2 Growth Stocks You Can’t Afford to Miss in 2019

While the NSE all share index has been more volatility lately compared to their counterparts in emerging markets, I still believe that there is still short to medium term growth potential for a patient, risk-tolerant investors that pick stocks at the bottom before they rally.

One key secret of such investor is that they no longer wait for final results before picking actual stocks to buy but uses “growth numbers posted on the first quarter, to spot growth stocks that are already on track to beat previous full year’s result“, then buy ahead of the anticipated market rush.

Today, I have picked two (2) sure stocks you can buy on dip and are clearly on track to deliver better than expected result in 2019.

Chams Plc

Chams PLC offers smartcard technologies. The Company offers a public access retail billing and collection system with Internet access. Chams also offer home office products.

Last year, the technology stock broke its record of a 3-year consecutive loss as its reported a profit after tax of N380m, a 131% growth compared to a loss of N1.26b declared in 2017. Interestingly, this is the highest profit posted by the company in 5 years.

The highlight of Chams’ financials in the previous full year shows that sales grew from N1.9b to N3 (57%), while the cost of sales expanded by 83% but didn’t deter the company from posting a high gross profit of  N785m compared to N742m.

A reduction in administrative expenses and write back of VAT provisions contributed to the company’s shift to positive territory, from an operating loss of N1.2b to a profit of N31m.  With shareholders equity of N1.95b, return in equity for the year was 19.4% compared to a loss.

Chams plc has also proved that the growth in the previous year’s result could be sustained as it reported an impressive Q1 2019 result.

Continue reading 2 Growth Stocks You Can’t Afford to Miss in 2019

Why Fidelity Stock Price Rally May Attract More Buyers to FCMB.

A few weeks ago, I alerted everyone on Fidelity bank, why the banking stock is still cheap at N2.38 and went on to share my technical and fundamental reasons you should quickly jump on the penny stock.  In line with my forecast, the stock did rally by 17% to N2.80 before reversing the 6 days bullish run to settle at N2.46.

While I still anticipate further upswing close to my estimated fair value on the release of the bank’s full-year result, we advise that you remain cautious by considering a 25-30% exit price of N2.9-N3.

Here is Fidelity stock’s Chart:

Based on the chart above, Fidelity might be set for another rally as evident by the bullish pin bar formation at N2.34 – N2.4 support level. The bank had already surpassed its 9-months figure in its previous comparable period (2017) and is expected to release better full year’s figures.

How does this translate to a buying opportunity on FCMB stock, you may ask?

Both banks, as of this analysis, have the same trailing twelve month EPS of 77k which when discounted by a modest adjusted risk premium rate of 19%, presents a fair value of N3.8 – N4.05. FCMB stock sells for N2.27 far behind Fidelity bank’s stock (N2.46).

Interestingly, FCMB formed a golden crossover today. Find more information on how I trade the golden crossover.

Continue reading Why Fidelity Stock Price Rally May Attract More Buyers to FCMB.

How a Novice Made N83,551.02 Profit from 4 Penny Stocks I Recommended

There is nothing that makes one feel happier than the feedback you receive from an anonymous blog visitor, at least it validates your analysis and keep you motivated.

This is a mail to sent by someone I don’t know.

Hi Oge, thank you for independent analysis of stocks on your blog. I am newbie who has lost so much money in the stock market. It’s been long I saw my portfolio in green colour. Despite the volatility and bearish trend witness in the market last year and political uncertainties surrounding the general election this year, my overall stock portfolio is up by 5.6% as I send this email to you. Thanks to  your penny stock recommendations like LearnAfrica, Fidelity and Wema. In fact, my portfolio would have been 35% up except for an Insurance stock whose value is down by almost 30.6%.

Thank you and God bless you!

Godwin, Abuja

He started following my stock recommendations last year with keen interest to buy every stock I analyse on this blog, I remembered when he sent a mail to me requesting a one on one training but the distance was a barrier but he never gave up, instead he followed my updates on undervalued penny stocks to buy.

Continue reading How a Novice Made N83,551.02 Profit from 4 Penny Stocks I Recommended

4 Reasons You Should Buy Learn Africa Stock at N1.40

When I shared a list of stocks you should watch closely before the general election, LearnAfrica was one of the stocks I asked my blog subscribers and Whatsapp group members to keep an eagle eye on.

The stock went up by 40% in 2018.

The stock, from the time we shared out first analysis, has appreciated by 12% to close at N1.4, from N1.24.

Here are 3 reasons we think the publishing company could go higher than its current market price.

The stock’s 50-day SMA had just crossed its 200-day to the upside.

When a stock is trending up as a result of increased buying interest, the moving average tends to follow the same direction and one of such is the 50-day SMA, an important average that reflects investors’ sentiment in medium to short term.

The 50-day MA also coincides with the 3-month period; this is the period every company is expected to release its quarterly results. A cross above the 200-day SMA indicates that the penny stock is attracting attention.

Continue reading 4 Reasons You Should Buy Learn Africa Stock at N1.40

Why Fidelity Bank Is Still Cheap at N2.38

If you had bought Sterlings bank’s stock when I shared my analysis of the banking stock and how it was grossly undervalued at N1.61, your equity investment should be up by 47%. The stock, as of this update, now sells for N2.36. Such return in 3 months is hard to come by in Nigeria, not even CBN Treasury Bill, FGN Bond nor your local bank’s fixed deposit can give you double-digit return.

