IN the past month, international markets have been under pressure by a seemingly constant stream of negative occurrences. The debt crisis in Europe, continued uncertainty in US financial markets, and what has now become the largest oil spill in US history, are a few examples of the challenges at hand. Meanwhile, investors have been wondering, with the pullback in equity prices, is there value in the market?

The Dow Jones Industrial Average (DJIA) hit a 52-week high of 11,258.01 in late April, but has since lost 9.96 per cent or 1,121.38 points to close at 10,136.63 heading into the Memorial Day holiday weekend in America. This dramatic point decline in such a short period of time would suggest that there are potential buying opportunities in the market worth analyzing. The Coca-Cola Company (NYSE: KO), one of the most recognizable brands in the world, opened Tuesday at US$51.40, down 9.82 per cent or US$8.05 year-to-date (YTD) and 13.54 per cent from the 52-week high of US$59.45. KO has traded at a P/E of 16.00x to 19.50x over the last 12 months, so in a snapshot the stock seems to be of interest at its current P/E of 16.11x, the lowest it has been since July 09.

Wal-Mart Stores Inc (NYSE: WMT) is another company on the forefront of the minds of many investors. Having begun the year at US$53.45 it reached its 52-week high of US$56.27 in March, but has since lost 10.15 per cent or US$5.71 at the start of trading on Tuesday, when it opened at US$50.56. The stock is trading at prices not seen since October 2009, added to that the fact that the current P/E of 13.20x is the lowest it has been over the last 52 weeks, WMT hit the radar as well. The market opportunity is not concentrated in one sector, several industries have seen pullbacks. Johnson & Johnson (NYSE: JNJ), a popular healthcare stock, also looks to be an attractive stock given the recent market pullback. JNJ opened on Tuesday at US$58.21, close to its 52-week low of US$53.86 and is 9.49 per cent or US$7.73 below the 52-week high of US$66.20 it hit in April 2009. If we look further back, JNJ has been trading between US$57.00 and US$77.00 over the past five years, notwithstanding the period from October 2008 — July 2009 when market uncertainty was at its highest. The stock’s P/E has ranged typically ranged between 12.75x and 14.00x over the past 12 months, so with the P/E currently at 12.25x, the lowest since July 09, this looks like an equity to place on the radar

as well.

The US market is ripe with opportunity, this is very similar to the situation the local market was in a few months ago. However, on the Jamaica Stock Exchange (JSE), prices have rebounded. Many stocks have moved from screaming buys to being more reasonably priced. Carreras Ltd (CAR), for instance, started the year at $35.05, just $0.49 from its 52-week low, and surged 56.92 per cent or $19.95 to a new 52-week high of $55.00 hit in late April. Even though it is trading closer to the $50.00 mark nowadays, this still reflects a P/E of 7.77x, and given that the P/E has been between six to seven times for a majority of the last 12-months it is considered less of a bargain.

At the start of the year GraceKennedy Ltd (GK) was also very attractively priced at $40.05 with a P/E of approximately 5.20x. But with heavy demand for the stock in March, over four million units traded, the stock had a strong rally, and eventually hit its 52-week high of $69.00. This represents a whopping 72.28 per cent or $28.95 YTD gain, as the P/E soared to 9.2x. Though the price has tapered slightly, $65.47 at the end of trading on Monday, it is reasonably priced with a P/E of 8.86x.

Many of the other blue chip stocks on the JSE have followed a similar pattern. A strong market rally, spurred on by declining interest rates, has pushed the prices and P/Es of these stocks significantly higher. So while investors have been rewarded for participating in the local markets over the last few quarters, many are now seeking new opportunities. Furthermore, the local markets are historically slow during the summer months, and investors are likely to be more passive as they await confidence, a key driver for the market, to return. With the stock prices on the NYSE coming under significant pressure, even for companies that do not necessarily have direct exposure to Europe or to the situation in the Gulf, the US equity market is a good place to

start analysing.

Sean Robinson is an Equity Trader at Stocks & Securities Ltd. You can contact him at srobinson@sslinvest.com.