ItsMoneyMark Newsletter #67

Is the Dow Jones heading to 25,000 Points, next stop? As we Touchdown at 30,000 Points & Below? 

Opportunities in the Slumping U.S. Markets

We got that brief feeling of “all was well”, the bit of sunshine before the storm, with the Dow Jones rebounding to 31.5k – 32k, even as high as 33k points, then “Boom”, came the fall, we wrote about this potentially happening recently at ItsMoneyMark, the Dow Jones at 30k???

Well, “Yosemite Sam”, Here we Go! What a ride as we near to closing out June 2022, and the first half of 2022…

Plus, the 0.75% Federal Reserve rate hike, helped for a day, but at the end of it all, this and the outlook of further rate increases and May’s annualized U.S. inflation at 8.6%, sent U.S. Markets lower…

If you are an investor, and not a speculator, some hopeful observations are the Buffet spending US$ 51 billion or more on U.S. equities in the first quarter (Q1 2022), U.S. markets being at those levels and even lower presently as we approach the end of Q2 2022, and typically during July 2022 or so (bad beat market summer months), we will get Buffet’s (Berkshire Hathaway’s) updated stock purchases/ sales, that is filings, we anticipate seeing even more purchases by the Buffet… 

Whether you are bullish on the respective sectors or not, even if there might be some earnings noise in the last 12-month trailing earnings, we at ItsMoneyMark, see some of the beaten-up share prices as opportunities and it makes our eyes light up a bit, & mind get going: 

  • The cruise liners are beaten up again badly, in line with or lower than March 2020, and seem too low to pass on them at current levels. We are talking about, Carnival Corporation (US: CCL) and Royal Caribbean Cruises (US: RCL). Respectively at US$ 9/ share and change, and US$ 36/ share and change…
  • The bundle of tech plays, Amazon (US: AMZN), Apple (US: AAPL), and Meta (US: META) (new ticker) are always interesting…
    • All at 52-week lows as well.
  • Starbucks Corporation (US: SBUX), trading below 19x P/E and near 52-week low.
  • The almighty and all-conquering Goldman Sachs Group, Inc (US: GS), at below 6x P/E at 52-week low. 

While, the whole market is down, U.S. wise, across the board, except energy stocks, and a few others, to their respective 52-week low ranges, one can’t chase all. 

Stay focused, and realize, things wouldn’t always be bad, but if U.S. P/E ratios are trading or commencing to trade below JSE P/E ratios, then keep your eyes open 😊. 

Because of the Fed’s positioning, the inflation issues, and oil prices, it could be a longer turnaround, but at the end of the day, “value is value”, and the margin of safety with some of these U.S. plays is getting better and better daily. 

Market Moves:

  • Wow, this past week, Bitcoin (BTC-USD) hits a 52-week of US$ 20,178, as it falls below US$ 21,000. As many analysts have come out recently and stated, not only get ready for a potential “recession” but get ready for a potential “crypto winter”. 

Coinbase (US: COIN), which like many newbies and “hot stocks”, whether you view them as tech, an influencer, theme plays, an alternative, etc. just announced this week, that they are cutting back their full-time staff by as much as 18%. The resulting impact will affect approximately 1,100 workers of their 5,000 employees. 

Coinbase’s comments included that they after a 10-year plus economic boom, the slowdown is expected, and they are being cautious and preparing for this in advance… Coinbase’s share price is down approximately 79% year-to-date in 2022 and bitcoin is down approximately 53% year-to-date in 2022. 

  • CAC 2000 Limited (JSE: CAC) reported its 2nd Quarter and got back to winning ways, it was overdue, and this is exactly what the market, Mr. Market wanted from a JSE – Jamaica Stock Exchange perspective… We focus on the 2nd Quarter, as that was the “big number” and that carried the year-to-date number and brought CAC back into the profit overall. 

