Ashford W. Meikle, Staff Reporter
A FEW weeks ago, the Bank of Jamaica reduced interest rates on its open market instruments by almost one half per cent - the central bank's rates are now between 14 and 16 per cent.
This now means that there could be a reduction in rates for money market instruments, such as fixed deposits, offered by banks and investment houses. Typically, when this happens, investors tend to seek out alternative options to maximise their investments. For many, investing in the equities market is the ideal route. "Definitely... some of the money will reach the stock market," agreed a stockbroker with whom Sunday Business spoke. "Plus," he elaborated, "traditionally pension fund managers tend to buy into the stock market at this time of the year."
Sunday Business asked a few experts from some of the more notable brokerage firms to recommend buys for those who might be thinking of venturing into the market. These were the top picks:
Jamaica Broilers: "The year will be good. The company has benefited from a stable exchange rate," said investment analyst at Pan Caribbean Financial Services, Kevin Donaldson. He noted that "Grain prices are going down and the company has significant cash. It has also built two silos and then there is its acquisition of Kingston Hatcheries."
Courts: Courts operates in about 11 Caribbean islands and the consolidation of the stores and the proposed cross-listing on all three markets will result in increased demand for its products. This demand will push up the P/E ratio, explained Mr. Donaldson.
Dehring Bunting & Golding: "If plans for cross-listing in T&T come to fruition that should serve as a major boost for the stock price because Trinidad stocks trade at higher multiples than those listed only in Jamaica," was the opinion of a financial expert.
Pan Jam Investments: Mr. Donaldson acknowledged that, compared to its peers, Pan Jam has a significantly lower P/E ratio. However, with the sale of First Life Insurance and the Hardware & Lumber transaction, revenues will go up; the outlook for the company is a positive one, especially in light of its stockholding in Sagicor.
Life of Jamaica: "It's the largest insurance company in Jamaica," summarised Mr. Donaldson.
Carib Cement: One broker explained this pick, "In my view, they stand to benefit the most from the current economic conditions. Construction is taking off, they control 91 per cent of the market and with World Cup Cricket [in 2007] there is bound to be new construction."
Goodyear: "It is expected that dividend payments will be high," commented the broker. "Moreover, overall, profitability is still up."
C&WJ: In a stock market summary, investment firm DB&G explained that interest in Cable & Wireless Jamaica could be as a result of the company's transformation initiatives, which seem to be showing positive results. "They're on the recovery path," agreed Kevin Donaldson.
Surprisingly, a number of 'top' stocks did not make it to the final cut. Although some of these companies are blue chip, in terms of capital appreciation, they are not the best buys at this time. But many of them pay good dividends.
Also, there is the view that a number of stocks are over-valued and pretty much have reached their growth potential. However, a contrary view is that the market has levelled off since the bull run in the first quarter of this year.
Another reason is that a number of companies returned disappointing results in recently published reports. However, one stockbroker stressed that it does not mean that these stocks should not be included in your portfolio if you buy stocks regularly. They can be held as long-term buys.
One final point about investing in the stock market seek a licensed broker. Investing in the equities market is one that is predicated on acumen and research and not emotion.
The broker is a trained professional who will be able to explain to you technical terms and give you an informed assessment of companies. He or she should also be able to guide you in determining what stocks should be in your portfolio and generally tailor it to meet your financial needs. There are over a dozen authorised companies with licensed brokers.
Call the Jamaica Stock Exchange for information or visit the website at http://www.jamstockex.com.