Another stock I had mentioned on this platform is Newrest ASL. I bought this stock at N4.95 and sold at 7 after the company notified the exchange of its voluntary exit, which translates to 41% return.

While we can’t assign 100% accuracy to our stock picks, we believe, from results, that you have a higher chance to make more money consistently, beat the market and build a passive income investing business if you master and stick to the stock trading strategy shared here.

Continue reading Why Fidelity Bank Is Still Cheap at N2.38

3 Stocks to Watch Closely in this Pre-Election Season

We are a few weeks away from the general election, the stock market index is at bottom of the curve, a bearish trend that started last year (2018). But should you follow the crowd and wait for the stock market to pick before investing? I bet you, you may be paying more than what you can get right if you allow fear to drive your trade decisions.

According to Warren Buffet, the best strategy to make money in the stock market is to be greedy when others are fearful and the be fearful when others are greedy. While the latter is for the bullish market, the former is for a bearish market.

Although we might witness another market fall as election risks drive more fund flow from the equity market to safer fixed income instruments but 28,000 – 30,000 basis point seems like a strong support region to watch closely.

How can one be greedy in this market when the daily index fall is alarming amidst Election Fever?

For me, I use moving average crosses to pick good stocks that are outperforming the market index, this strategy account for 80-90% of my success in the Nigeria stock market. As simple as the tool is, it has helped me weed out sluggish stocks and scan for best performers even in a bearish market.

Continue reading 3 Stocks to Watch Closely in this Pre-Election Season

The Short term Stock Trading Strategy that Works

Trade Nigerian Stocks Using These Short-term Strategies – Learn the Best Short Term Trading Strategies that Works and Makes 20-30% Return in a Bearish or Bullish Market

The key secret to making money in the stock market isn’t all about jumping into a fast-rising stock because you don’t know when the trend is about to reverse but understanding and having a perfect trading strategy that spots the beginning of a bullish trend ahead of others.

In this guide, I will be sharing a short-term stock market trading strategy that can deliver an impressive gain of 25-30% return in 1-3 months. With this guide, you will weed out bad stocks, focus on momentum stocks that are attracting huge buying interest even in a bearish market.

My result:

I bought Sterlings bank and averaged down to N1.6 on November 4th, 2018 and after 1 month, I sold  50% of my units holding at N2 per share (25% profit), I left the other units because the banking stock could surpass the fair value estimate since it had delivered double-digit growth in the last 9 months.  As of this write-up, Sterlings is selling for N1.81 per share.

See – Analysis of Sterlings Bank stock during Golden Cross

To save time on this long story, the strategy I am talking about is Golden Crosses.

What is Golden Crosses? This is a moving average crossover that describes a rare cross between the 50-day SMA and the 200-day SMA. While the 50-day measures the average price of a stock in the last 3 months and widely used by short-term traders, the 200-day, used by long-term investors, measures the average price of stock in the last 1 year.

If you invest for a long-term, you shouldn’t be worried about short-term fluctuations, rather look for longterm sentiments and momentum stocks.

An effective Golden cross isn’t all about chart patterns but understanding the fundamentals behind price.

If a company is built on solid financials; impressive double-digit quarterly results and has a steady rising trend, and suddenly the 50-day moving average crosses the 200-day to the upside, it can bring the attention of a lot of existing and new investors.

You must also note that for a Golden Cross to happen, the stock’s price must have been moving up for a reasonable amount of time before the cross happened, say 3-6months.

After all, the shorter of the two moving averages are 50 periods. (EG 50 days), so for the price to pull the 50MA up to cross above a 200-day average, then there’s already been some significant strength in the price.

Please note that it is not all crosses that are golden, you need to understand the fundamentals of the stock, check recent results, opportunities and fair value estimate.

Here are my criteria for picking stocks that made golden cross:

  • The 50-day SMA should show a recent cross above the 200-day SMA; for instance, the 50-day price of Sterlings bank was N1.52, slightly above the 200-day average of N1.50.
  • The fundamentals of the stock should support the recent momentum: Sterlings bank’s PBT, PAT and EPS in Q3 jumped by 30%, 38% and 33% respectively.
  • The estimated fair value of the stock should be well above the 200-day SMA. The fair value of Sterlings bank as at when I bought was N2.44, which was far above the 200-SMA and 50-day SMA. If the fair value is below, the long-term average, avoid such stock, reversal is imminent.
  • The price should be trending in the last 1, 3, 6months before the golden cross. Sterlings bank year to date performance was 60%+ before it made a golden cross.

Sterlings Bank:

The stock went from N1.6 to N2 in weeks, that’s 25% return.

Away from Sterlings bank, here are some other stocks that made golden crosses recently and their recent performances:

Newrest ASL (Airservice)

 

I bought Newrest ASL at 4.95 after the stock made a golden cross (see my analysis here some days after purchases) in September 2018. As of this write-up, the stock price is N6.9, 39% profit in 2 months.

Newrest ASL had already surpassed its previous year financials, and from my fair value estimate, the stock should sell for N10.

As you can see, these are excellent stocks with beginnings of new momentum building. Golden cross mixed with fundamental analysis is a great short-term strategy that works in a bullish or bearish market.

 

Looking for an Undervalued Penny Stock in the Banking Sector?

