Rezworth Burchenson. - IAN ALLEN/STAFF PHOTOGRAPHER
REZWORTH BURCHENSON is vice-president & general manager of Pan Caribbean Asset Management Limited, formerly called Sigma Unit Trust. In 2004, Sigma Unit Trust's Sigma Optima Fund was Jamaica's top performing equity fund (102 per cent net gain), while Sigma Solution (18 per cent net gain), the company's fixed income fund, was the top performing fund in its class on the island. Below he gives his views on his company's strategies as well as market opportunities.
WB: What do you all look for in an investment?
RB: It's important to emphasise that we are first and foremost a growth fund, not a value fund. So if the earnings of a company aren't growing, we're not going to buy the stock. So then we try to separate the performance of a company, from the stock price even though they're co-related. We have to satisfy ourselves about certain things such as whether the management is strong and deep; how much growth exists at the bottom line and the strength of its balance sheet; whether they're diversified outside of Jamaica things like that
WB: Go on......
RB: Well, what we find is that there is a very strong correlation between the performance of a company's stock price and the growth in a company's bottom line. A company's value is determined by its price earnings multiple. If a multiple is constant, then the only thing that can change is its earnings per share. it therefore means that we have to look for those companies with the growth. At Pan Caribbean we buy the top 10 per cent of the high growth companies.
WB: I see. Tell us: which stocks do you like?
RB: Oh, I like Courts, and I like Gleaner for the medium-term, and Lascelles for the long-term. I also like Producers as a value stock, and Carib Cement because of our projected GDP growth
WB: What about PCFS and LOJ? Have you invested more in LOJ, since your association?
RB: Well, between both stocks they make up about 17 per cent of our portfolio. Between the start of 2004 and now, as a result of the same rigorous analytical process I mentioned, we have basically tripled our investment in both companies
WB: What would you say is the most over-rated stock on the JSE?
RB: You don't expect me to answer that, do you! (laughs) Seriously, though, what I'd prefer to say is what investor's should stay away from. Well, for one thing, they should avoid the hype when results are released. Another thing is that they should always benchmark a company's PE (price earnings) ratio to its industry.
WB: For example?
RB: For example, within the financial sector there are companies with multiples as low as 10, and as high as 20
WB: And the most under-rated stock?
RB: I don't know about "the most", but 2 examples of under-rated stocks are Jamaica Producers and Gleaner Company. The market is ignoring their value, I think, maybe because they aren't what we think of as "momentum stocks". You have to remember that occasionally, some of the best buys are companies that aren't sexy, companies that don't have a lot of PR tracking their activities. Sometimes you'd be surprised how even professionals are affected by public relations.
WB: Any dark horses for 2005?
RB: I don't believe in dark horses (laughs)! We have our strategy and we stick to it, remember.
WB: How much do you think the market will grow by this year?
RB: About 20 per cent, I think. We think the multiple will remain constant this year, so what will drive the market is the performance of the listed companies. On average, you'll have companies growing their earnings in the high teens to low 20s which is still ahead of other investment classes
WB: Finally, what about you would surprise most of your associates?
RB: Maybe that I'm basically risk-averse! Let me explain, though, that because I work every day with a team that uses a strategy that over the long-term tends to minimise any possible down-size, I'm not involved in a risky business at all.
