and some manufacturing entities could see revenues and profits improving in 2021.
The TOP Main Market stocks’ potential gains range from 70 percent to 290 percent. The Junior Market range is 145 percent to 400 percent. Quite a number of the TOP 15 are recovery candidates. In fact, the Junior Market is filled with these, of which there are six that suffered badly from the effects COVID-19 had on their customers or in dampening demand for their products. A few in the Main Market were partially affected but not as much as some Junior Market companies.
This year 2021, seems set to be the year of surprises as many stocks that suffered badly in 2020 could be making a major turnaround in revenues and profit, while some that may not fully recover could start showing good signs of returning to normalcy.
The TOP 15 Main Market stocks: Berger Paints, Grace Kennedy, Jamaica Broilers, Pan Jam Investment, Radio Jamaica, Victoria Mutual Investments, Scotia Group, QWI Investments, Wisynco Group, Carreras, Sygnus Credit Investments, JMMB Group, Caribbean Cement, Seprod and Sterling Investments.
The TOP 15 Junior Market stocks: Lasco Financial, Caribbean Producers, Caribbean Cream, Main Event, Elite Diagnostic, Jetcon, Medical Disposables, Caribbean Assurance Brokers, Access Financial, Stationery and Office Supplies, Jamaican Teas, General Accident, Lasco Distributors, Lumber Depot and MailPac.
While there are clear signs of improving economic conditions, the path for the year ahead is uncertain for a number of companies. Some that suffered badly in 2020 will be showing signs of recovery, but the timing of their return to fairly good health is unclear at this stage. Investors should be on the watch for these early signs in individual companies.
Banks suffered from the need to increase expected credit loss provisioning, but it appears that it may not be as bad as initially projected. As such, there is likely to be less provision for credit losses in 2021 for banks and other lenders.
JSE Main Market on a rebound and heading to 460,000 points based on the AJ Index.
For other companies, just the fact that the second quarter lockdown of the economy last year is unlikely to be repeated will result in second quarter results in 2021 being better than last year. This would be of benefit to Caribbean Producers, Elite Diagnostic, Jetcon and Stationery and Office Supplies.
Strong growth in the construction sector favours stocks such as Berger Paints, Caribbean Cement and Lumber Depot while a rebound in the tourism sector will help boost revenues for Caribbean Producers, Grace Kennedy, Jamaica Broilers, Wisynco Group and the banks.
The financial challenges caused by the coronavirus are likely to lead to some businesses seeking to merge or dispose of a majority interest to other entities. As such, there is the possibility that a number of listed companies could acquire some of them at good prices. This is a potential development that investors should be on the alert for.
This week’s focus: The long awaited initial public offer of shares by
The top three stocks in the Junior Market with the potential to gain between 220 to 350 percent by March 2021 are Caribbean Producers, followed by Elite Diagnostic and 
The Main Market TOP 10 stocks trade at a PE of 9.3 or 57 percent of the PE of that market.
The Main Market closed lower at the end of the past week having pulled back from last week from the close of the previous week. Against the above out turn, there is just one new addition to the TOP10 at the end of the week but there were some price movements of note during the week.
AMG Packaging and Caribbean Producers fell 7 percent to $1.55 and $2.74, respectively. Lasco Distributors fell 8 percent to $3.16 from $3.55. Lumber Depot rose 12 percent to $1.55 and Jamaican Teas gained 8 percent to $2.05.
The Junior and Main markets are currently trading well below the market average, indicating strong gains ahead. The JSE Main Market ended the week, with an overall PE of 16.8 and the Junior Market 13.7, based on ICInsider.com’s projected 2020-21 earnings. The PE ratio for the Junior Market Top 10 stocks average a mere 7.2 at just 53 percent of the market average. The Main Market TOP 10 stocks trade at a PE of 9.2 or 55 percent of the PE of that market.
IC TOP 10 stocks are likely to deliver the best returns up to March 2021 and ranked in order of potential gains, based on likely gain 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.
The Junior Market closed the week at the highest level since November 17 and before that, October 2 and seems poised to take out all recent highs on the way to the year-end rally and a bullish period to come, to take it over 3,000 points. The main Market pulled back from last week’s levels but closed at the highest point for the week on Friday.
Honey Bun dropped out of the TOP 10, with Derrimon Trading replacing it at the bottom of the list. Honey Bun’s stock price jumped 19 percent for the week to $6.49 on Friday, with the stock now showing very limited supply and a bit of demand on the buying side, although a bit below the last sale price. The increased demand this week follows a strong September quarter profit that rose 76 percent over 2019. Wisynco Group spent just a week in the Main Market TOP 10, moved up in price to close out the week with the stock rising to $16.43 from $16.10 and replaced by NCB, in at the tenth position. The projections are for earnings to recover from the increased provision for expected credit loss charges in 2020 and from continued growth in the business and deliver earnings of $12 per share for the current year to September.
Former TOP10 holder MailPac, hit a record high on Friday, in closing at $2.60, up 19 percent from $2.19 last week. Lumber Depot reported earnings for the October quarter, keeping earnings on track for 20 cents per share and put added life into the stock, moving the price up 6 percent to close the week at $1.39 at a PE of 7 times earnings, well below the market average of 13.7. Caribbean Producers moved up 13 percent from $2.60 to $2.94 at the close and up a nice 21.5 percent for the month to date. The stock seems on target to move back into the $4 range sooner than later, with stock supplies thinning out and prospects for improved business looking increasingly better in 2021.
