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The Different Classes of Asset Ownership

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An asset, whether a gold nugget or a working farm, can and should be compared to others when making purchasing or investing decisions.

This is known as opportunity cost.

By putting money to work for you in the most rational, fulfilling way, you can enjoy success earlier in life and with less risk.

Asset Type #1: Those That Generate High Returns On Capital

These are the second best investment because you can earn significant returns on very little money. The downfall is that you have to pay out all of the profits as dividends or reinvest in lower returning assets because the core operation can’t be expanded through organic capital additions.

Asset Type #2:  Those That Appreciate Far Above the Rate of Inflation but Generate No Cash Flow

Think of a rare coin or excellent art collection.

If your great-grandparents owned a Rembrandt or a Monet, it’s going to be worth millions of dollars today versus a relatively small investment on their part.  Despite this, over the years your family owned it, you wouldn’t have been able to use the appreciation in the asset to pay the rent or buy food unless you borrowed against it, suffering interest expense.

That is the reason these types of assets are often best left to those who can either:

A.) Afford to hold because they have substantial wealth and liquid assets elsewhere so that tying the money up in the investment is not a burden or hardship on the family.

B.) Those who have an intense passion for the underlying collection market and derive considerable pleasure from the art of collecting whatever it is they enjoy collecting.

I’d go so far as to say you should never collect anything about which you are not personally excited.

Asset Type #3: Those That are Stores of Value and Will Keep Pace With Inflation

Certain assets are intrinsically valuable enough that they can keep pace with inflation, assuming you bought them intelligently at the lowest price you can.  While not true investments, they do provide a bulwark that can be used in dire emergencies such as a Great Depression.

A classic example of this sort of asset is high-quality furniture bought in the secondary market from antique dealers or at auction; it very well may end up not only retaining its value but beating bond yields over the holding period!

Asset Type #4: Stores of Value That Will Keep Pace With Inflation but Have Frictional Costs

This is where gold and real estate fall.

These assets classes might keep you rich, but they won’t make you rich unless you deploy massive amounts of leverage to amplify the underlying return on equity.  In practical terms, that means if we were going to experience extreme inflation, it would be best to utilize leverage by either borrowing to purchase real estate or acquiring gold futures which has its drawbacks.

This is why you see a lot of wealthy families engage in something known as equity stripping (there are some asset protection reasons for doing it, but the economic returns are equally, if not far more, relevant, in my opinion).

Asset Type #5: Consumer Goods or Other Assets that Depreciate Rapidly with Little or No Resale Value

Without a doubt, when you look at the data and research, this is how most people spend their paycheck. From video game consoles to cars that lose tens of thousands of dollars the moment you drive them off the lot, new clothes to some new must-have gadget you’ll forget about in two years, this is what you find in the homes of most Americans.

Perhaps the quickest way to guarantee poverty or at least a paycheck-to-paycheck lifestyle is to purchase this asset with debt.

This is the reason lottery winners go broke.

This is the reason NFL, and NBA stars end up back in the poorhouse following eight and nine-figure career earnings.

This is the reason trust funds are exhausted.

Be very careful with the percentage of your cash flow you put to work in this category as it’s a sunk cost.

If you liked this article and want to read other great stories, try our Archives. Also if you are new to investing you can try our Investment Basics Blog.

If you want to start investing with SSL but don’t have the time to monitor the market or to conduct the trades yourself then you can choose one of SSL’s managed Financial Planning products. We offer a variety of products for every type of investor and if you are interested in managing online trades yourself and having complete control over your investment portfolio then you can try SSL’s Brokerage account.

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How Does Behaviour Affect Trading?

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Most investors buy and sell stocks based on emotions rather than cold, hard evidence. You may want to believe trading is based on objective information and keeping an eye focused intently on your investment goals.

But you’re only human.

You may have been influenced to purchase a stock because you saw a talk about it on social media. You may sell a stock because it’s lost some value and you’re in panic mode. You’ve probably bought or sold stocks just because it feels good to make a transaction. All these actions stem from what industry experts refer to as market sentiment.

Even if you haven’t traded based on emotion, there may be other instances where you didn’t make the optimal investment choice due to a lack of information.

Behavioural finance is a new field of study that examines this phenomenon. It looks at psychology and emotion and seeks to explain why markets don’t always go up or down the way we might have predicted.

Conventional or Traditional Finance

People have been studying finance for years. As a result, many theories and models use objective data to predict how markets will respond under certain circumstances.  But these models make false absolutes, such as:

  • Investors always having complete and accurate information at their ​disposal.
  • Investors have a reasonable tolerance for risk, and that understanding does not change. ​
  • Investors will always seek to make the most money at the highest value.​
  • Investors will always make the most rational choices.

As a result of these assumptions, conventional finance models don’t possess a perfect track record. Over time, academics and finance experts began to notice anomalies that conventional models could not explain.

 

Strange Stuff

If investors are behaving rationally, certain events should not happen. But they do.

