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Weekly Caribbean Stock Report

Published:Tuesday | February 14, 2012 | 2:00 PM

Caribbean stocks ended the week of February 10 lower, as 14,525,713 shares valued at US$6,885,420 crossed the floors of the six stock exchanges across Caricom, with 23 stocks advancing, 57 declining and 46 remaining unchanged.

Stocks were dragged down by weak performances in financials and conglomerates.

Cable & Wireless Jamaica was the volume leader with 4,395,638 shares being traded, Carib Cement posted the largest gain of 24.08% for the week, while on the losing end, Lasco Financial fell 17.92%.

For the week, 10 of the CSX 30 stocks advanced, fourteen declined and six were unchanged. The CSX 30 lost 1.42 points to close the week at 1,300.63, down 1.09% year to date.

On the junior market, two stocks advanced and 10 declined. The CJSX lost 30.97 points to close the week at 1,699.98, down 6.44% for the year. Table 1 provides a summary of the broad market indices for the week as well as some international comparisons.

Table 1: Broad Market Indices February 6-10

Sector Analysis

Across the various sectors, the CMSX posted the strongest performance for the week advancing 1.40% as eight manufacturing stocks advanced, fifteen declined and eight were unchanged.

The group was led by gains for Carib Cement (24.08%), Seprod (14.13%), Kingston Wharves (4.09%), Jamaica Broilers (3.27%), Berger Jamaica (2.72%), Angostura Holdings (2.55%) and West India Tobacco (1.65%).

There was a 7.18% decline in the shares of National Flour Mills, a 4.10% decline in Jamaica Producers and a 3.37% decline in Flavourite Foods. The CRDX advanced 0.52% as one retail-distribution stock advanced, four declined and six were unchanged.

The CIIX declined 0.85% as one insurance-investment stock advanced, seven declined and seven were unchanged. While Sagicor Life Jamaica gained 2.52%, the group was dragged down by losses for JMMB (4.83%), Mayberry (2.74%) and Pan Caribbean Financial Services (1.68%).

The other sector indices were essentially flat for the week.

Table 2 provides a summary of the sector indices, followed by details on the performance of the stocks in each sector.

Table 2: Sector Indices February 6-10

Stocks On The Move

Tables three and four provide some widely used financial metrics on the biggest movers for the week. Prices are in US dollars.

Table 3: Advancing Stocks: February 6-10

Table 4: Declining Stocks: February 6-10

Investing School

Dogs of the Dow Investing Strategy

The Dogs of the Dow is an investment strategy popularised by Michael B.O. Higgins, in 1991 which proposes that an investor annually select for investment the ten Dow Jones Industrial Average stocks whose dividend is the highest fraction of their price.

Proponents of the Dogs of the Dow strategy argue that blue chip companies do not alter their dividend to reflect trading conditions and, therefore, the dividend is a measure of the average worth of the company; the stock price, in contrast, fluctuates through the business cycle.

This should mean that companies with a high yield, with high dividend relative to price, are near the bottom of their business cycle and are likely to see their stock price increase faster than low yield companies.

Under this model, an investor annually reinvesting in high-yield companies should out-perform the overall market.

The logic behind this is that a high dividend yield suggests both that the stock is oversold and that management believes in its company's prospects and is willing to back that up by paying out a relatively high dividend.

Investors are thereby hoping to benefit from both above average stock price gains as well as a relatively high quarterly dividend. Of course, several assumptions are made in this argument.

The first assumption is that the dividend price reflects the company size rather than the company business model.

The second is that companies have a natural, repeating cycle in which good performances are predicted by bad ones.

Prepared for the Department of Management Studies, UWI Cave Hill.