Quantitative

This usually indicates that the market may be undervaluing either the company's earnings compared to its competitors or that the market price may not be reflecting the true value of the company's assets as reflected on its balance sheet.

ROE measures how well a company's management team is investing shareholders' funds.

A higher ROE figure than the industry's overall average indicates that the management team is investing in the kind of projects which will have a net effect of increasing the company's profits resulting in a higher stock price.

Once a company meets all five criteria, then it is only a matter of time before the stock price will reflect the company's true value.

If the dividend yield is a good one, then it provides even more value for shareholders from owning the stock.

Several stocks on the market now can be considered value buys for 2006. Three stand out - Cable and Wireless Jamaica, Life of Jamaica and Jamaica Broilers. Let us look at these companies in detail.

Here is the story of a former industry giant reawakening.

After losing cellphone dominance to Digicel and struggling with its land line business, Cable and Wireless finally took some hard decisions and cut its staff complement, changed its management team and undertook the challenge to become a dominant player in the emerging broad band arena.

This push, including its new one rate calling plan, should pay off for the company over the next twelve months.

In addition to an attractive dividend yield, shareholders can look forward to being rewarded with solid capital appreciation.

Life of Jamaica (LOJ) is undoubtedly a market leader in the growing Jamaican insurance industry.

After absorbing one of its few competitors, First Life, and surpassing the $2 billion mark in net profits, LOJ is not looking to rest on its laurels, but is pushing for increased growth from all its revenue lines. Its only other major competitor in the marketplace is Guardian Life.

With a management team that has a significant track record of success and a dividend policy of paying out up to 40 per cent of company profits LOJ and its share prices is expected to show solid growth in 2006 through to 2007.

Jamaica Broilers Group (JBG) is one of the big success stories of the manufacturing sector. The company is lead by a strong management team and is, in effect, debt-free.

With only one major competitor, it continues to expand locally and is pushing its way on to the international market.JBG is currently trading at all but book value as a result of fears of bird flu hitting the island.

The company estimates that the chances of the flu reaching an island country like Jamaica is less than 10 per cent with further protection being found in the completely contained tunnel system that houses the company's chicken stock (described as being in effect an 'air-conditioned room'), thus limiting the possibility of contagion.

Despite this, JBG has also put in place multiple safe guard measures to prevent contamination and is also insured against the potential loss of chickens. Once the concerns subside, JBG should see solid share price appreciation.

OTHER VALUABLE STOCKS

Investors should also keep an eye on:

Lascelles if the share price dips closer to its book value of $154.15

Bank of Nova Scotia (price at or below $20 per share with a 2005 dividend yield of 3.33 per cent)

Jamaica Producers with a book value of $45 per share is trading at a price to book ratio of 0.69

Although the market for 2006 is expected to continue as it has since the start of the year, investors should bear in mind that, historically, even in a down market, strong stocks have done well.

The key to profiting from the market is to invest in solid companies, that are undervalued, for at least 12-18 months.

While these recommendations are for stocks that should outperform the overall market in 2006, as with all investments consult with a registered financial advisor who can provide more personalised guidance with respect to the levels of risk that may be involved with any equity purchase.

A financial advisor would also be able to offer advice tailored to individual risk tolerance, your investment objectives and current portfolio.

Doyl Smith is a registered investment adviser with JMMB Securities. He is professionally qualified with an MBA and has interned with Merrill Lynch, the largest investment bank and brokerage house on Wall Street.