There is no rational explanation for these occurrences, but human behaviour can explain them. Consider the so-called, “January effect” which suggests that many stocks outperform during the first month of the year. No conventional model predicts this, but studies reveal that shares surge in January because investors sold off stocks before the end of the year for tax reasons.

Accounting for Anomalies

The human psychology is complex, and it’s impossible to predict every wrong move investors might make. But, those who have studied behavioural finance have concluded that many thought processes push us to make less-than-perfect investment decisions.

These are evidenced by:

  • Attention Bias: There is evidence suggesting that people will invest in companies that are in the headlines, even if lesser known companies offer the promise of better returns. Who among us hasn’t invested in Apple or Amazon, simply because we know all about them?​
  • National Bias: A Jamaican is going to invest in Jamaican companies, even if stocks in the Caribbean offer better returns. ​
  • Under-diversification: There is a tendency for investors to feel more comfortable holding a relatively small number of shares in their portfolio, even if wider diversification would make them more money.​
  • Cockiness: Investors want to believe they are good at what they do. They aren’t likely to change investment strategies, because they have confidence in themselves and their approach. Similarly, when things go well, they are likely to take credit when it fact their good results come from outside factors or sheer luck.

How It Can Help You

If you want to become a better investor, you will want to become less emotional. That sounds harsh, but it will benefit you to take stock of your own biases and recognise where your faulty thinking has hurt you in the past.

Consider asking yourself tough questions, like, “Do I always think I am right?” or “Do I take credit for investment wins and blame outside factors for my losses?” Ask, “Have I ever sold stock in anger, or bought a stock based on a simple gut feeling?”

Perhaps most importantly, you must ask yourself whether you have all of the information you need to make the right investment choices. It’s impossible to know everything about a stock before buying or selling, but a good bit of research will help ensure you’re investing based on logic and objective knowledge rather than your own biases or emotions.

If you liked this article and want to read other great stories, try our Archives. Also if you are new to investing you can try our Investment Basics Blog.

If you want to start investing with SSL but don’t have the time to monitor the market or to conduct the trades yourself then you can choose one of SSL’s managed Financial Planning products. We offer a variety of products for every type of investor and if you are interested in managing online trades yourself and having complete control over your investment portfolio then you can try SSL’s Brokerage account.

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Health Conscious Consumers a Growing Concern for Pepsi

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On Thursday, PepsiCo Inc. reported its quarterly review which was better than expected. Pepsi recorded double digit growth in some markets but failed to improve its results in the soda market in the U.S. as many persons are now more health conscious than ever before. Current trends are recording a shift in lifestyle behaviours where consumers are limiting their consumption of carbonated soft drinks.and are leaning more towards healthier juices. According to Beverage Digest, the consumption of sodas fell to a 31 year low in the US in 2016.

In an effort to combat this development, PepsiCo has introduced new drinks to the U.S. market that have yet to meet wild commercial success reminiscent of campaigns past . However, since Pepsi introduced four new flavours of Diet Coke there has been an increase in demand for its Coke Zero sugar beverage. Sales for Coke has outperformed other beverages and because of this, Pepsi has decided to increase its marketing spend on colas.

Revenue in PepsiCo’s beverage unit in the U.S. fell by 1 per cent; as soft drinks account for nearly a third of total revenue for PepsiCo. Overall revenue was USD$12.6 billion compared to the forecasted value of USD$12.4 billion. There was a 14 per cent increase in sales in Europe and the sub-Saharan African markets. On the other side of the globe, sales in North Africa the Middle East and Asia increased by 7 per cent.

In addition to beverages, PepsiCo also markets popular brands such as Frito Lay chips and Quaker Foods, which have done better on the market than beverages. Frito Lay sales increased by 3.4 per cent while Quaker sales remained unchanged due to negative pricing.

PepsiCo is currently trading on the NASDAQ at USD$103.26 per share.

 

If you liked this article and want to read other great stories, try our Archives. Also if you are new to investing you can try our Investment Basics Blog.

If you want to start investing with SSL but don’t have the time to monitor the market or to conduct the trades yourself then you can choose one of SSL’s managed Financial Planning products. We offer a variety of products for every type of investor and if you are interested in managing online trades yourself and having complete control over your investment portfolio then you can try SSL’s Brokerage account.

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Will Starbucks be Affected by Its Poor Decision?

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Recently, it was reported in international media that two black men were arrested in a Philadelphia Starbucks after the store’s manager called the police. It was later reported that they were waiting for an associate for a business meeting. A video recording of the incident went viral as customers expressed outrage and disbelief at what happened.

According to YouGov Brand Index, Starbuck’s reputation has been damaged as the company’s Buzz score fell from 13 to negative 8 since the news of the incident became public. YouGov measures the public’s perception of company brands based on what they hear or experience. Scores can range from -100 to +100 with zero being neutral. YouGov interviews 4,800 people every day and conducts over 1.5 million interviews per year.

