Fri | Dec 27, 2024

QWI wants more US stocks after Nvidia bounce

Published:Friday | December 27, 2024 | 12:06 AMNeville Graham - Gleaner Writer
File
John Mahfood, CEO of Jamaican Teas and QWI
File John Mahfood, CEO of Jamaican Teas and QWI

QWI Investments has managed to turn the page on a string of annual losses aided by adding more US stocks to its portfolio, including Nvidia.

Going forward, management wants to grow its US stocks to half of the fund’s portfolio, from the current 25 per cent.

QWI operates a pooled investment fund that seeks to reduce investor risk by choosing a basket of stocks on behalf of investors. It aims to smooth out the peaks and troughs inherent in the equities market. The Jamaican equities market declined 1.7 per cent from the start of the year. The US Nasdaq grew 27 per cent since the start of the year. A chunk of that rise came from one stock alone, Nvidia, the AI chipmaker which tripled its market cap this year to US$3.4 trillion. QWI CEO John Mahfood said the decision to invest in Nvidia and other key US stocks has served the company well.

“In addition, we have some very good investments in Jamaica that’s also paying off, like TransJamaica Highway and Scotia Group Jamaica, and so on,” he observed.

Mahfood said that QWI’s ability to easily invest in overseas stocks “differentiates” it from other traded funds on the local market, such as Mayberry Equities Jamaica and Sagicor Select Funds.

“We have a bigger percentage of our investments in the US stock market,” Mahfood said. “Potential investors who want to be in the US stock market but don’t have the knowledge to do so, can align with us.”

The JSE Combined Index closed at 342,053 points on Tuesday, Christmas Eve, compared to 501,200 points on the same day in 2019 when the market was bullish. Three months later, it lost one-third of its value to 337,500 points. The rapid drop was due to the onset of the 2020 pandemic, sparking a health crisis and fears of a global business reset.

For the financial year ended September 2024, QWI posted net profit of $126 million, which reversed the loss of $44 million for 2023. This was on the back of gains from investment activities of $294 million, or four-and-a-half times more than the $60.5 million in 2023.

The profit shows the growth of the fund, but the fund managers also focus on the net asset value (NAV), which stood at $1.8 billion to September 2024. This shows the value of all the stocks in the portfolio after fees. Mahfood said since going public in 2019, QWI has consistently returned a NAV per share that is close to its listing at $1.35. The NAV closed at $1.25 on Christmas Eve.

“That shows you that the investments that QWI has been making have been pretty good, and it has well outperformed the JSE Index, which was when we started out,” Mahfood said, observing that better performance was the key selling point.

QWI’s stock closed trading at $0.79 on Tuesday, or one-third less than its NAV per share. Funds on the market generally trade at a discount to their NAV per share, which frustrates managers who want to reduce that spread.

“That’s something we are trying to figure out ourselves, you know, whether that original idea of outperforming the Jamaica stock market resonates enough with our shareholders,” Mahfood added.

In assessing the reasons for the difference between the company’s NAV and the market price, Mahfood observed that QWI was not paying regular dividends. ‘That is something we are now looking at. We paid a dividend this year, and we probably will be likely to pay regular dividends going forward,” Mahfood said.

“The other thing is, I don’t think we have marketed the company enough. We’re pretty quiet,” Mahfood added.

In 2025, Mahfood expects more interest in the JSE arising from the reduction in benchmark interest rates set by the Bank of Jamaica. Those rates dipped to 6.0 per cent this month from 7.0 per cent in August, when rates cuts started. When the market was bullish, interest rates hovered at 0.5 per cent for years.

neville.graham@gleanerjm.com