While everyone is cautious about buying stocks in the NSE market on growing bearish sentiments, Sterlings bank’s stock seems to have shown some resistance last week as it appreciated by 6.67% to close at ₦1.60, from an opening price of ₦1.5. This might be one of the undervalued bank stocks to buy in the Nigeria stock market.

You are strongly advised to do you own research.

The upward move in the share price isn’t unconnected to the bank’s impressive Q3 results which showed revenue, interest income and profit on double-digit growth trajectory.

As of this analysis, the stock is selling for ₦1.65 with 1-year and YTD performance now at 57.17% and 48.15% respectively.

Analysis Recent Result

Results for the 9-month ended September 2018 show that interest income increased from ₦78.6 billion in 2017 to ₦93.5 billion in 2018, 18.9% growth.

Profit before tax jumped by 30%; from ₦6.5 billion in 2017 to ₦8.5 billion in 2018. Profit after tax increased by 38%; from ₦5.9billion in 2017 to ₦8.2billion in 2018.

In summary, the bank’s bottom line was largely supported by efficient utilization of customers’ deposit on loan and over 50% reduction in impairment charges. This is coming at a time other top tier banks (GTB, Zenith, UBA, FirstBank) are cutting down on their loan book which unsuprisingly affected interest income.

The bank has a Return on Equity 10%, Return on Asset of 1% while Net Interest Margin is 7%

Customer’s deposit, a measure of customers’ confidence in the bank, also grew by 5% to ₦723 billion from ₦684 billion. This also translated to increased lending to the private sector, as loan and advances to customers increased from ₦662 billion from ₦598 billion.

OPEX increased by 54% as the bank incurred more cost on administrative expenses.

Cash generated from operations on the Q3 report is ₦7.6 b (compared to a negative cash flow ₦100 billion in the previous comparable period)

Technical Analysis

Sterlings bank share price is trading for ₦1.65, above its 50-day average of ₦1.52 and 20-day moving average price of ₦1.43.

Generally, a stock is bullish on a short and long term when its share price is above 50-day and 200-day moving averages respectively.

With the price showing a recent cross above the 200-day SMA of ₦1.50, Sterlings bank might be set for an impressive long-term bullish run

undervalued bank stocks to buy

Valuation

Sterlings bank reported a 9-month EPS of 28k, which is 33% more than the EPS of 21k in the comparable period (2017).

Using an adjusted discount rate of 15%, an assumed zero growth on TTM EPS of 37k we assign a fair value of ₦2.46 to the stock, which is 49% above the current share price of ₦1.65.

Besides, the banking stock has a forward PE ratio of 4.45 which is below industry average; there is room for upside.

Market update

No update on

Recommendation

We assign a BUY rating on Sterlings bank’s stock.

About Sterlings Bank Plc

Sterling Bank PLC provides banking products and services to personal and business customers. The Bank offers services in corporate/commercial banking, retail & consumer banking, financial investments and management services, capital markets, insurance, and other financial services.

Top Gaining Stocks to Watch Closely Next Week

The NSE All-Share Index and Market Capitalization depreciated by 2.38% to close the week, November 2nd, 2018 at
32,124.94 and N11.728 trillion respectively.

Similarly, all other indices finished lower with the exception of the NSE ASeM index that closed flat.

  • NSE Consumer Goods Index (-2.72%)
  • NSE Premium Index (-3.09%)
  • NSE Main Board Index (-1.73%)
  • NSE ASeM Index (0.00%)
  • NSE 30 Index (-2.39%)
  • NSE Banking Index (-0.38%)
  • NSE Insurance Index (-2.96%)
  • NSE Consumer Goods Index (-3.25%)
  • NSE Oil/Gas Index (-7.8%)
  • NSE Lotus II (-2.81%)
  • NSE Industrial Goods Index (-4.06%)
  • NSE Pension Index (-2.86%)

Here are top gaining stocks for the week:

  • Presco Plc – The stock price increased from N53 to close the week at N59.85, 12.92%
  • Neimeth International Pharmaceutical Plc – The stock price increased from 54k to close the week at 60k, 11.11%
  • Consolidated Hallmark Insurance Plc – The stock price increased from 30k to close the week at 33k, 10%
  • Newrest ASL Nigeria Plc – The stock closed the week at N6.6, from N6 representing 10% growth in 7 days.
  • C & I Leasing Plc – The stock started the week at N2.55 and appreciated by 9.8% to close at N2.80.
  • Livestock Feeds Plc – The stock opened at 52k and appreciated to 57k, representing 9.62%.
  • International Breweries Plc – The stock price went from N31 to close the week at N33.55, 8.23%
  • Learn Africa Plc -The education stock opened at N1.10 and close the week at N1.18, 7.27%.
  • Mutual Benefits Assurance Plc – The insurance stock started the week at 28k and appreciated to 30k, 7.14%.
  • Sterlings Bank Plc – The banking stock also appreciated by 6.67% to close the week at N1.6, from the N1.5 opening price.

(Source: NSE)

Stocks to Watch:

  • Newrest ASL Nigeria Plc

The company released its Q3 results with revenue and profit jumping to the roof. Based on the 42% increase in top line and 293% growth in Q3 EPS, Newrest ASL has surpassed its 2017 full-year earnings by a wider margin.

Our TTM EPS on this stock is N1.97, which on a 15% adjusted discount rate, presents a fair value estimate of N13.