Starbucks has since been trying as hard as possible to tackle the ‘negative press.’ They first apologized and then reported that all 8000 plus stores in the US will be closed in the afternoon on May 29 in order for employees to undergo anti-bias training. They will be trained on how to make all customers feel welcomed. This training will be critical to the future success of Starbucks.

Surprisingly, Starbucks’ share price did not fall significantly. On Monday, the stock closed at USD$59.43 and on Thursday closed at USD$59.22. Evidently, the company’s response to the incident has somewhat appeased customers and investors. However, the company’s bottom line may be affected as it is estimated they may lose between USD$6 million to USD$8.7 million in sales once the stores are temporarily closed.

Many persons describe Starbucks as a ‘third space;’ a comfort space which is neither home nor work. The coffee may be expensive and not well known for being of superior quality but customers enjoy the brand and the space. This is why it is crucial for Starbucks to effectively address the situation and ensure it does not repeat itself.

Even though the incident is not a one- off situation, we at SSL continue to recommend the stock to our clients as it has consistently performed well over the years.

If you liked this article and want to read other great stories, try our Archives. Also if you are new to investing you can try our Investment Basics Blog.

If you want to start investing with SSL but don’t have the time to monitor the market or to conduct the trades yourself then you can choose one of SSL’s managed Financial Planning products. We offer a variety of products for every type of investor and if you are interested in managing online trades yourself and having complete control over your investment portfolio then you can try SSL’s Brokerage account.

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Simple Tips for Building Wealth

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Accumulating wealth and living financially secure begins with healthy financial habits. Practicing healthy financial habits takes diligence and hard work. It is no walk in the park in the age of consumerism and social media’s dopamine induced highs that motivate persons to always show their best life. It’s quite easy to see the need to buy and experience more, and get thrown off track, swaying from your financial goals.

Here are some simple tips to avoid wasting money and build wealth:

Don’t Spend Your Money on Excessive Living

Ask yourself what you really need and don’t need. Do you really need that new, fancy smartphone even though your current one is still functional? No you don’t! Not if it doesn’t directly correlate to income for you. Do you really need to eat out at a sophisticated restaurant every weekend? No. Not unless you are a food blogger. You can cook two of those four weekends and eat in. Limit being excessive in your lifestyle and find ways to enjoy life while saving money.

Invest Your ‘Spare Change’

Investing is one of the most effective ways to build wealth and contrary to popular belief, you don’t need a lot of money to get started. The random $100 bills and $20 coins you get back in change from a purchase can go towards your investment portfolio. You can also choose to keep a change jar that you keep near your door. Every day when your return home, you can add to your change jar and every quarter, use that money to add to your investment account.

Track Your Spending

You can’t build wealth if more money is leaving your wallet than coming in. To ensure you’re earning more than you’re spending, track your daily expenses. Use an excel sheet or an app to always keep a tab on where your money is going. Periodically through the year, you can assess your spending habits and compare them to your financial goals. Where there is a gap, make the necessary changes and stick to it.

Start Saving Now

No one but you is going to look after you in your older years!  No matter how small the amount, the sooner you start saving, the better life you will have in your later years. Having ample savings prevents you from needing to liquidate your investments when life gets a little rough. Saving is a habit and with all habits, it can be hard to start. Bite the bullet and start anyways and keep going for 3 months. After those 3 months, it may not get easier but you’ll feel great about the fact that you are putting you first. Don’t worry, give it time; you’ll soon become an expert saver.

Treat Investing Like Your Bills

Pay yourself first. Apart from savings, be sure to set aside your money for investments before you pay anything from your salary. Bills are important but paying yourself is critical to your overall success. The same commitment you show to paying your light, water and internet bills monthly, is the same commitment you should have to adding money to your portfolio monthly. There is never enough money to do everything you want to. It’s just the reality we all face. But, when you commit to achieving your financial goals first, you make your future a priority.

Surround Yourself With Persons With Similar Goals

Award winning talk show host, producer and philanthropist, Oprah Winfrey once said, “Surround yourself with people who are only going to lift you higher.” Find a trustworthy person(s) that will keep you accountable in your financial journey and surround yourself with friends that are on similar financial missions to you. Learn from each other and keep listening to sound advice to stay on the path to securing a solid financial future.

Stay In Close Connection With Your SSL Financial Advisor

Your SSL Financial Advisor is always aware of market opportunities that can help you grow your portfolio. It’s important on your journey to tap into that expertise regularly and capitalize on the opportunities to grow your investment portfolio.

Preparing for your financial future isn’t something you have to do alone! SSL’s team of experts can help you to get started and grow your wealth. Contact us via our website, social pages or simply give us a call. Don’t be intimidated by the investment market or share prices. Start small and as you grow, you will be happy that your money is working for you.

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The IPO Bacchanal Continues

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With a total of nine initial public offerings (IPO) confirmed so far to be launched in the first quarter of 2018, the volume of listings to the Jamaica Stock Exchange strongly indicates that the total number of companies to list will surpass that of 2017. 

There has been noted increase in companies choosing to raise capital by offering part ownership through shares on the stock exchange. This is partly due to fringe benefits of listing which include an entity avoiding taking on additional debt, and five years break from paying income taxes. 

