Month: January 2018

There has been some debate about the outlook of the economic cycle. Some will argue that we are at the peak of the bull market, we wholeheartedly disagree.

The U.S. economy is now in what we economist like to call the late-cycle. Growth peaks and accelerated inflation are two characteristics of the late-cyle,  demanding attentiveness from investors.

We believe the economy is supportive of further upside for asset markets.

During the year 2017, investors witness the most coordinated above-average global growth performance in a decade. Market indicators suggest this pattern will continue in the first half of 2018, but it is undoubtedly not without risk.

Outlook & things to watch for 2018:

• Oil supply
• Unemployment rate
• Federal Reserve
• Brexit
• Trump Administration

The focus for most central banks globally is maintaining stability while simultaneously avoiding asset bubbles.

What does this mean for asset allocations?

We believe the current cycle reinforces our recommendation to diversify across asset classes, sectors and geography.
Historically, stocks outperform other assets during this period and we see no reason for this to change.

We expect the Fed, regardless of leadership, to raise rates modestly. That being said, a balanced portfolio of stocks and bonds will provide the best outcome for investors in our opinion.

The most significant risk for investors in navigating this cycle is exiting too soon. The late-cycle equity returns are often substantial, and the opportunity cost of missing out can more than offset a drawdown that might be subsequently avoided.

Investors should pay keen attention to policies, market sentiments as well as be vigilant in this market.

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Move over AT&T-TimeWarner!
It’s official, Walt Disney has inked a US$52.4 billion deal to acquire 21st Century Fox.

News broke this morning that Disney has acquired Fox studios which now brings the top six studios to five. Therefore, Disney has maintained its lead obtaining 39.6% of the box office market share. The deal is subjected to antitrust regulation, similar to AT&T-TimeWarner, which will take two years to be approved.

Why a merger?

According to the official statement released, the consolidation will help Disney-Fox create movies that dominate the box office, as they share intellectual property.

What do I think?

Disney’s target audience has always been family-friendly while Fox has the leg up on reality TV which viewers gravitate to.

This merger also means job cuts and other cost-cutting measures as Disney feels the pressure of declining viewerships. Tech companies like Netflix and Amazon.com who offer online-streaming services have forever shifted the traditional TV viewership. Furthermore, sports enthusiasts will be impacted as well since Disney now has the monopoly and can now force higher fees for ESPN which will trickle down to its customer base.

Should you buy?
Despite this news, Disney is NOT a buy for me.

In Q4 of 2017, Disney reported lower-than-expected results and the company’s operating income is down by 11% year over year.

The stock is currently overvalued at 18.1x P/E compared to the industry P/E of 13.02x.

Need I say more …?

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We all can remember Snapchat and their grand entrance on the stock market when they launched their IPO in March of this year. They had the biggest IPO since Alibaba Group Limited, raising a whopping US$3.4 billion. The IPO price of US$17 quickly rose to US$24 on the stock exchange market just 24 hours after being listed. However short-lived, the stock price fell below the IPO price three months later, and it has been a roller coaster ride ever since.

Snapchat has been competing with social media giants Facebook, Instagram and Twitter but it is crystal clear who is winning. Facebook recorded 1.34 billion daily users while snap only recorded 134 million for their entire third quarter.

Snapchat has plans to redesign some features of the app and introduce a live feature similar to that of Facebook and Instagram.  Despite the discovery feature, where companies place ads, Snapchat is a long way from competing with Facebook and Instagram in the ads market.

Snapchat’s revenue year to date has increased from US$404 million to US$705 million. However, the company’s net income is US$-3265 million, an alarming -463.2% deficit.

With a -102.8% in return on equity and a -92.2% return on assets, I remain concerned about the management team. It came as no surprise when critical executives of Snapchat Inc. resigned.

Currently, NYSE: SNAP is trading at US$14.75, a little above its fair value of US$14.00.

No need to get excited.

Given Snap’s significantly lower user base, the firm is more vulnerable than Facebook. A decline in digital ads would hurt Snap’s revenue growth more than that of its competitors and could delay or change the firm’s path toward profitability.