Verdicts: The stock had already risen by 10% in the last 7 days, investors might need to wait for a dip on profit taking or buy available offers at not more than N7.

Year to date, the stock is up 10.92%.

  • Sterlings Bank Plc

The bank released an impressive result with double-digit growth; Q3 revenue grew by 21%, profit before and tax after increased by 30.7 and 38.1% respectively. The bank’s customer deposit increased from N684 billion to N723 billion, 5% growth.

As a loan driven bank with loan/asset ratio of 61% (an increase from 55%), Sterlings bank demonstrated its capability to utilize customer deposits as a loan; interest income from loan and advances to customers increased by 20%, from N58 billion to N70 billion.

Based on a TTM EPS of 37k and an adjusted discount rate of 15%, we assign a fair value of N2.46, 53% upside potential from the price of N1.6.

Year to date, the stock is up by 48.1%.

Disclaimer: Please do your homework, this is not a buy or sell recommendation.

This Top Gaining Catering Stock Still Has 96% Upside Potential

Investors love stocks that consistently appreciate and are still trading below their fair value estimate; we call such stock cash cow as their risk of melting down is minimal while the upside potential is high.

In my company’s analysis, I will be reviewing Newrest ASL (Airservices), a stock with an upside potential that is clearly supported by its improving financials and could reward smarter investors who key into the current price of N6. Although I started accumulating the stock at N4.95, the closing price of N6.6 is grossly undervalued when compared with its estimated fair value.

Newrest ASL Nigeria Plc provides catering and related services. The Company operates inflight catering facilities, lounges, and restaurants. Newrest ASL serves the aviation industry operating in Nigeria.

See – How I Pick Penny Stocks To Trade

The stock is up by 10.92% on YTD as investors increase their bid in today’s trading after Q3 results were released.

Fundamentals.

Newrest ASL has just released an impressive Q3 2018 results with revenue coming out at N4 billion against N2.8 billion reported in 2017, representing a 42%.

On a breakdown, revenue growth was largely supported by Inflight catering services from Lagos branch, Handling and Laundry services. The company also commenced catering services to local flights and industry which contributed a significant N93million value to the top line.

Gross profit margin fell marginally to 65% (from 67%) but well above industry standard.

Operating margin, which was negative in the previous comparable period, was also impressive at N402 million while profit after tax increased by 191% to N1 billion respectively.  Interestingly, the company had surpassed its 2017 record profit of N428 million.

Return on Equity, a measure of how the firm utilized shareholders’ fund also increased to 22% against a paltry 8.5% in 2017 while exposure to debt was scaled down as debt to equity declined from 40% to 33%.

The liquidity position of Newrest ASL as indicated by current ratio increased to 3.6 from 2.7′; the company can settle its short-term obligations with its working capital.

Cash generated from operation fell from N1.7 billion to N902 million.

Technical Analysis

The stock closed at N6.6 which is above its 20-day and 50-day moving average of N5.99 and N5.57 respectively. Technically, the stock is bullish on short-term as long as the 20-day moving average is above the 50-day MA.

While the share price is above 200-day moving average of N3.38, long-term sentiments are also positive.

Valuation

Newrest ASL didn’t only reported a 293% growth in Q3 EPS, from 44k to 173k but also surpassed previous year’s EPS of 68k. Using an adjusted discount of 15% on TTM EPS of 197k, we assign a fair value of N13 to the stock which, when compared with its current closing price of N6.6, represents 96% upside potential.

From our end, we assign a BUY rating on the stock.

This Bank’s Stock Has a 33% Upside Potential.

Wema Bank Annual Reports & Analysis of Banking Stocks – See My FInancial Result Analysis of Wema Bank and Fair Value Estimates Using Q3 2018.

NSE banking index has been worst hit by market sell-offs and we already know why: the effect of fallen yield on fixed income securities and cautious lending to the private sector, hence lower loan and advances.

Amidst these risks, Wema bank seems to be the only short-term penny stock in the banking stock I’d love to buy and resell in 2-3 months. Here is why:

The bank had just released its Q3 earnings report with key metrics showing double-digit growth.

The stock is selling for 63k with its YTD performance of 30.77%.

In January, Wema bank had an explosive run from 46k to ₦1.48, 221% growth but had since fallen to a year low.

Month to Date, the stock is up 15% which is the second month the bank stock closed higher, a sign that investors may have started accumulating the stock again.

Recent Result

Results for the 9-month ended September 2018 show that interest income from loan disbursements grew from ₦37.4 billion in 2017 to ₦38 billion in 2018 while interest expenses declined to ₦23billion (from ₦25.2billion).

Net impairment loss on financial increased to ₦477.04 (from ₦255.6), a development the bank needs to watch and manage closely.

Profit before tax jumped from ₦1.7billion in 2017 to ₦3 billion in 2018. Profit after tax followed suit; from ₦1.5billion in 2017 to ₦2.6 billion in 2018. Thanks to the well-managed operating expenses.

Wema bank generated ₦362.2b deposit compared to ₦250.9b, an increase that is tied to the bank’s growing subscribers on ALAT mobile banking app.

While tier 1 banks like GTB, UBA, and Zenith reported a lower loan and advances to customers on cautious lending, Wema bank is strategically increasing her loans to private sectors. This is evident in its recent partnership with the development bank of Nigeria.