What kind of companies tend to go to market you wonder? Firms ideally should have a marketable value proposition and have at least a few years financial statements to help fulfill the process of filing a prospectus. They should be willing to adhere to the regulations that govern publicly traded entities and should be prepared to offer long term value to shareholders. 

The Jamaica Stock Exchange got a boost of confidence in 2015 when Bloomberg noted the 39 year old entity as the best performing exchange in the world. For this year, medical tech company Elite Diagnostics and new financial entity Sygnus Capital are among the first expected to launch prospectuses in January. For the first time ever in the stock exchange’s history, an educational institution- University College of the Caribbean will seek to offer shares to investors. 

Additional proposed entities on the roster for a 2018 listing are Caribbean Insurance Brokers, Everything Fresh, Winchester Medical, Medican JA and others.

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PanJam Investment Ltd’s Minority Stake in Term Finance Jamaica

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PanJam Investment Limited has expanded its interests recently to include a 20 percent minority stake in a micro financing company, Term Finance Jamaica Limited. The micro financing company is a subsidiary of Term Finance Holding Limited, which has an 80 percent stake in the  company. Term Finance operates in six other Caribbean countries in addition to Costa Rica.

But what makes Term Finance Jamaica Limited stand out when there are many other similar micro financing companies?

Term Finance operates solely online and who wouldn’t prefer that approach. We live in a technological age where the click of a button on a smartphone or a computer is more widely acceptable than walking into an office. It is more efficient, faster and saves time. This is not only beneficial to clients but also to the company as they save money from not having to set up and operate a physical branch.

Term Finance began operating online in Jamaica in September 2017 but went live in November and in just four hours of business, the company issued its first loan. The secret is in checking the applicant’s credit score. Once this is completed the process takes little to no time. The company achieves this through algorithms and proprietary systems and technology that help to reduce costs. Term Finance wants to ensure that their customers are able to save money in the application process  and also through the low interest rates. The company’s three months loan is priced below 10 per cent but in other countries the rate is at 12 per cent.

Term Finance Jamaica Limited is looking to increase its loan book in 2018 and hopes to achieve this through more frequent engagements with the public.

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What Is Opportunity Costs and Why You Should Pay Attention

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When a person uses money to make a purchase, they often believe that the only thing they are giving up is the money itself, but this is only the half, or even the quarter of what they really lose. Many individuals are unable to identify the opportunity costs when weighing the benefits and against the costs of a payment for a good or service. Take for instance an individual makes the decision to go to the movies. They might think the only cost to them is the movie ticket and possibly something from the concession stand, however, what they don’t realize is that they forego the time they are spending watching the movie, when that time could have been used to do something else that might bring more benefit than the movie, at a lower cost. Investopedia defines opportunity cost as the benefit that a person could have received, but gave up, to take another course of action. In layman terms, an opportunity cost represents an alternative given up when a decision is made.

This can be applied to the principles of investing. The volatility of both the local and international stock markets have sparked uncertainty in many tend to stash their savings to make the best possible gain. Conservative individuals may opt to take the safe route by depositing their money in savings accounts and earn measly percentages every quarter or year, more aggressive ones will take on the stock and bond markets to wager their wealth and stand to earn significantly more returns, with far greater risks. So, who has the upper hand? For everyday that passes with money sitting in a savings account, a conservative investor loses the opportunity to put their cash in low risk bonds and generate returns higher than what a commercial bank is offering. At the other end of the spectrum, everyday spent not being proactive or aggressive about investments, is another lost opportunity in making more gains than a more a conservative, or even a moderate investor.

With more private companies edging their way into the public sphere, I urge those who aren’t knowledgeable about stock markets to take the time out to learn about the wealth they can gain by investing in equities and bonds, rather than leaving money lazy in a savings account. There are risks involved in the safest instruments, but the gains far outweigh the possibility of losses, as well as the opportunity costs.

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Seprod Set to Strike Big with its Largest Shareholder

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Seprod Limited [JSE:SEP] has announced that it has arrived at an agreement with its largest owner Facey Group Limited, to acquire its consumer business Facey Consumer at an undisclosed sum,  consisting of only Facey’s consumer brands such as Eve and Delight and pharmaceutical products.

Facey is a leading value-added distribution group with operations in the Caribbean, Central America, Europe and the Pacific. Today, Facey is one of the largest private companies domiciled in the Caribbean.

With this acquisition Seprod will be gaining warehousing space and real estate at 53 and 61 Newport Boulevard at Newport West, Kingston. Moreover, the most important part of this acquisition is the leveraging of company’s brand through a larger distribution network.

As was stated leveraging and strengthening the manufacturing company’s distribution platform is its main priority. CEO and Managing Director Richard Pandohie of Seprod, stated “the acquisition of Facey’s consumer business will allow Seprod to take its distribution capabilities to the next level by giving us control of an established, first-class distribution network which is needed to support the continued expansion of our businesses and expand our portfolio of market-leading brands.”