While buying any security has risk, SnapChat, in my opinion, is an unnecessary one not when there are better performing competitors like Facebook and Google.

Do you agree?

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Facebook has taken its first step in competing with other music rivals such as YouTube by today signing a multimillion deal with Universal Music Group (UMG). The deal allows Facebook users the opportunity to share and listen music without breaching copyright laws. The deal was also extended to Messenger, Instagram and Oculus Rift. While the deal was initially signed to prevent copyright infringement, it may possibly allow users to also gain access to a compilation of music across different genres in the future.

Facebook’s plan is to create a unique social feature for music once users upload them from Universal Music, creating personalized experiences through interaction with musicians. This deal seeks to create a dynamic relationship between the music industry and social media platforms while also advancing the interest of artists, entertainers and songwriters.

Before this deal, Facebook was forced on multiple occasions by Universal Music to remove various posts including covers of popular songs. Chairman and CEO of Universal Music Group, Lucian Grainge, sees this described the deal as flexible as it offers a balance between how music is offered to the public and how artists are compensated.

This is just another step by the social media giant to revamp and improve its services to its users. I am positive this will be well received by users and could possibly increase the stock price for Facebook in the coming months. The company is currently trading at $177.45.

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GraceKennedy (GK) is looking to provide an estimated 90 jobs for Jamaicans as the company plans to open a new manufacturing space by mid-2018. The company has leased 60,000 square feet of space from the Factories Corporation of Jamaica in order to increase production of canned and frozen vegetables. The manufacturing space located in Denbigh, Clarendon, is expected to be in operation by August 2018.

With plans to add products such as cassava, breadfruit, green plantains and ripe plantains to the production line, GraceKennedy hopes to create multiple jobs for locals. Not only will jobs be provided in the manufacturing aspect of production, but also externally. Produce will be purchased from local farmers on a contract basis with quantities predicted to be increased over time. This will be a great opportunity for the local Agricultural Sector to capitalize on.

The facility leased is already being used to store production equipment but will be ready for mass production of canned and frozen foods once upgrades are completed next year. These items will be marketed and sold both locally and internationally under the GraceKennedy brand.

GraceKennedy’s performance on the market has not been very exceptional for 2017 as the company recorded a loss of 19% in profit in its second quarter compared to its 2016 performance. However, for the quarter ending September, GK experienced a 1.4% increase in net profit to move from $3.7 billion in 2016 to $3.75 billion. It’s safe to say GK has been relatively volatile throughout 2017 making investors uneasy and quite cautious but if you are an aggressive investor why not take the risk? It is a bit risky but nonetheless a solid stock to consider investing in or holding on your portfolio. GraceKennedy currently trades at $43.

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It’s the most wonderful time of the year to purchase certain stocks. With increases in holiday shopping and spending, the Christmas season is said to be one of the most profitable holidays throughout the year for retailers especially. There are increases in sales whether online or in stores. Smart investors capitalize on this by investing in certain stocks before the holiday, not after. Here is a list of 4 stocks you may want to consider buying before the holiday has passed.

1. Amazon – The Company’s performance last year in terms of sales for the Christmas season was the best of all retailers online and is predicted to be even better this year. Amazon is said to capitalize on increased toy sales as their competitor, Toys R Us, filed bankruptcy recently. The online retail giant recorded a whopping $4 million in toy sales for 2016, with more than a third of that sale for December only. Additionally, Amazon accounted for up to 50% of online sales during Black Friday recently. Therefore, it is not surprising that the e-commerce giant is a recommended stock for this Christmas.
2. Apple – Apple is expected to profit from the recent acquisition of Shazam, the popular music recognition app in the coming weeks. Furthermore, with the increased sales for the IPhone X from 68% last quarter to 72% in September, Apple is predicted to be consistent in sales for the season.  
3. NVIDIA – For this visual computing company, the stock price more than doubled this year. It is currently trading at $197. The stock is predicted to continue rising in price at least for the next year.
4. FedEx Corp – The package delivery company is on target for another record holiday-shipping season. Today, it reported an increase of 1.4% and is currently trading at $242.54. Compared to a year ago, the stock price has increased by 30%. This is due to the increase in online shopping for the holiday.