Loan to deposit fell from 84% to 67% as the bank looks to explore the fixed income space; asset held for trading increased from ₦4.3b to ₦12.2billion.

Cash generated from the operation on the Q3 report is ₦53.3b against a negative figure reported in a similar period.

Technical Analysis

Technically, Wema bank stock’s price is below its 20-day price of 66k and 50-day moving average price of 75k which suggest bearish sentiments. As price approaches its 20-day average price, the bank’s stock may be set for some rally on the recent impressive result.

The long-term sentiment is clearly bearish, except the price surge past its 200-day moving average of 76k.

Valuation

Wema bank reported a 9-month EPS of 9.2k, which is 73.5% more than the EPS of 5.3k in the comparable period (2017).

Using an adjusted discount rate of 15%, and a projected year-end EPS of 13.2k we assign a fair value of 88k to the stock, which is 33% above the current share price.

Market update

The bank announced its partnership with development bank of Nigeria (DBN) to help small businesses access to cheaper loans of up to ₦600 million.

Recommendation

We assign a BUY rating on Wema Bank’s stock on the back of increased interest income from loan and advances and expected rise in yield on fixed income securities.

About Wema Bank

Wema Bank Plc provides commercial banking services. The Bank offers retail and corporate banking services, trade finance, treasury as well as foreign exchange operations.

Is CCNN Still a Good Buy or Sell Stock?

While the overall NSE index is down by 15% or more, CCNN stock has already doubled shareholders’ wealth this year. As of this writing, CCNN’s stock year to date and one-year returns are 137.89% and 170.7% respectively. The stock is currently the best performer so far and as the government plans to rebuild northeast and finance more infrastructural deficits in that region, CCNN is better positioned to deliver impressive results this year.

Month to Date, the stock is down 26.86% as it looks overvalued. The current share price is N22, down from N31.35, its 52-weeks high.

See – How I analysed and bought this stock at N16

Recent Result

Results for the half year ended June 2018 show that revenue grew from ₦8.5 billion in 2017 to ₦12 billion in 2018 while the cost of sales increased to ₦6.6billion (from ₦5.4billion). From the result, Sales increased by 41%. On each Naira sales, the company spent less as cost ratio declined from 63% to 55%.

Profit before tax jumped from ₦1.3billion in 2017 to ₦3.6 billion in 2018. Profit after tax followed suit; from ₦1billion in 2017 to ₦2.6 billion in 2018.

Gross profit margin improved from 35% in 2017 to 45% in 2018.

Debt to Equity, a measure of financial leverage, increased from 70.8% in 2017 to 77.6% in 2018 but the increase in interest coverage shows that the company is able to finance its interest expenses with profit from operations.

Technical Analysis

Technically, CCNN stock’s price is below its 20-day price of ₦30 and 50-day moving average price of ₦27 which suggest that investors are taking profit right now. A break below the 50-day average price may set the stock up for further fall which is a great opportunity for long term investors to key into the company as fundamentals remain intact.

The long term sentiment is clearly bullish as the price is well above the 200-day moving average of ₦20.56

Valuation

CCNN reported a 2018 half year EPS of ₦2.07, which is 152% more than the EPS of 82k in the comparable period (2017). Using a discount rate of 14%, an assumed zero growth and a TTM EPS of ₦3.82, we assign a fair value of ₦27 to the stock, which is 22% above the current share price.

Market update

No recent news.

Recommendation

We assign a BUY rating on CCNN stock.

About Cement Company of Northern Nigeria

Cement Co Northern Nigeria PLC is a cement manufacturing and marketing company.

Why You Shouldn’t Sell but Buy More Units of NEM Insurance.

NEM Insurance Stock Price – Why You Shouldn’t Sell NEM Insurance at Current Price – Learn How We Analyse Cheap Growth Stocks to Buy in the Nigerian Stock Exchange.

If you had bought NEM stock a year ago, your investment in the insurance company should be up by more than 200% now. As of this writing, NEM insurance year to date return is 80.72%, an impressive performance that earned the stock one of the best performing equities in the Lagos bourse.

It paid a dividend of ₦0.10 to shareholders on June 20, 2018. The dividend yield on the payment date was 3.61%.

NEM Insurance stock price is ₦2.85.

Since the stock is up by more than 200%, why are investors not taking profit?

Recent Result

Results for the half year ended June 2018 show that net premium income increased from ₦4.3 billion in 2017 to ₦4.4 billion in 2018. Profit before tax jumped from ₦1.4 billion in 2017 to ₦1.7 billion in 2018. Profit after tax jumped from ₦1.2 billion in 2017 to ₦1.5 billion in 2018.

As an insurance stock, we will be using the claim/loss ratio, expense ratio and combined ratio to ascertain the profitability of NEM insurance.

The claim ratio measures the proportion of net premium that is paid out as a claim to policyholders. NEM insurance paid out ₦135m as claim the half-year period to June 2018 compared to ₦365m reported in 2017, which is 63% lower.

The claim/loss ratio is 2.2% compared to 8.4% in 2017. This is the lowest in the industry.

Other insurance companies and their claim ratio: Aiico (79%), Mansard (66%), Wapic (49%),  Mutual Benefit (36%), Cornerstone (61%), Lasaco (26%), Consolidated Hallmark (47%), Law Union and Rock (39%), Sovereign Trust (41%), Regency Insurance (27%), Royal Exchange (40%), Prestige (47%), Linkage (62%) and Niger (28%)

The company also reported an underwriting expense of ₦2.1b in 2018 compared to ₦1.8b. The expense ratio increased from 41% in 2017 to 47% in 2018.

