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It’s regular Friday Programming for us and we know you don’t mind – So let’s get into it!
jChina & Tech
The regulations in China continue to be of grave concern to investors and the hurt and eradication of shareholder value that they are carrying to companies like Alibaba and recently announced further hits to Tencent Holdings. Be extremely careful here if you are in and hoping for the best. Many investors who have bet on tech, have stayed in and tech has rebounded many a time in the past and done extremely well, e.g., GOOGLE in the early years, Facebook via its up and downs, Twitter after a slow start, Uber after a few earnings’ false starts, but this China “change” towards tech is not a “up and down” or a “false start”, this is a seismic change. Significantly re-look at your guidance if you are in here or sticking with it.
“China state Media brands Tencent Holdings video games – Spiritual Opium”
While we have seen many an opportunity over the past 18 months to be greedy, with the falls of Carnival Corp, Boeing Inc, and a selective few of others during the on-set of the Pandemic (March 2020), the issue here is the adage, “NEVER FIGHT CITY HALL”. Number 1, it is not worth your money, and Number 2, or your time.
You will LOSE. In this case, the City Hall, is China.
10-Year US$ Treasury
The last time we spoke about this, the 10-year was about 1.7% and it was all the market rage approximately 3 months ago, with the discussion on managing inflation and the ensuing impact on the 10-year. As seen below that has subdued and the discussion on the 10-year yield has also.
With that said, don’t be tricked as “inflation” in the USA, Jamaica and globally has not.
We continue to be in a phenomenon of low market interest rates, that are fuelling equities markets, alternative asset classes and to an extent consumer spending while on the other hand – raw materials, consumer goods and services prices increasing significantly above real wage increases.
In the recently released Seprod quarterly earnings report, that is the Management, Discussion & Analysis (MD&A), the CEO of Seprod, Mr. Richard Pandohie summarized some of this best regarding the relationship between what is happening with raw material price increases, shipping price increases (“whopping”) and the difficulty in increasing end user pricing.
In examining the chart below, the US$ 10-year yield has after peaking, fell from approximately 1.7% to 1.18% within 90 days – fuelling more liquidity for capital markets. More liquidity, meaning, very successful USA IPOs as we have evidenced during this time, and just in the past week or two, the very successful offer and price increase in Robinhood Financial.
Therefore, in any period, yields have gone up too much, the U.S. administration has stepped in with some sort of vast benefits or liquidity – these are interesting times…
|Topic of Inflation|
The next 90 days should be interesting to see in Jamaica… maybe, this could be extended to say before December 2021. NIR is at peak levels, above US$ 3.0 Billion, interest rates are at all-time lows, JSE levels are confident, there is significant positive macro positive data that we can speak about, but there is a but… A lingering one that as investors we must consider.
Inflation and let’s be more simplistic, the cost of living.
Instead of looking at the CPI or %, we are going to take a very basic recent sample size below from “ItsMoneyMark” and we plan to expand this soon on our website:
|We are still in a Pandemic, and potentially a 3rd wave that is worsening (re: Delta, Lamba, who knows other names coming), and look at these % increases. The principal to takeaway is the %, not the specific example used. These % range from 14% to 32% and all contribute to any basket of your life. In addition, we have not utilized basic food or other food items yet, but if you take snippets from public Jamaica Stock Exchange earnings reports from the food companies CEO reports you will get an even better picture of what is happening. Arguably those % increases are higher than this table.|
Takeaway here, is to ensure you take care of your money right now, ensure you have some US$ holdings and be ultra-careful with your budgeting and expenses.
Everyone keeps asking us, what are the best 2 stocks to buy? Its an interesting question. Clearly investors are getting more focused and selective as they should. Historically, you make more money that way. Hence, we assume it is a growing and growing query. We offer some thoughts below, but as always, consult with your licensed financial advisor or broker.
Carreras Limited (JSE: Carreras): We have been talking about the cigarette distributor on/off in our newsletter for some time now. Boom! Carreras signalled a quarter ago it was finally turning a corner, perhaps 2 quarters ago. Well, in its latest quarterly earnings it has come GOOD!
While branding, logos, marketing are not the end all, be all, they do tell you something about the Board of Directors and Management mindset and their attitude toward action in our opinion.
Seprod was a direct example of this. It does not work in all cases, but once that marketing and branding engine commenced at Seprod under Pandohie, the earnings trajectory changed.We feel the same order of events could now be taking place at Carreras.New Manging Director, New Logo, Branding, and you feel it. Also, the Managing Director is clearly more present in the marketplace. Again, we are not saying to be successful you must do this, but it helps anywhere, and investors/ analysts clearly observe this.RESULT: First Quarter June 30th, 2021, Numbers are in, and EPS of J$ 17.8 Cents versus J$ 13.4 Cents
Growth year over year of 33%Not a comeback but a Cinderella Story hereIn Closing – Carreras new Slogan is “A Better Tomorrow”, but let us tell you, investors are feeling the Earnings for “A Better Today”.
Supreme Ventures Limited (JSE: SVL) and JMMB Group (JSE: JMMB).The recent competition that has entered the lotteries space seems to have if anything, strengthened SVL. The Gaming & Entertaining giant seems unbothered and just actually expanding, doing more deals, and hiring more talented executives to add to their arsenal. The recent earnings were massive, and their transformation continues with a Fintech arm, and a business hub. If you watch their branding angle, more and more, their branding is coming across as a conglomerate as well as a gambling company. Their outlook seems bright.
JMMB just seems to always get it done and trades at a lower P/E to the market and its sector. Sometimes we feel this happens, as they are not as out there with their branding as they used to be or perhaps flamboyant as the leadership as some of the other financial entities, but the key words, they “get it done”. They will come good soon.
Whether making that associate stake in Sagicor Financial Corporation (global), always raising additional strategic capital when required (strength of the brand) and their financials, numerous capital market deals, they always get it done. Eventually, their stock price should reflect their earnings and the underlying valuation.
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Happy investing and Happy markets.
Enjoy the It’s Money Experience until next week!
These opinions and thoughts are solely of ItsMoneyMark and does not constitute investment advice.
Ensure to always speak to a Licensed Financial Advisor.
Thank you for reading!