Investing in these stocks is worth taking advantage of for Christmas. So instead of painting or probably changing furniture for the holiday, why not consider investing in your future.

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It has been an excellent year for the regional powerhouse National Commercial Bank Financial Group NCBFG shareholders as they enjoyed the growth in price from March 16, 2017, at J$63.00 to November 13, 2017, at J$107.74.

It was certainly not surprising when NCBFG made a takeover bid for Guardian Holdings Limited after acquiring 29.99% in May 2016.

In anticipation of the takeover news, the price of NCBFG  declined by 16.74%, typical for any firm acquiring another entity. In fact, sounds like a great buying opportunity for investors.

On Monday, December 11, 2017, the price of the stock went the opposite direction hitting the J$100.00, contradicting the typical market behaviour when these transactions occur.

The acquiring company’s stock will experience short-term decline of their stock price  while the targeted company’s stock will rise.

So why is NCBFG going the opposite direction?

The  answer is simple.

You.

Investors.

Investors are bullish on the conglomerate as they reported a net profit of J$ 19.1 billion as of September 30, 2017, a 32% increase over same period last year.

Investors have been enjoying over 100% increase in capital growth, and they don’t want it to stop. With this acquisition of Guardian and Clarien Group, it is obvious NCBFG has big plans for 2018.

Are you ready …?

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Lasco Distributors Limited (LASD) has discontinued its distribution of Unilevers dry food and cold storage brands today. This means Lasco will not be distributing brands such as Red Rose Tea, Lipton, Breyers Ice Cream, Flora, among other products. However, the company will continue to distribute Unilevers Home and Personal Care brands such as Breeze, Dove, St. Ives and Axe to name a few. The decision was made in an effort to reduce operational costs and to improve logistics and the efficiency of Lasco’s service.

Unilever Food Portfolio represents 28% of its business but for Lasco Distributors, the distribution of Unilever brands adds up to an estimated 1% of the business.

Lasco has been revamping and improving efficiency right across the board recently in an effort to increase the company’s profitability. Lasco spent $725 million to expand their warehouse in White Marl by 100,000 square foot recently. Compounded by several upgrades which were made to Lasco’s IT system, the company’s expenses have been increased significantly. Furthermore, LASD performance has been affected by expenses it incurred for legal fees paid in relation to the Pfizer case. Lasco was optimistic that the court would rule in its favour US$490.1 million plus interest in damages, after a 7 year injunction from Pfizer preventing LASD from marketing certain pharmaceuticals. The company however received only JA$273 million; a huge setback for Lasco.

Even though LASD experienced a $1.25 billion revenue increase in the financial year ending March 31st 2017, the company’s net profit fell by 14.9% to a total of $609.7 million when compared to 2016. LASD has also been underperforming on the Jamaica Stock Exchange market. The stock price fell by 33.9% between November to December 2017 and is currently trading at $3.99. We are still looking to see how Lasco Distributors Limited performs for 2018 as the company continues to cut costs and improve service delivery.

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Pre-owned car dealer, Jetcon Corporation, is well on its way to becoming the first car dealership in Jamaica to engage in the trading of pre-owned cars outside of the country. Jetcon is looking to explore distribution within the Caribbean region. Not only are they looking to sell cars to individuals but also to other dealers. This will be possible as the company has partnered with suppliers in Japan to export large shipments of cars to the island. This shipment will be facilitated by a lease agreement signed between Jetcon and Kingston Wharves Limited (KWL). The lease will provide storage space for the imported vehicles at KWL Tinson Pen complex. Additionally, Jetcon is capitalizing on the opportunity provided in the agreement to bypass import permits and duties.

Jetcon sells up to 100 cars per month locally but is seeking to sell up to 400 cars per month. The lot leased however, can hold up to 800 cars. The company recently increased its inventory to accommodate a wider variety of cars, which paid off financially as Jetcon recorded double digit growth in sales for the September quarter. Net profit grew from $9 million to $35 million as sales doubled from $143 million to $267 million. This is an exceptional growth for the company that was listed on the Jamaica Stock Exchange in March 2016. Jetcon was listed at $2.25 but grew to almost $17 in just four months before experiencing a stock split. Jetcon now trades at $4.70; a positive outlook for the company.