The addition of these ratios indicates that NEM insurance combined ratio improved from 49.4% to 49.2% and is still below the 100% benchmark.

A combined ratio below 100% means that an insurance company is profitable; it generates more money than it’s paying out as claim and underwriting.

Technical Analysis of NEM Insurance:

Technically, NEM stock is trading at the same level as its 20-day moving average after touching a high of N3.4.

The stock’s current price is ₦2.85, 19% of its 52 weeks high. All the indicators point to a short-term sell-off which might be ending soon, as the price is currently at a key 20-day MA support.

Valuation

NEM reported a 2018 half year EPS of 0.28, compared to 0.23 in 2017, 21% upside. Using a discount rate of 14%, an assumed zero growth and a TTM EPS of 0.58, NEM insurance has a fair value of ₦4.14 which 45% above the current share price.

Market update

A private equity firm, Eaton limited, announced the purchase of 130 million shares of NEM insurance PLC at N4 per share, representing a 40.35% premium over the insurance company’s closing price of ₦2.85.

Recommendation

Generally, when the 20-day moving average is above the 50-day, and 50-day is above the 200-day MA, the stock is bullish on a short term and long term. We assign a __BUY__ rating on NEM stock

About NEM Insurance

NEM Insurance Plc (NEM) is engaged in general insurance business. The Company is engaged in the provision of non-life insurance services for both corporate and individual customers.

The Company operates through two segments: Nem Insurance (Nigeria) Plc, and Nem Insurance (Ghana) Ltd. The Company’s products and services include fire/extraneous perils policy, consequential loss policy, burglary or housebreaking policy, fidelity guarantee policy, public liability policy, money policy, goods in transit policy, group personal accident policy, motor insurance policy, marine policies, aviation policy, financial risk management policy, machinery breakdown policy and electronic equipment policy.

The Company provides oil and gas, and energy insurance in Nigeria with a focus on various areas, such as upstream risks, downstream risks, and power, solid mineral and other products, and it also provides risk management services.

This article was first published on Yochaa App, Nigeria’s leading stock market data and information application.

How to Pick Stocks In a Bearish Market

How I Pick Nigerian Stocks To Buy In a Bearish Market – Learn How To Analyse The All-Share Index Using Technical Analysis and Pick Fast-Rising Stocks

The Nigerian stock market seems to have lost the momentum it gathered at the beginning of the year. As of this writing, the YTD performance of NSE index is less than 5% compared to the impressive 16% return achieved.

What could have been the driver of the bearish market? Some analyst attributed the fall to normal market correction, others felt there is no major news that could support the next bullish run. I had earlier expected the upward trend in the oil market to be a key supporting factor but as the price of oil inch higher every week, the market seems to have taken a “U” turn. My next question is “should one sell-off existing stocks and wait for a bullish signal “? and How can one pick a good stock in a bearish market like we are seeing now?

For traders with existing stocks, I believe it’s time to cut your loss and cash out as the bearish market trend. Take a closer look at the chart below, the market sell-off seems to be stronger every day.

Maybe you should look into my low-risk and high yield investment ideas right now pending when the stock market will bounce back.

pick stocks in bear market

This chart may look confusing to you but if you had bought my trading strategy course on “Little Secrets that Make Big Money In Stock“, you should be able to understand the market trend displayed on the chart above.

The summary of this chart is that NSE all-share index may go down further as pointed out by the MACD and DMI. We could see the index fall to 38,000 level as selling pressure continues to increase week by week.

According to BusinessDay (publication on May 28th, 2018), this bearish trend is connected to a massive repatriation of the foreign portfolio as the yield on US 10-year bond rises to 3-year high above 3% following the US interest rate hike to 1.75%. Ordinarily, a rate hike in a country attracts investors to fixed income securities, so this is a normal capital flows that affect emerging markets more. Another factor is the political tension and party congresses as the country’s election draws near, besides, the USD/NGN exchange rate is under pressure right now: the naira has depreciated to N368 from N360 in the investors and exporters window.

To address the second question which is “How can one pick stocks in a bearish market”, I would be discussing my top 2 stocks to watch closely this year. They are Cement Company of Northern Nigeria (CCNN) and BetaGlass. From the time I recommended these stocks, the former has added N6-N10 to its share price while the latter has added N4-N5. What caught my attention to these two stocks is that they keep hitting new highs as the general market witnesses further sell-offs.

A stock that keeps gathering momentum in the midst of stronger bearish market is worth looking into, there must be something peculiar only few traders are seeing. While a good number of stocks are falling off the cliff, creating more south-ward space away from their the green territory, CCNN and BetaGlass have continued to top gainers chart, and eventually, become investors’ appetite.

Well, you could be partly right to attribute the performance to fundamentals, but I rely more on technical when picking stocks in a market like this.

As a smart trader, here is what I do to find great stocks in a bearish market:

  • Check the overall market performance and bearish sentiment.

The NSE market index began its bearish run in February 2018 after it posted an impressive run of 16% in January. The market has since dropped from a peak of 45,000 basis point to 40,213, that’s like 12% off the 16% to bring the YTD return to 4.9%.

