The investing weave

The investing weave

The Sterling Report

BY YANIQUE LEIBA-EBANKS

Sunday, December 08, 2019

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The dawn of low interest rates has made it necessary for investors, including retail and institutions, to seek more profitable avenues for growth. This is particularly necessary for listed financial institutions.

As soon as you list your company on the stock exchange, there is tremendous pressure to increase profits quarter over quarter, year over year. Analysts don't look at net profit as an absolute figure — meaning the number itself means very little, unless it is compared to the prior period.

So, the question is always; did the company do better than last year? What is the five-year trend? With that type of pressure, it has become harder and harder for companies to keep up the “right” level of growth.

Companies faced with this challenge, after eking out the best value that they can with their core business in the low interest rate environment, go after investments that they feel will add meaningful growth to their bottom line.

There are many options available — including private equity deals, real estate and other alternative investments, but this article will focus on acquiring stakes in other companies.

WEAVING IN AND OUT

JMMB bought a 22 per cent stake in Alignvest which owns Sagicor Financial, which in turn owns 49 per cent of Sagicor Group Jamaica.

Proven owns 20 per cent of JMMB, and Barita bought five per cent of Proven Investments Limited (making it the largest shareholder).

Sagicor Group Jamaica bought 60 per cent of Advantage General from NCB Capital Markets. NCB increased its ownership stake of Guardian Holdings to approximately 62 per cent.

PanJam and Portland Private Equity bought 15 per cent each of itelBPO, and reduced their holdings of Sagicor Group Jamaica to 30 per cent.

In 2018, PanJam bought six per cent of JMMB.

Sagicor Investments Limited bought a 10 per cent stake in Express Fitness from Norbrook Equity Partners.

GraceKennedy partnered with Musson to create Canopy Insurance.

The list is not exhaustive, and if you find it difficult to keep track, then you are not alone.

Moreover, it is not going to stop, it will only get more exciting.

WHAT DOES IT MEAN?

It may mean nothing for you if you don't own stocks. But it is very possible that you own a combination of some of the companies named or even all of them.

When things are good, the benefit ought to be magnified.

But if you are building out what you think is a diversified portfolio, you may want to keep in mind the various intersections of company ownership.

THE BIG PICTURE

Mergers and acquisitions, investments in other companies are all signs of a vibrant economy. These have always been a feature in First World economies.

As for Jamaica, it is heartening to see our reach extend locally and regionally — it shows that there are lots of exciting opportunities for the taking. Happy investing!!!

Yanique Leiba-Ebanks, CFA, FRM, BSBA., is the AVP pensions & portfolio investments at Sterling Asset Management. Sterling provides financial advice and instruments in US dollars and other hard currencies to the corporate, individual and institutional investor. Visit our website at www.sterling.com.jm Feedback: If you wish to have Sterling address your investment questions in upcoming articles, e-mail us at info@sterlingasset.net.jm.


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