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GraceKennedy’s made changes recently to its management team across all sectors of business, in an effort to bounce back from a weak market performance in the second quarter of this year. The company recorded a loss of 19% in profits from the previous year which was attributed to business expansions. Despite this, CEO, Don Wehby, reported that the company is still on track to improving its operating performance for the rest of the year.

GraceKennedy’s poor performance may be redressed through recent changes to the business’ management team.

Andrea Coy has been appointed Chief Executive Officer of GK Foods International Business. Coy is to manage the manufacturing and distribution of GraceKennedy in the United States of America, United Kingdom, Canada, Latin America, the Caribbean, West Africa and Europe. Wehby lauded her success in locally managing and growing different companies within the group and is confident that she will continue to successfully transform and grow the company internationally.

Ryan Mack, who previously held the position of CEO of GK Foods International, was appointed CEO of GraceKennedy’s Local Business. This includes management of HiLo Stores, Grace Foods and Services, World Brand Services and the Consumer Brands Limited.

Derrick Reckford, who joined the company as a management trainee in 1987, was promoted to Acting President and CEO of Grace Foods (USA). Also, Steve Whittingham, who is currently the Chief Investment Officer of GK Group and managing director of GK Capital Management and Investment, has been appointed to the executive committee of the company. Finally, Margaret Campbell, who previously held the position of Chief Financial Officer for GraceKennedy Money Services the Western Union agent in Jamaica, is now the country manager for that subsidiary.

The company is currently trading at $43 on the Jamaica Stock Exchange and is looking forward to a strong finish in performance for 2017. Time will tell.

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Carreras Limited has been awarded the Best Performing Company for 2016 at the Jamaica Stock Exchange (JSE) Best Practices Awards ceremony recently. The Best Performing Company award recognizes outstanding performance by a company through enhanced shareholder value in areas such as profitability, capital efficiency and direct return on shareholdings.

The company has won 8 awards from this area over the past few years from a field of 50 companies listed on the JSE. They also obtained the 2nd runner up placement for Best Website Award for the third time.

This is impeccable for the cigarette distributor despite the challenges it faced whether it was regulatory and economically. In March of last year, the government imposed a tax on cigarettes increasing the excise duty by $3. This decreased sales for Carreras as consumers were more inclined to purchase cheaper cigarettes from bootleggers selling counterfeit cigarettes. Even wholesalers were cashing in on the illegal cigarettes as they were more readily available.

The company has overcome these challenges by revamping its marketing campaigns, expanding the brands it distributes and working externally with control agents to rid the market of smugglers.

The company made an increase in net profit from $3 billion to $3.8 billion for the period ending March of this year and we look forward to seeing the continued success of Carreras on the Jamaica Stock Exchange Market.

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Music has always been a vital ingredient to the success and growth of Apple. Followed by the acquisition of Beats and the launch of Apple Music in 2014 and 2015 respectively.

Therefore, it came as no surprise when Apple, last Monday, announced that it had bought Shazam.
Shazam, the favourite UK based music app, is one of the first apps to utilise the microphones on smartphones to recognise songs, movies, TV shows and commercials.

Shazam has a considerable user base. The app recorded a whopping 20 million users across the U.S. for November of this year and 4 million in the U.K. Having been downloaded more than a billion times since its inception, Shazam now has over 120 million users worldwide.

Shazam generates its revenue through paid advertisements. They have come up with an innovative way to display ads while users are searching for songs without full-screen interference. Additionally, Shazam makes money through referring users to various music providers, which will apparently be an advantage for Apple.

What does this mean for Apple Inc.?

Buying Shazam means Apple has acquired all the intellectual properties of Shazam which includes the 200 patents the song recognition app was granted.

Currently, Apple [NASDAQ: AAPL] trades at $176.42 on the U.S. market. Apple Inc. was estimated to have brought Shazam for $400 million; the stock price may decline in the coming weeks making it an excellent time for investors to buy.

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.

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