  • Look for stocks that are showing bullish strength in the same period.

Sincerely, it is very risky to play in this type of market. If you do, you are already going against the first general trading principle. don’t trade against the trend, the trend is your friend, so why make the trend your enemy? If you insist, then don’t trade what you can’t afford to lose.

The NSE market index is down by 12% in the last 4 months (February – May), but here is a stock that had also increased in the same period.

pick stocks in bear market

BETA GLASS is a company that manufactures and sells glassware. The Company provides glass bottles and containers for soft drinks, wine and spirit, pharmaceutical, and cosmetics companies.

The stock, as of this writing, has gained close to 17% in the same 4-month period the NSE market index lost 12%. From the chart above, BETA GLASS has continued to post a positive monthly return since the start of the year, rising from N52 in January, crossed February, the exact month all-share index showed a sign of sell-off, to hit an all-time high of N87.

BETAGlass is currently trading for N83 per share with YTD return of 56.6%, a clear market-beating figure.

See – How I Make Money Trading Penny Stocks

  • Check Fundamentals of the stock

Even though I employ technical analysis when picking stocks in a bearish market, it doesn’t mean that that the fundamentals of the stock doesn’t matter, at least, your selected stocks should be posting good numbers on key line items. This will help you avoid pump and dump stocks that are only growing on one-time news.

Read my guide on how to analyse the quarterly result of a company. You will have a better understanding of fundamental analysis.

  • Is this the time to buy?

BETAGLAS stock may be due for reversal; all indicators on the monthly chart point to an overbought stock; expect a sell-off as traders look to take profit soon.

pick stocks in a bear market

On the daily chart, MACD bearish crossover is a warning sign that BETAGlass stock sell-off is imminent, so I would advise you to wait for a bullish sentiment as long as the fall doesn’t exceed the general market index.

pick stocks in a bear market

Back to my question, is it the right time to buy? No, wait for a pullback and ride the next move once MACD bullish crossover surfaces on the daily chart.

In summary, this is how I pick stocks to buy in a bearish market and I hope you would find this guide useful for trade decisions. But like I said earlier, this strategy isn’t devoid of risk, you may lose you cash.

Top Gaining Stocks To Watch Closely This Week, 14th May, 2018

The NSE All-Share Index and Market Capitalization depreciated by 0.48% to close the week at
41,022.31 and N14.860 trillion respectively.

Similarly, all other indices finished lower with the exception of NSE Premium, NSE Banking, NSE
Insurance, NSE Oil/Gas and NSE Lotus II indices that appreciated by 0.35%, 0.45%, 0.83%, 0.13%
and 0.34% respectively while the NSE ASeM closed flat.

As usual, I pick recommended stocks, using a combination of technical and fundamentals every week, that will sustain their momentum from a pool of previous week’s top gainers. I believe that stocks that post a weekly gain in the midst of a bearish market are investors toast, so why waste time on just financial statement analysis when I can use my technical tools to pick fast-rising stocks with strong potentials.

If you have checked my best stocks to buy and cash out by year-end, (see here) you will notice that they are currently selling at a high price per share.

Okomu Oil

Okomu oil closed the previous week N90 (from N81, 11.11%). The stock has been trending upward after the company released an impressive Q1 result:

  • 21% revenue growth,
  • reduction in cost to sales ratio from 20% in Q1, 2017 to 8% in Q1, 2018
  • a significant increase in gross profit margin to 90% from 79%
  • PBT growth of 18% and PAT growth of 13%.

top gaining stocks

The possibility of Okomu oil share price touching the N100 mark isn’t far again as all indicators on my chart reveal a strong bullish trend.

Caverton Offshore Support

Caverton closed the week at N2.61, from N2.4 (8.75%). The company had just confirmed the commencement of its contract with Chevron to provide logistics services to the oil company. This is one of the stocks that is directly correlated with the oil market; a bullish oil price brings in more money to Caverton’s clients, hence increase the possibility of sustained cash flow and contract renewal.

In its latest Q1, 2018 result, the company witnessed a drop in its top line as a result of non-renewal of its contract but this isn’t going to impact overall performance as the newer contract from Chevron-NNPC JV is believed to provide much buffer and cash flow.

top gaining stocks

Technically, Caverton stock has just shown a crossover on RSI and MACD indicators; possible bullish signal investors can quickly use to enter now. The possibility of Caverton closing above N3 is near.

What I noticed on these two stocks is that their volume growth witness in the last two trading days of the previous week was huge; a sign that new buyers may have taken a position ahead of capital appreciation.

Disclaimer: This is my personal opinion on stocks to trade and not a buy/sell advice, consult your financial analyst for more details.

Top Performing Stocks To Watch In 2018

The NSE All-Share Index and Market Capitalization depreciated by 0.06% to close the week at
41,218.72 and N14.931 trillion respectively.
Similarly, all other indices finished lower with the exception of NSE Premium, NSE Banking, NSE
Industrial goods, and NSE Pension indices that appreciated by 0.12%, 1.56%, 1.06% and 0.21%
respectively, while the NSE ASeM closed flat.

We are still not deviating from our usual practice of picking stocks to watch from a pool of top gaining stocks that made investors money last week. But, here is a catch about my recommendation this time:

The two stocks are not only a pick for short-term play but have always been top performers in their industry, besides, they are one of the best Nigerian stocks to buy and hold for the rest of the year.

