January 13, 2016

Jamaica’s 2016 investing themes - Navigating through uncertainty

Published in the Jamaica Observer

Given the significance of the macroeconomic and political events taking place in 2016 in Jamaica, it might be easy to be uncertain about where to invest capital this year. This particular period in the lifespan of the IMF programme, the upcoming injection of capital into the financial system, and the uncertain global economic climate all play their part in confounding even the most savvy investors about what the best investing strategy should be for the next few months. I’ve had a number of questions related to this topic during the latter part of 2015 and offer my thoughts on the key investing themes that I see unfolding in 2016.

EQUITY — NOT CASH — IS KING

Without some exogenous shock to current fundamentals, I expect the equity story (ie strong stock market performance) to continue to play out in 2016 as more liquidity enters our system and the macro picture continues to stabilise. Debt costs will continue to get cheaper and equity will be the direct beneficiary.

If we see any acceleration in GDP growth as well, we will get an added lift to not only company performance but also the multiples you should be willing to pay for these businesses.

My advice here is not to completely rotate out of bonds or real estate, but you should feel fairly comfortable increasing your equity allocation.

Pay attention to the names that haven’t participated as much in the stock market surge. There are still some good companies out there trading at attractive multiples (eg GraceKennedy, Jamaica Broilers, Pan Jam).

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