Investing in the Caribbean
- a new philosophy

Investors looking at stock markets in the Caribbean region will have to change their investment philosophy, says Darcy Carr, Managing Director of Investments International.

"With increased focus on export-driven growth and the introduction of the Internet and other means of rapid communication to the Caribbean region, stock markets are starting to take on a world perspective. Traditional methods of analyzing past years' performance to justify this year's prices are likely to fade," says Carr.

"Here in Caricom," he continues, "investors focus heavily on earnings, dividends and past years' performances. But this type of analysis does not consider the dramatic changes that would affect company's earnings in the future. Investors must give more consideration to the underlying fundamentals of a company, considering its management, the industry in which it operates, new Government policies, such as trade liberalization, and its potential to improve earnings over last year's performance.

"Of key importance today is the ability of management to quickly adapt to changing times and deliver the quality of service and product that is necessary to satisfy the new discerning consumer." Proactive management and new aggressive small companies are consistently outperforming the traditional conglomerates, following the worldwide trend towards small to medium enterprises.

Forecasters predict that by the year 2010, more than 80 per cent of the world's workforce will be employed by companies with fewer than 200 employees. This trend is definitely visible in the Caribbean region. Traditional family businesses are finding they need to become more aggressive in marketing to other regions.

"Investors should be careful to consider how profits would be generated in years to come," says Carr. Industries that have been doing well in recent times will not continue to do so unless they are able to keep pace with change. Few stocks trading on the region's stock exchanges are growth focused. This very much restricts the choice the investor has to improve his returns above traditional stock market index performance. Following a stock picking approach using a blend of both value and growth-focused analysis is probably the best means for long-term success. Search for companies whose sales and earnings are growing but whose stock is also undervalued relative to traditional or competitors' performance.

"A very interesting approach used by Peter Lynch, Fidelity Magelan's famous Investment Manager," noted Mr Carr, "was to go to the top company in the industry and ask them who they respected the most. Ninety percent of the time Mr Lynch purchased the stock that the leading competitor respected most, as that was the company which demonstrated the dynamic leadership and growth path which was best in the industry."

"Remember, not to get over- exposed in any one region or with any one favourite stock. Falling in love with a security leads to disappointment, as you are too emotionally attached to its success," says Carr. Taking a conservative approach does not yield the best of results in fast- moving markets. But more importantly, this approach tends to conserve funds and succeed in poorly performing markets.

"Don't be afraid though," says Carr. Just like buying a house, investing in ownership, through stocks in a stock market, is one of the few alternatives which provides the investor with the ability to outpace inflation over the long term, delivering the funds necessary to adequately meet retirement needs.

Rank                Investment                                    Outlook

1   Unit Trust Corporation (G&IF) - Trinidad         Growth expected on last year's results
2   Government T-Bills - Jamaica                          Gov't Backed but some currency risks
3   Unit Trust (MMF) - Jamaica                            Strong L-Term growth, some X-change risk
4  Casa Autrey - Mexico                                       Low Risk, high growth potential
5  L J Williams (B) - Trinidad                               Undervalued, high growth potential
6  Telecom of Jamaica - Jamaica                           Undervalued Gain to year end
7  Carreras Group -  Jamaica                                Strong cash rich position
8  Alfa Corp - Mexico                                          Well Managed - Diversified risk
9  ANSA McAL - Trinidad                                   Well managed - Diversified risk
10 Cemex - Mexico                                              NAFTA expands futire prospects
11 Bank of Nova Scotia - Trinidad
12 Penoles Mining - Mexico
13 Jamaica Flour Mills - Jamaica
14 Bank of Nova Scotia - Jamaica
15 Republic Bank - Trinidad
16 Royal Bank of Trinidad and Tobago
17 Govt Repos - Jamaica   
18 GCC - Mexico
19 Commercial Bank CD's - Jamaica
20 Trinidad Cement Limited- Trinidad

Executive Time "Online" also has a printed version which is available throughout the Caribbean and some selected North American cities.