Cement Company of Northern Nigeria (CCNN)

When I shared a detailed guide on how to pick the best-performing stocks to buy in the stock market using a detailed top-down approach, CCNN was my recommended stock which as of now has added N6 to the share price N16 traded at that time. The stock is up more than 100% YTD, the top performing stock so far.

Last week, CCNN emerged as one of the top gainers with 14.62% share price appreciation to close at N22.35 against the week open of N19.50.

The recent Q1 result revealed a lot about the positive outlook of this stock; Sales was higher by 24%, on the back of increasing volume compared to Q1, 2017 while EPS grew significantly to 0.86 (111%), 9% below the company’s single-quarter best of 0.95 recorded in Q4, 2017. Some analyst had already forecast a 2X annual EPS for 2018 if the company maintain this momentum.

top gaining stocks

Technically, the stock is bullish with limited upside. I’d advice you wait for profit-taking before riding the next move as it’s close to overbought already. But, if you don’t mind the short-term reversal and would like to play the cement stock between now and end of the year, you can buy now.

BetaGlass

The stock started the year at around N52 per share but is already close to N90 mark, it gained 10.20% to close the week at N83.2.  As of this writing, it’s one of the stocks trading at 52-weeks high; no resistance for now.

Looking at the Q1, 2018 result, the fundamentals of this stock remain strong.

top gaining stocks

Technically, Betaglas is bullish on all chart intervals; daily, weekly and monthly.

Top Gaining Insurance Stocks To Watch This Week – 23nd April

The NSE All-Share Index and Market Capitalization depreciated by 0.28% to close the week at
40,814.89 and N14.743 trillion respectively.

Similarly, all other indices finished lower with the exception of NSE CG, NSE Premium, NSE-Main
Board, NSE 30, NSE Banking, NSE Oil/Gas, and NSE Pension indices, which appreciated by 1.08%,
1.38%, 0.54%, 0.13%, 2.34%, 0.73% and 1.42% respectively.

See – NSE weekly stock market report here

As usual, we select our top stocks to watch from a pool of stock that closed last week on a positive note. But, something is quite interesting about my pick this week; the two stocks, I am going to buy and hold for two weeks are insurance stocks.

Insurance like I shared in my post on how I analyse insurance stocks, is one of the financial products that are difficult to sell in Nigeria; the adoption of insurance policies in this part of the world is very low which is even evident in the sector’s contribution to GDP growth. However, this doesn’t mean you should avoid the big opportunities inherent in the sector; some companies are actually doing well. I shared the 3 key ratios to uncover top insurance stocks in that post and when you combine that with the potential of trading penny stocks, I still feel, insurance is a sector to look into but not without caution.

Let’s see the two insurance stocks on my radar:

Custodian And Allied Insurance Plc

The stock open at N4.9 to close at N5.09,  3.8% growth but here is why I picked the stock:

  • It is trading at an all-time high right now.
  • Investors’ sentiment is largely positive as the latest financial result looks good, no wonder the stock is up by 33.9% YTD, outperforming both insurance and NSE indices.
  • Technically,  the stock is trending up on the daily, weekly and monthly chart.

Top Gaining Insurance Stocks In Nigerian Stock Market

Advice:  Buy now and take profit at N5.34-N5.5.

NEM Insurance Plc

The stock gained 22k to close the week at N2.62, 9.17%. NEM is one of the most profitable insurance stocks to watch this year as the company’s result so far is impressive. I have already analyzed this stock extensively when I posted my guide on “how to trade insurance stocks“. You will recall that I ended my verdict on NEM stock as “overbought” when it traded at N2.7: there was a possible fall as investors were expected to profit.

Watch this chart closely:

Top Gaining Insurance Stocks In Nigerian Stock Market

In line with my forecast,  NEM actually fell from N3 to N2.64 (the yellow region).

Here is why and when I will buy NEM insurance:

  • The overall sentiment on this insurance stock is positive on the weekly and monthly chart but the daily chart isn’t fully bullish yet.
  • The latest financial result of NEM insurance is on point.
  • NEM insurance is up by 66.4% YTD, outperforming the insurance and NSE indices.

Verdict: Wait for the stock to show more bullish sign this week and buy at N2.8 with a target profit of N2.94-N3.08.

That’s all for now. I hope you will follow this two insurance stocks in the next two weeks to see how they performed.

Top Gaining Stocks to Watch This Week, 3rd April

The NSE All-Share Index and Market Capitalization appreciated by 0.08% to close the week at 41,504.51 and N14.993 trillion respectively.
Similarly, all other indices finished lower during the week with the exception of the NSE Premium, NSE Consumer Goods, NSE Lotus II and NSE Pension Indices that appreciated by 1.15%, 1.73% 1.58% and 0.34% respectively

On a weekly basis, we pick top stocks to watch from the list of previous week gainers, these are stocks we think will continue their upward move following week.

Wema Bank

The banking stock gained 24k to close at 99k (from a market opening of 75k), that’s like 32%. Technically, the stock is looking good and set to continue its move as all indicators, on daily, weekly and monthly chart, signals a buy entry.

Caverton Offshore Support

The oil stock gained 18k to close at N2.67 (from a market opening of N2.49), that’s like 7.23%. Technically, the stock has just broken a trend channel to the upside.

Continue reading Top Gaining Stocks to Watch This Week, 3rd April