Whereas Seprod’s Board unanimously approved the acquisition of Facey Consumer, it still has some fine details to iron out, such as a definitive legal document and approval from its other shareholders which is scheduled for April 9, according to the Financial Gleaner. Furthermore, Pandohie is of an optimistic view that all will go well and by late June early September of this year this new acquisition will be up and running.

Seprod Limited, together with its subsidiaries, operates through two segments, Manufacturing and Distribution in Jamaica. The company’s products primarily include beverages, cleaning products, dairy products, industrial products, personal care products, produce and distributes consumer goods. The company offers its products primarily under brands such as Miracle, Serge, ButterKist, Pronto, Swizzle, Lider, Monster, Betty and Supligen to name a few. Seprod Limited was incorporated in 1940 and became a public company and was listed on the Jamaican Stock Exchange in 1985.

Currently Seprod Limited is trading at a price of $33.50 and we here at SSL recommend a ‘BUY’ for the manufacturing company, as it has considerable activities in its pipeline.

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First #DeleteFacebook; Now #DeleteNetflix

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While we continue to monitor the controversy surrounding Facebook [NYSE: FB], news has now surfaced of another company facing similar issues which may affect its stock value in the coming weeks. Netflix [NYSE: NFLX] is the latest victim of a boycott from Brazilians, an international market which provides the company with a vast number of subscribers.

There is now an active #DeleteNetflix campaign on Twitter, protesting the original Netflix series ‘The Mechanism’ which was aired last Friday. The Mechanism is a fictional show based on a true story of a corruption investigation in 2014, most popularly known as ‘Car Wash.’ It involved business leaders, multinational corporations and not surprisingly, politicians. The investigation was initially targeted towards black market dealers who used small businesses such as gas stations and car washes for money laundering purposes. In other words to wash illegal money. Over 150 persons have already been arrested in the probe, prosecuted or were brought before the courts. This made ‘Car Wash’ one of the most talked about and most complex corruption scandal of all time in South America.

Impeached former President of Brazil, Dilma Rousseff, described the show as ‘underhanded and full of lies.’ While movie critic Pablo Villaca also chimed in on the issue referring to the series as ‘irresponsible.’ He cancelled his subscription to Netflix after been a loyal customer for six years and further encourages others to follow suit. Villaca lamented that the producer of the series is ‘a creator of fake news’ and equated the series to a ‘movie where Winston Churchill makes a deal with Adolf Hitler to attack the United States.’

Now wouldn’t that be a complete fallacy?

The series director, Jose Padilha, subsequently responded saying, ‘critics are too focused on the details and missing the bigger picture.’ However, since we all know Padilha is a native of Brazil he shouldn’t be surprised that the series has gotten this type of attention and criticism from Brazilians. While standing firm on his position that the series is non-ideological, Padilha may have contradicted himself as he further stated, ‘We can’t blame the messenger.’ He seems to think Brazilians are overreacting and he has no plans of cancelling the series. Padilha hopes to air as much seasons as possible until corruption ends in Brazil; which may very well be a long time.

While Netflix is yet to officially respond to the uproar, the company recently posted a video on its Twitter page with a video of an advertisement which reads, ‘corruption store.’ Additionally, the ad depicted items such as ankle monitors and pocket underwears to facilitate store bribes.

We anxiously await Netflix’s response to this development as well as the impact on viewership and subscription. This is definitely one to watch.

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Tencent and Naspers Ltd – A Giant Venture Capital Payoff

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Naspers Ltd, the Cape Town-based company, is selling $10.6 billion of shares in Tencent Holdings Ltd., equal to 2 percent of the stock in the Chinese operator of the WeChat messaging service, in one of the greatest venture-capital investments ever. The stake Naspers bought for just $32 million in 2001, when Tencent was an obscure website in a nation where few people used the internet, is now worth $175 billion.

Asia’s most valuable company warned it would sacrifice short-term margins, spending on content and technology in pursuit of growth.

We continue to believe that Tencent is positioned to be one of the very best growth enterprises in any industry in the world. This firm saw EPS growth of 30.9 percent last year, with the current growth estimate for this year calls for earnings-per-share growth of 39.6 percent. Furthermore, the long-term growth rate is currently an impressive 27.2 percent, suggesting pretty good prospects for the long haul.

And if this wasn’t enough, the stock has seen estimates rise over the past month for the current fiscal year by about 1.9 percent. Thanks to this rise in earnings estimates, Tencent remains a strong buy which further underscores the potential for out-performance in this company.

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Is There a Trade War Brewing Between China & the U.S.?

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Tension between the two biggest trade partners has intensified, as China announced its first of many retaliation against metals levies hours after President Donald Trump outlined new tariffs on $50 billion of Chinese imports.

China was not pleased and divulged a $3 billion tariffs on U.S. imports. U.S. stock futures dropped, signalling a further retreat for the S&P 500 Index after falling 2.5 percent. This escalation does not inspire confidence in the global scheme of trading especially in the case of  economic growth.