Diagnostic and Jamaican Teas. Lumber Depot, in at third position last week, is now down to sixth after investors responded positively to quarterly results. With expected gains of 146 to 236 percent, the top three Main Market stocks are Berger Paints, followed by Radio Jamaica and Carreras.
The average projected gain for the Junior Market IC TOP 10 stocks is 192 percent down from 210 percent and 129 percent from 133 percent last week for the JSE Main Market, based on 2020-21 earnings. IC TOP 10 stocks are likely to deliver the best returns up to March 2021 and ranked in order of potential gains, based on likely gain 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.
Wisynco Group’s performance was on a roll, with revenues up 27.5 percent in the nine months to March this year, and 24 percent in the March quarter, but gross profit margin slipped in the March quarter while rising Administration and other expenses squeezed profits even more. Sales dipped slightly in the June and September quarters, but the September 2019 quarter, includes sales of $503 million from a discontinued operation, leaving flat sales from ongoing operations. Net Profits Attributable to Stockholders from continuing operations was $851 million or 23 cents per stock unit compared to $932 million or 25 cents per stock unit for the corresponding period of the prior year. Revenues for the quarter from continuing operations of $8.1 billion fell 6.1 percent from $8.6 billion in the 2019 quarter. 
The company expects to have lower energy costs with the successfully commissioning of the Cogeneration plant in July 2020, with the company seeing a positive contribution from the implementation through reduced energy costs.
The PE ratio for the Junior Market Top 10 stocks average a mere 6.9 at just 53 percent of the market average. The Main Market TOP 10 stocks trade at a PE of 9 or 56 percent of the PE of that market.
The move in the Main Market continues the move gradually higher ahead of the year-end and is in keeping with bullish signs that points to more gains ahead.
The company is on target to earn 50 cents per share for the current financial year ending June 2021.
The PE ratio for the Junior Market Top 10 stocks average a mere 7.1 at just 54 percent to the Junior Market average. The Main Market TOP 10 stocks trade at a PE of 8.7 or 55 percent of the PE of that market.
This week’s focus: Grace Kennedy continues to enjoy a phenomenal year, with profit attributed to the company’s shareholders, rising 33 percent to $1.68 billion in the September quarter, from $1.26 billion for the third quarter in the previous year and grew 35 percent for the nine months to September, to just $4.4 billion from $3.27 billion the corresponding period in 2019. Taxation more than doubled in both periods, but profit before tax grew 49 percent in the third quarter to $2.79 billion and for the nine-months, it rose 51.5 percent to $7.3 billion. Earnings per share are $1.69 for the quarter and $4.47 for the nine months and should exceed $6 for the full year.
With expected gains of 150 to 238 percent, the top three Main Market stocks are now, Berger Paints followed by JMMB Group and Grace Kennedy in the third position.
The average projected gain for the Junior Market IC TOP 10 stocks is 247 percent, and 147 percent for the JSE Main Market, based on 2020-21 earnings, indicating potentially greater gains in the Junior Market than the Main Market.
Remittances grew 11 percent and added $50 million to revenues while Cambio operations contributed 10.8 percent or $34 million to increased revenues, the company’s Managing Director Jacinth Hall-Tracey, informed shareholders in a commentary accompanying the quarterly report.
With expected gains of 161 to 238 percent, the top three Main Market stocks are now Berger Paints followed by JMMB Group, Radio Jamaica replacing Grace Kennedy in the third position last week.
The average projected gain for the Junior Market IC TOP 10 stocks is 287 percent, and 149 percent for the JSE Main Market, based on 2020-21 earnings, indicates potentially greater gains in the Junior Market than the Main Market.
The markets moved moderately higher to close at their highest levels since mid-August for the. The Main Market closed the past week higher than the previous one, but the Junior Market closed the week lower than the prior one.
With expected gains of 152 to 240 percent, the top three Main Market stocks are Berger Paints, followed by JMMB Group and Carreras. Radio Jamaica is now down to the fifth spot with slightly lower earnings per share of 15 cents from 20 cents previously.
The average projected gain for the Junior Market IC TOP 10 stocks is 279 percent and 145 percent for the JSE Main Market, based on 2020-21 earnings, an indication of potentially greater gains in the Junior Market than in the Main Market.
This week’s focus: Jamaican Teas came in for increased buying during the past week after the company advised the Jamaica Stock Exchange that the board of directors will meet to determine a new record date for the sub-division of the Company’s shares, following the deferral at the Annual General meeting. The stock traded at $4.30 on September 29 and closed at $4.83 on Wednesday, with 161,040 units changing hands, with the offer at $4.50. The volume ballooned to over one million units on Thursday, with the price hitting $5.55 during the day. The company completed the 2020 fiscal year at the end of September.
The market’s targeted average PE ratio is 20 based on the profits of companies reporting full year’s results, from now to the second quarter in 2021. Both the Junior and Main markets are currently trading well below this level, indicating the potential gains ahead. The JSE Main Market ended the week, with an overall PE of 15.1 and the Junior Market 11.2, based on IC Insider.com’s projected 2020-21 earnings. The average PE ratio of the Junior Market has been slowly rising, with better profit opportunities than the Main Market and narrowing the gap. The PE ratio for the Junior Market Top 10 stocks average a mere 6.1 at just 54 percent to the overall Junior Market average. The Main Market TOP 10 stocks trade at a PE of 8.2 or 54 percent of the PE of the overall market.
The average projected gain for the Junior Market IC TOP 10 stocks is 283 percent, and 153 percent for the JSE Main Market, based on 2020-21 earnings, indicates potentially greater gains in the Junior Market than in the Main Market.
