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| The Jamaica Stock Exchange in downtown Kingston. |
THERE have been interesting developments over the past approximately six to nine months in the ownership structures of publicly listed companies on the Exchange.
It seemed to commence during the 4th quarter of 2014, but it may have even been earlier. In speaking to international investors or fund managers whose investment analysts or data analysts, or Bloomberg terminals derived the JSE market to be significantly undervalued, it seems a number of overseas domiciled hedge funds or fund managers entered the local market with sizeable positions.
Although I am not old enough to garner information from memory from the 80s or 90s market as accurately, I can recall the 2004 bull run to 2005, and in analysing those lists, we did not have as much depth in overseas ownership as we do now, or volume in overseas ownership. In addition, and on a side note, it does represent positive strides for overseas investors taking positions in our local stock market.
Some of the interesting Fund/ Company names that come to mind are Krohne Fund LP, Milville Opportunities Master Fund LP, Worldwide Opportunity Fund (Cayman) Ltd, Terra Capital Cayman, Neon Liberty Lorikeet Master Fund LP and Frontaura Global Frontier Fund Holdings Ltd.
For the reader, this is public information from the exchange, albeit at a cost, when making or considering your future investments.
In most cases, the investments are, as anticipated, in the more liquid blue chip stocks available on the local exchange.
Investments such as Carreras, given their high return on equity, and NCB, given their lower than sector average price to earnings multiple and high return on equity as well, were popular and remain so.
Holdings viewed as at 30th April 2015 were as follows.
While not including all named LPs/ Funds/ investment vehicles holdings from above, you will get my drift from the list and their focused holdings.
Alex Krohne is a CFA and launched Krohne Fund Partnership in 2004 as a hedge fund primarily to invest in long equity securities using a value approach. Their tagline is, "value investing without borders." In an analysis and commentary in one of his most recent newsletters, Krohne Capital, he commented, "I cannot sell the Jamaican tobacco company Carreras, with a 20 per cent dividend yield, to buy Altria (Philip Morris) yielding 4 per cent."
In his Jamaica trip in December 2014, Krohne comments in his write-up/ blog, "The cigarette market is obviously not a growth market anymore; however, this company is making a killing with a return on equity of 100 per cent."
Terra Partners Asset Management Limited ("TPAM") also drew my attention, which is the manager of Worldwide Opportunity Fund (Cayman) Ltd. The fund is described as an investment fund investing in frontier markets with approximately US$50 million in assets on its home page. The manager is domiciled and regulated in Malta.
In reconciling their investment strategies, two major themes emerge -- price to earnings multiples of five times or less sending signals to their Bloomberg terminals and their focus on companies with a high return on equity.
It is important to recognise the growth in our local market, the number of securities listed, and the old adage that where money is to be made, investors will pay attention. Even more so, in today's world of limited asset classes, the local exchange should not be underestimated regardless of the size/ liquidity of the market as often commented on by local investors as an issue.
In Part II, we will look at the impact of this foreign demand versus local demand in the year-to-date movement of prices analytically, as well as interesting developments in GraceKennedy's ownership list.
Mark Croskery is the Chief Executive Officer of Stocks and Securities Limited (SSL)
SSL focuses on investment management and financial planning for its client investment portfolios, through its registered dealers' representatives with the Financial Services Commission.
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