Suppliers to Apple Inc. were among the hardest hit in Hong Kong and mainland markets on Friday, as investors focused on potential losers from the trade spat.

Our analysts agree that China’s response is surprisingly modest in light of the U.S. actions, suggesting there could be a good deal more to come. And lest we forget that China is the largest foreign owner of U.S. Treasuries, therefore China has considerably more leverage over the U.S. some things President Trump is choosing to ignore.

China reportedly is set to pursue legal action against the U.S. at the World Trade Organization in response to planned tariffs on steel and aluminium imports. If China and the U.S. can’t reach an agreement on steel and aluminium trade following a public consultation period ending March 31, Beijing could begin collecting tariffs of 15 percent on imports worth $977 million, including fresh fruit, nuts, wines, denatured alcohol, ginseng, and seamless steel tubes. After evaluation, China could then implement tariffs of 25 percent on around $2 billion worth of product imports, including pork and aluminium.

We are concerned that a trading war could undermine the broadest global recovery in years. Meanwhile, business groups representing companies ranging from Walmart Inc. to Amazon.com Inc. are warning U.S. tariffs could raise prices for consumers and sideswipe stock prices.

We will be monitoring this one closely.

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Why is Facebook’s Stock Decreasing in Value?

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The controversy surrounding data mining firm, Cambridge Analytica has been reflected in Facebook’s stock value. Cambridge Analytica has been accused of stealing personal information through Facebook from approximately 50 million users. The information collected was said to be used to win the 2016 Presidential Election in favour of the Trump Administration, a client of Cambridge Analytics .

They extracted data from millions of Facebook profiles by creating personalized models based on people’s profiles, then promoting Trump through advertisements that would be appealing to users. Cambridge Analytica is now under criminal investigation as their actions are said to be illegal. Facebook allegedly knew about a breach in security and went ahead in suspending Cambridge Analytica from advertising on their platform.

After news broke about the infringement on Friday, Facebook’s stock price declined by 4.5 percent at the end of the trading day. As word spread further, two major new outlets posted details about the connection between the data firm and Facebook, the stock price continued to plummet, falling by 6.8 percent on Monday (the most it has ever declined since 2014) and then opening 5 percent below on Monday.

Due to these reports, Facebook is now being investigated by the Federal Trading Commission and Cambridge Analytica is being investigated by The U.K. Information Commissioner’s Office. As a result of this and information still being made public factors uncertainty and anxiety among current shareholders are on the rise. Facebook’s stock had experienced a decent start to 2018, with shares rising by about 4.9 percent, but the stock has since underperformed the broader Technology Select Sector SPDR ETF.

Based on an analysis of the stock’s charts, signs are showing that Facebook could be headed 10 percent lower, with the potential to fall by as much as 20 percent. Regardless, we encourage investors to hold their shares, and view this fall as a buying opportunity while keeping abreast of the changes in its case with Cambridge Analytica.

We are bullish on tech companies because history has shown that they have the ability to bounce back following adversity. Buying more shares in Facebook now can possibly prove fruitful in the near future.

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Rihanna vs Snapchat

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Snapchat Inc. (NYSE: SNAP) has been taking a lot of hits recently, from Kylie Jenner $1.3 billion “does anyone else not open Snapchat anymore?” comments to “Would you rather” game featuring Rihanna and Chris Brown.

The ad, which was created by a third party cost Snapchat $800 million as well as a 4% plunge in stock price. Since its IPO Snapchat has been one of those lacklustre performing company that should only be used a trading play rather than be considered an investment option.

Let’s not kid ourselves, Snapchat is not the new Facebook (NYSE: FB) or Instagram, of which both of these social networks have already added Snapchat’s most notable features into their platform while maintaining their domination of market share.

Rihanna who has over 61 million followers, responded to the offensive ad – would you rather “slap Rihanna” or “punch Chris Brown”, “You spent money to animate something that would intentionally bring shame to DV victims and made a joke of it!!!” she posted on her Instagram story.

Following the post, Snapchat apologised for the ad that referred to the Rihanna assault by then-boyfriend Chris Brown in 2009. But is the damage done?


If there is any confusion about how powerful market sentiment is, consider this exhibit A.

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Is Inflation a Necessary Evil?

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You hear the term, you probably listened to some financial guru speak about it, you researched the term, so you have a basic understanding. But how does inflation affect you?

Inflation refers to a situation in which you find that it takes more units of currency to buy goods and services than it took you yesterday or last year to buy the same products and services.

What are the specific effects of inflation?  

Why should you be concerned about its spectre haunting the economy?

Inflation Begins with Money Losing Value

To understand the effects of inflation consider this; a J$100 bill in 2000 cannot buy the same things today. A patty cost J$30 or J$40, but now the same patty cost J$150.

The same situation applies to bread, gas or everything you use on a regular basis. The significant effect of inflation is that a nation’s nominal currency loses value – it takes more Dollars, or Pounds Sterling, or Swiss Francs, to buy the same quantity of goods.