For the 3 months, to April 30, 2022, CAC registered revenue of J$ 313.4 million, versus J$ 255.1 million, registering an increase of 23% year over year. Net profit for the quarter ballooned to J$ 46.6 million, from J$ 766k a year earlier, carrying net profit for the 6 months or year-to-date to J$ 13.7 million, erasing all the losses CAC registered in the 1st Quarter. Year-to-date earnings per share, now stand at J$ 11 cents to April 30, 2022 (6 months) for CAC

Given the results, CAC has rallied a bit from its 52-week low to presently J$ 7 – J$ 8/ share, however, CAC remains a way from its 52-week high of J$ 12.10/ share as the market, analysts await another quarter from CAC.

  • Indies Pharma Jamaica Limited (JSE: INDIES) rebounded strongly for its Q2 2022, with both revenue and net profit surging. We had mentioned in ItsMoneyMark newsletter, that we felt it was just a matter of time, like what we had viewed with Paramount Trading (Jamaica) Limited, CAC 2000 Limited, Carreras, and a few others, that hit earnings slumps, and it does not necessarily make them bad companies… 

INDIES for more than a few quarters fell into the similar bucket, just had not registered the earnings growth it was accustomed to, and the market got used to after its listing. In giving them sometime, INDIES in this quarter just reported, April 30, 2022, seems to be back to the old INDIES that we know them for. 

Revenue grew 25% to J$ 250 million for the 2nd Quarter, and Net profit grew by a phenomenal 213% to J$ 64.1 million for the 2nd Quarter. The profit outturn for INDIES for this quarter is reminiscent of where INDIES is coming from and where the market would like to see INDIES, keep at, or maintain this run rate on a quarterly basis moving forward. INDIES earnings per share for Q2 2022, translated to J$ 5 cents. The company’s cash & cash equivalents improved to J$ 260 million to close the quarter. 

  • VM Group with the “massive” announcement of plans to re-structure per Scheme of Arrangement. It’s not only a Big One, but this is “huge news” for the financial markets, their customers, their members, analysts, shareholders in their listed subsidiary, future investors, and the market overall! 

VMBS has received a no-objection letter from the Central Bank, Bank of Jamaica (BoJ) on this matter. We outline a few points here, but clearly, if you weren’t a member or a customer of VMBS before, you need to make it a priority to become one. All the details are not released yet, but just the concept that has been released to the JSE – Jamaica Stock Exchange, of VMBS moving from a member building society to a proprietary building society, how this will all work, the approval process, and the names being encompassed in the release such as: 

  • VM Group
  • VM Financial Group

It just makes you to start to think about, shareholder value, future IPO possibilities, and positive vibes, especially considering the recent re-brand VM Group executed, and the positioning that VM Wealth, VM Investments has been making in the marketplace and now this. 

  • Seprod Limited (JSE: SEP) has been making those moves in 2022, and at ItsMoneyMark we really wonder, does the market really understand the significance of the deal SEP just closed in Trinidad, A.S. Bryden & Sons Ltd. 

SEP’s original release to the JSE – Jamaica Stock Exchange stated that, the combined deal, could see the combined entities register revenues more than US$ 500 million. It did not go or release any information regarding projected EBITDA, net profit, etc. at this stage. Regional markets do not typically do that yet. SEP has been trading on or around J$ 71/ share recently and its 52-week high is J$ 80.57/ share. Therefore, SEP is not that far away from its peak. SEP also, recently published its annual report for 2021, and we saw the magnitude of its products, brands, etc, ranging from butterkist, serge, goya, betty, brunswick, and much more. The annual report gives you an appreciation of SEP’s depth in the marketplace and potential upside. 

The point we make, is unlike U.S. markets, and other advanced markets, that would give M&A – mergers, actual earnings guidance, regarding material transactions, companies do not do this or advise this in Jamaica markets/ JSE; therefore, SEP could well be mispriced as we do not know A.S. Bryden’s potential contribution to SEP’s bottom line (the most important factor) moving forward in 2022, consolidated SEP’s results. 

Sometimes, it is this mispricing that creates the opportunity, and no pun intended here, given SEP’s annual report 2021, is headlined, “Opportunities Unloading”. 

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