GRACE’S stock price has hovered between $47.01 to $65.50 for the past 2.5 years, a band of 39 per cent.

A far cry from the all-time high of $123 seen in the 2005 period; the said period where investors have seen the dollar devalue from approximately $59.80 to US$1 to currently $116.91 to US$1, an approximate 48.8 per cent decline.

For an investor in Grace during that period, (which we assume there were quite a number), either outright or through unit trust vehicles, the rate of return has been -96.4 per cent — that being the unrealised capital loss in stock price as well as the unrealised currency loss (not factoring in dividends).

During stages of market euphoria, such as 2005, it is safe to assume, whether through one of the aforementioned vehicles, advisors may have had their clients purchase these shares, and hold, unfortunately for the past 10 years given the intangible value of Grace and due to the extremely strong brand equity that Grace has to their credit.

Should they hold a bit longer? A valid question, as we look at Grace’s shareholder list to commence the discussion.

Being more balanced, if we used the average price of 2005 of $108.55, the capital holding loss would be -40 per cent — or if we used the average price of when the market had a mild rebound in 2007 ($61.45) or 2008 ($76.86) period, the capital and FX holding loss would be, -38% and -56% respectively (not factoring in dividends), according to data from our trusted source of Bloomberg.

I recall back in October 2013 when I appeared on Smile Jamaica — a very popular programme on Television Jamaica — I mentioned that SSL as a financial advisor had GraceKennedy as a Sell, and at the time it alarmed the host, Neville Bell. It was assumed or interpreted that this was a negative or derogatory thing to say. Nonetheless, since that date to now, the holding period return — taking into account price movement in the stock price as well currency movement in the local dollar — has been 3.27 per cent (not factoring in dividends).

I do not think Mr. Bell, in hindsight, would have been too pleased if he had bought the shares over perhaps purchasing another investment.

So, our Client Investment Committee was accurate with conviction. That is, there were better returns for investors in the global or local markets equities market or fixed income actually based on available coupons.

GraceKennedy a buy

Earlier this year, we have moved GraceKennedy to a Buy. We are disappointed with Q1 results as Grace is still trailing the pack, and reported less than stellar recent results (Q1 2015), with earnings down 29 per cent year-over-year for the first quarter, despite growing the top line by 16 per cent. As a result, the price has remained in the current $60-$65 price range awaiting earnings growth to be reflected by management or some degree of value creation for shareholders. Fair enough, Mr Market.

In comparison to other local stocks or conglomerates, here are some snapshots on year-to-date price movements for investors to recognise:

1) Seprod — up 20 per cent year to date, from $3.00 to $J$ 15.70. A reminder:

during this year Seprod touched a high of $J$ 18.50.

2) Supreme Ventures — up 75 per cent year-to-date, from $2.00 to $3.50.

3) Desnoes & Geddes — up 41 per cent year-to-date, from $4.95 to $7.00.

For balance, Pan-Jam and Jamaica Producers have not fared as well either year-to-date, similar to Grace, which draws a comparison — but that may be for a separate topic. Pan-Jam is up 3.8 per cent and Jamaica Producers is up 5.7 per cent year-to-date. It seems Producers has the nose over the new conquerors of tourism for now.

This moves us to our headline — a few large owners have recently moved into Grace’s shareholder list — defined as XAMCAYA Ltd., which was announced in the Observer in a March 19, 2014 article as an overseas-based investment subsidiary with the principal activity in the holding of equity investments, by a publicly listed company — Seprod Group.

I have found difficulty locating it in the annual report or audited financial statements footnotes that accompany Seprod; however, reliance has been placed on the article for these purposes. As at April 30, 2015, XAMCAYA owns 8,524,055 shares, which represents approximately 2.57 per cent of the outstanding share capital in GraceKennedy.

The other notable purchaser is ATL Pension Fund, which has become a top 10 shareholder in Grace, with 6,968,187 shares as at April 30th, 2015, representing approximately 2.1 per cent of Grace’s outstanding share capital.

It has been a long time that I have seen much action (if any) in Grace’s ordinary shareholder list. At times, one may have seen unit trust vehicles, pensions or otherwise, hold small positions (not material), but from what I would deem as legacy investments or historical decision-making periods.

There are very few local stocks that have not benefited from the general rebound in prices since January/ February of this year — probably less than a handful. Grace is one of the stocks that has really not moved, and if one “buys” into the “buy recommendation”, despite the weak earnings history — it can be accumulated at a relatively attractive valuation — with distinct focus on price.

We will not use the word “cheap”, as while the words, such as 50 per cent to book value are used candidly and glorified, if the earnings do not grow and improve on a trajectory, your money will not grow either. We are actively observing the next few quarters.

If we assume these larger owners are our local Warren Buffetts, then perhaps the smaller man can follow as well and get rich over the next investment thesis of three to 10 years. Owning stocks, folks, are not just for the rich man. Become involved and keep pace with the cost of living.

In our next series, we will look at what a 20 per cent ROE would be defined as for Grace. Do investors realise the Earnings per Share that would need to be realised? Present earnings per share to future earnings per share. We will help spell this out in our continuing series.

Mark Croskery is the Chief Executive Officer of Stocks and Securities Limited (SSL)

Email: mcroskery@sslinvest.com

SSL focuses on investment management and financial planning for its client investment portfolios, through its registered dealer’s representatives with the Financial Services Commission.