The obvious effect of this is that inflation makes it more difficult for people to afford the necessities of life if their labour is not able to keep pace with the inflation rate. This results in families struggling to keep up with the price of everything from cornflakes to college tuition.

Inflation Transfers Money From Savers and Investors to Debtors

Moving beyond the underlying effects of inflation, you come to realise there are two other significant effects of inflation.

The effect of inflation on savers and investors is that they lose purchasing power.  Whether you’ve buried your money in a coffee can in the backyard or it’s sitting in the safest bank in the world, it is becoming less valuable with the passage of time.  This can create an incentive to spend money or, under the wrong conditions, a disincentive to invest money in things that would otherwise be good for civilisation in the long-run.

The effect of inflation on debtors is positive because debtors can pay their debts with money that is less valuable. If you owed $100,000 at 5 percent interest, but inflation suddenly spiked to 20 percent per year, you are effectively watching 15 percent of your debt get paid off each year, entirely free of cost.  At some point, you’d be able to get a minimum wage job for $100 per hour and obliterate your debt.

Put more bluntly, the net effect of inflation is that it serves to transfer money from savers and investors to debtors.  It punishes those who postponed their enjoyment and invested in building roads, schools, factories, and businesses and gives their reward to those who are in debt.  It is a severe moral injustice, mostly caused by governments printing money — or, these days, making electronic entries — to cover expenses that cannot be paid out of the general treasury revenue.

Think about it.

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Tencent Holdings Limited A Screaming Buy!

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Now valued at $500 billion, Tencent Holdings Limited has become Asia’s first technology company to reach such remarkable value. The Chinese tech giant also boasts the title of being the fifth largest internet company in the world. Since the release of their IPO in 2004, Tencent’s stock price has increased astronomically by 11,000 percent. Therefore it did not come as a surprise when the company recorded a 115 percent increase in its stock price in 2017. Earnings per share grew 65 percent, and revenue is estimated to be $10 billion. Tencent Holdings Limited plans to release its financial statement for 2017 on March 21, 2018, and we are excited to see its performance.

Tencent Holdings Limited is an extraordinary company which, over the years, has expanded into payment services, property, advertising, e-commerce and gaming. Tencent’s WeChat has taken the company to another level. It is described as the heart of Tencent Holdings. Similar to apps of the western such as Facebook, Snapchat and Instagram, in the East (China), the social media add that dominates is WeChat.

WeChat while it has its similarities to the others, it has its differences. WeChat allows users to send money across China. The service is called WeChat Pay. It is used by 800 million Chinese. It is similar to Visa or MasterCard as persons can use it to purchase goods. WeChat is a cashless system utilized by even street vendors. How incredible is that?

Tencent Holding’s most popular game, Honour of Kings, now has 200 million monthly players. In 2016, the company purchased the majority stake in Clash of Clan’s Supercell and recently partnered with Nintendo. For a company that has not yet fully explored the western gaming market, but is considered the largest and most valuable gaming company in the world, the possibilities are endless for Tencent Holding.

We recommended TCEHY when the company was trading at US$23.17, now currently trading at US$ 59.73, a 157.79 percent gain in just one year!

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Supreme Ventures Gaming in Guyana

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Supreme Ventures Limited (SVL) recently reported that the company has signed an agreement to open up gaming operations in Guyana. The agreement was signed with Guyana’s Gaming Authority, which could see SVL infiltrating the gaming industry in Guyana dominated by hotel franchise, Princess Hotel and Casino.

Details of the agreement have are still forthcoming, however, it is clear that SVL intends on expanding its reach across the region and with this move there is a greater opportunity for the company to increase revenue and net profit in the coming months.

The local gaming industry, as stated by the Betting, Gaming and Lotteries Commission, amassed revenue of $135.6 billion between 2015 and 2016. Of that amount, video lottery terminal accounts for $16.7 billion, a 22 percent increase from previous years, while 19 and under gaming operations made revenue of $1.4 billion. A significant portion of that total was contributed by lottery games, which accounts for nearly one- third of the gaming industry.

Additionally, lottery gaming made revenue of $34.1 billion and the betting sector accounted for $317.3 million in 2016. Supreme Ventures Limited made revenue of $45 billion in 2016, a 2 percent increase from 2015.

Guyana currently has gaming products including different scratch and win games, Draw d Line, Lotto Supa 6, Lucky 3 and Daily Millions.

We do recommend that our clients purchase this stock and with news of an expansion, we look forward to see the performance of the company for 2018.

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Billion Dollar Tax Cushion For Flow

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Cable and Wireless Jamaica Limited, most commonly known as FLOW, recently announced that they have accumulated a tax cushion of $44.8 billion, as a result of tax losses the company incurred over a number of years. FLOW has been operating at a loss for years due to a debt of $60 million owed to parent company Cable and Wireless Communications and a consistent reduction in the value of assets, among other reasons.

Despite all this bad news, something positive came about. Based on the tax losses of $44.8 billion, the company is able to offset against any future profit, once the Tax Commissioner and the Tax Administration of Jamaica decides how it should be used.

