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The NGX index is up by 6% on a Year-to-date with 3 stocks already posting double-digit returns above 50%; International Energy Insurance Plc (up by 160.98%), John Holt (66.25%) and NNFM (58.54%).
While this looks like everyone’s dream in the stock market, I don’t think they’d be the winner for 2023 as it’s too early for such a call.
Personally, I am not in this market to be right on any stock, as long as I am making consistent returns year after year by following the 3 simple trading steps I teach in my trading course, I can boldly say that I am a profitable stock trader.
If you have been asking what these 3-steps are, they are:
- Finding beaten-down stocks with improving financials so you can get in early.
- Knowing the stocks that are attracting attention from your selected picks and
- Making sure they are not overbought but still have room for more upside potential.
Last week, I sent a mail to all the subscribers to my weekly newsletter (www.IWillTeachYouStocks.com) and one of my strong buys in the list of stocks to watch is Unilever.
Unilever has lost over 350% in the last 5 years which makes it a no-go area for long-term investing (at least for now). But if you are a smart short trader looking for trending stocks that have upside potential, you can consider these consumer goods stocks.
In the last 6, 3 and 1 months, I have seen positive sentiment drive the stock price of Unilever to the north; 0.37%, 35.50% and 16.81% respectively. I believe that if a stock is set to do 50-100%, I want to see some level of capital appreciation that’s not just tied to the general market run but one that’s largely connected to its impressive quarterly results.
Financial performance of Unilever:
- Trailing twelve-month revenue and quarterly growth year on year are 25.8% and 14.26% respectively.
- Net income and quarterly growth year-on-year print at 75.78% and 381.22%.
- EPS in the same period stands at 75% and 171.67%
Technical Analysis:
The stock bounced off the 52-week low of N9.7-N9.8 twice (May 2020 and November 2022) to confirm a strong bottom. It has since appreciated by 37%, from the low price to reach its current market price of N13.55
Interestingly, the stock price is at par with its 20-month average and from the chart above, the price had been well below this average since 2018 – a perfect reflection of negative sentiment gradually turning to positive.
It had tested this average twice in the past; in November 2021 and July 2022 before it pulled back to the 52-week low of N9.82.
Right now, I am watching the stock for a possible breakout above the 20-month average of N13.55; If the short-term sentiment driving the stock continues to grow, it could rally higher to its 50-month of N17-18, representing a 25% upside.
But this isn’t my target upside; Unilver had established support levels that attracted buyers four (4) times before the price broke out to the downside in November 2019.
This region, which was between N25-N26, was tested in April-May 2012, December 2014, March 2016 and March 2017 respectively. This looks like the closest resistance if the stock price clears the minor resistance of N17-N18 in the next 5-6 months.
The only downside risk is if the company results fall short of expectations but for now, I think the high inflationary environment may support improved margins and bottom line which may help sustain the current bullish sentiments.
