In my research and investing I stress three things: people, structure and value. I look for companies that are controlled and managed by quality people, have corporate structures that align minority and majority shareholder interests and trade at valuations that are below fair value if not outright cheap.
This post is mostly about people and a bit about value.
Let’s get value out of the way. My interest in Jamaica was spurred close to two years ago when it came up on my screens as having some of the world’s least expensive listed companies. Stocks were cheap, but what about their value? To answer this question I started to research the country and its listed companies. Most of what I learned seems positive for investors and 'cheap' quickly became 'value'.
Part of that learning process included reading “Jamaican Entrepreneurship: A review of the characteristics, traits and ideas of some of the island’s most accomplished entrepreneurs”. It is simply one of the best books I’ve read for a while and near perfect for my type of research and investing.
Before reviewing the book, below are some interesting and lesser-known information about Jamaica that I came across. Most of news flow has been positive in the short time I've been looking at the country. Consider the following:
- Investors are bullish about Jamaica’s future. If stocks markets make indicators of future growth, the Jamaican economy should do well in the next few years. The JSE All Jamaican Composite recently hit its all time high this month and is up 72% so far this year in Jamaican dollars and 65% in US dollars.
- Sovereign borrowing resumed. Jamaica issued its first sovereign bond in three years in July 2014. It was way oversubscribed (related article here).
- SME support. According to the 2015 Doing Business Report by the World Bank, Jamaica has the best laws for small and medium-sized businesses in the Caribbean. It ranks as the 58th best place for small businesses in the world, jumping 27 places from last year (article here).
- Reinvigorated bauxite exports. Despite the price of aluminum falling close to its 2009 low, bauxite production appears to be increasing with Russia’s Rusal expanding production. Bauxite is an importance source of foreign exchange for Jamaica (article here).
- Social openness. Judging from the number of women in powerful positions and the racial smorgasbord of corporate directors’ names and pictures, Jamaicans appear to focus on ability rather than gender or color. Women in powerful positions include Jamaica's prime minister, Portia Simpson-Miller and Kingston's mayor Angela Brown Burke. Almost 20% of Jamaica’s listed companies have female CEOs. This includes Jamaica's largest bank (Scotiabank, headed by Jacqueline Sharp) and Jamaica's sole electricity supplier (JPS, headed by Kelly Tomlin) (article here).
- Expanding financial markets. Another female leader is the head of the Jamaican Stock Exchange, Marlene Street Forrest. Since becoming General Manager, the exchange introduced online trading, and currency and bond markets. She's also promoting the exchange as a place for companies to raise money as proudly proclaimed on its Facebook and Twitter feeds (article here).
- Urban redevelopment. Jamaican conglomerate Grace Kennedy plans to move its headquarters to downtown Kingston’s waterfront thanks to the Urban Renewal Act. The development may be available to investors through a REIT in the future (article here).
- Laws coming in-line with reality. Along with many Western Hemisphere jurisdictions, Jamaica decriminalized medical marijuana in Apr 2015 (article here). Just recently a Jamaican living in Canada has proposed investing US$100m in a marijuana growing initiative (article here).
“Jamaican Entrepreneurship” is my kinda book. It is heavy on facts and very people-centric. Its 239 well-organized and easy-to-read pages profile 15 Jamaican entrepreneurs from different segments of society, provides a short history of the island’s economy and business environment, and reviews policies that favor entrepreneurship.
The profiles form the bulk of the book. They include the entrepreneurs’ background, family connections, education level, and business accomplishments. Most books such as this focus on the subjects' business backgrounds and typically provide just cursory background information. Bravo to the author for including a full view.
Some of my favorite profiles are Audrey Marks, the founder and CEO of Paymaster Jamaica, the island’s first multi-payment agency; and Norman Wright, the Founder of Perishables Jamaica, who is helping to revitalize Jamaican farming by packaging, branding and exporting locally-grown herbal teas. Others are Rita Humphries-Lewin who founded and chairs the Barita Group of Companies, one of Jamaica’s largest investment banks; and high school dropout Gordon ‘Butch’ Stewart who started the Sandals hotel chain and revitalized tourism on the island.
Having written about many South East Asia-based Chinese business groups I found the profiles of Jamaican Chinese entrepreneurs to be the most interesting. Many trace their roots to Fujian and Guangdong provinces – the same home provinces of many of the richest families in South East Asia. Their stories parallel those of many South East Asian entrepreneurs such as Soedono Salim (blog post here). Many started as traders before moving into manufacturing or services. The profile of Vincent Chang, who started a chain of fast food restaurants, is very similar to the history of some of South-East Asia's richest families.
The book also includes a short and concise background to Jamaica’s history and economy. Its ‘discovery’ by Columbus and the enslavement of indigenous people under the Spanish. The rise of, and dependence on sugar plantations based on imported slave labor. Independence in 1962 with a few good years before socialism, corporate nationalization and subsequent economic decline in the 1970s. The 1990’s financial meltdown and the lost decade that began the new millennium.
Coming In From the Cold
It’s almost 20 years since the island’s financial crisis, and the country still has a lot of problems. National debt is high at 132% GDP. The book notes that interest on it accounted for about 50% of government expenditure in 2013. There is a concern that this high debt level does not include that owed to China (article here).
Jamaica’s diaspora is a double-edged sword. The book notes that it has the fifth highest rate of remittances in the world, which account for nearly 15% of GDP. These are maintained by the high rate of migration with 85% of tertiary graduates leaving Jamaica – one of the highest rates in the world. Every year 20% of Jamaica’s specialist nurses and 8% of its registered nurses leave the island.
However Jamaica has a good shot at moving forward. It can educate its citizens. It has a young population. Political transitions have been peaceful since independence. Its financial infrastructure appears to be improving. Laws and regulations are changing to support its business sector.
Jamaica punches far above its small size in a wide variety of fields. Its citizens prove time and again they can compete with the best in the world. With its progressive government, talented people, and a bit of hard work, there’s a real possibility that the next decade will see Jamaican businesses do as well at home as it’s citizens have abroad.
The book’s introduction logically points out that, “Jamaicans have already shown that they can have an impact on the world stage in areas such as sports, music, food and culture. Now it’s time to make a mark on the global economy”.
My thanks to Dr. Laman for researching and writing such an insightful and easy to read guide to Jamaica’s other talent pool. It can be purchased at his website which is here.
I'll end this blog with a link to one of my favorite Jamaican songs. George Faith's "To Be a Lover", remixed by Lee 'Scratch' Perry, can be found here