Furthermore to the tax loss announcement, FLOW released its 2017 financial report. In 2017, they made an operating profit of $5.02 billion, however, it had to pay $5 billion owed to CWC Entities for debt financing charges. While a net loss of $383 million made the $261 million profit the company made in 2016 insignificant, FLOW managed to increase its revenue by 8 percent to $27 billion compared to $25 billion in 2016.

Additionally, with thousands of new customers under its belt, FLOW announced an 11 percent revenue growth for broadband services and 18 percent for mobile services.

Unfortunately, the 2017 financial report can be the last publicly released by FLOW, if the stock is delisted due to acquisition of majority of shares by CWC Cala Holdings. In the meantime, trading of CWJ stock on the JSE has been suspended until March 22, 2018 and will resume trading on March 23, 2018.

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Amazon is On A Roll

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The latest Amazon venture in its quest to infiltrate every industry, has recently delved further into the world of Fintech. There has been reports of Amazon currently in talks with banks such as Capital One and JP Morgan Chase about implementing hybrid checking accounts for its customers. If this comes to fruition then many persons, especially millennials without bank accounts, will be the main target.

Many may ask; will Amazon open a bank? Well, the answer to that is no. They will be in partnership with a bank on a product to benefit its customers while also benefiting the company. This move would see the company benefitting from not having to pay high fees to financial firms and allow the company to better understand the spending habits of its customers.

This may be a great move as more and more Gen Xers and millennials are tech savvy than ever showing a preference to flexible options and lower fees. Investors should note that this is not Amazon’s first time trying to enter into the financial services. Last year they launched Amazon Cash, a service similar to PayPal where customers could add funds to their account in order to buy for goods online. Amazon cash offers a Prime Reload Visa card from JP Morgan Chase. Additionally, Amazon Pay, another financial service offering from Amazon, allows customers to shop and pay for goods on other sites without re entering their credit card information.

Amazon is still in the early planning stages and there is skepticism from analysts as to the likelihood of this idea coming to fruition. Nonetheless, there is no denying that with Amazon anything is possible.

We are waiting to see how the company perfects this idea and the results of the discussions with banks. If you still have not purchased Amazon, now may be a great time to do so.

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Investing Mistakes New Investors Should Avoid

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Investors work against their own best interest by making foolish, emotion-driven mistakes.  It is this lack of rationality, combined with an inability to stick with a valuation-based or systematic-based approach to equity acquisition.

All of this while paying little attention to marketing timing, which explains the research from studies put out by Morningstar and others that show investor returns are often far worse than the returns on the stocks those same investors own.

In fact, in one study, at a time when stocks returned 9 percent, the typical investor only earned 3 percent. Take into consideration all of the risks of owning stocks and enjoying a fraction of the reward being too busy trying to profit from a quick flip rather than seeking foreign cash-generating enterprises that might enrich your portfolio for the medium to long term.

We will address five of the most common investing mistakes inexperienced investors make. Though the list certainly isn’t comprehensive, it should give you a good starting point in avoiding moves that may come back to haunt you:

Paying Too Much for an Asset in Relation to Its Cash Flows

Any investment you buy is ultimately worth no more, and no less, than the present value of the discounted cash flows it will produce.

If you pay a higher price, you earn a lower return. If you pay a lower price, you earn a higher return.

The solution is to use the P/E ratio.Know how to compare the earnings yield of a stock to the long-term. This is basic stuff that is covered in beginner’s finance. If you’re unable to do it, you are one of the people who have no business owning individual stocks.

Incurring Fees and Expenses That Are Too High

Whether you are investing in stocks or a bonds costs matter. You have to know which costs are reasonable and which costs are not worth the expense. It can be tricky, but the consequences are too high to waive it away.

Ignoring Inflation

Focus on your purchasing power. Imagine you buy $100,000 worth of 30-year bonds that yield 4 percent after taxes. You reinvest your interest income into more bonds, also achieving a 4 percent return. During that time, inflation runs 4 percent.

At the end of the 3 decades, it doesn’t matter that you now have $311,865. It will still buy you the same amount you could have bought three decades earlier with $100,000. In short, your investments were a failure. You went 30 years without enjoying your money, and you received nothing in return.

Choosing a Cheap Bargain Over a Great Business

Warren Buffett warns against this in more shareholders letters than we care to count. If history is any indication, investors, are likely to have a much better chance at amassing substantial wealth by owning an excellent business that enjoys rich returns on capital and strong competitive positions, provided your stake was acquired at a reasonable price. This is especially true when compared with the opposite approach — acquiring cheap, terrible businesses that struggle with low returns on equity and low returns on assets.

Buying What You Don’t Understand

Many losses could have been avoided if investors followed one, simple rule: If you can’t explain how the asset you own makes money, in two or three sentences, and in a way easy enough for a kindergartner to understand the basic mechanics, walk away from the position. This concept is called Invest in What You Know. You should almost never — and some would say, absolutely never — deviate from it.

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