The best thing that happens to us, as stock market investors looking for moderate capital appreciation, is when a good company gets cheap due to overreaction or fear of losing money.

We know that the whole world is battling a pandemic that has hit some industries very heard but there are some few profitable companies, selling at a huge discount, that are showing potentials of appreciating from their multi-year support levels.

Here’s why you should pick these stocks for capital appreciation:

• GTBank may touch N23

With the price settling below 50-day SMA in the last 3-months and now at N18.85, GTB bank stock has lost 5.28% and 41% of its market value in the last 1 and 3-months respectively.

Recently, the bank’s stock has been appreciating successively for 5 trading days. As of the close of the trade, the stock gained 3% pushing its weekly close to 8.9%.

Continue reading “Buying These 2 Stocks Could Give You 20% Return”

If there is one investing tip I have learned in my years of buying and selling stocks, it’s this: let your winning stocks run and cut the losers. While profit-taking, uncertainties and government policies often cause the stock market to correct, I think it’s a test on our resolve to stick to the stocks we pick, the fact is that good and high-quality stocks will always increase in value over time, hence make investors money if they’re patient.

As for me, of the 6 stocks I hold in my portfolio, there are two that I have absolutely no intention of ever selling this month but will keep buying more because I think they are ripe for appreciation after heavy correction.

Access Bank

One simple way to multiply your money in the stock is to take advantage of the huge price swings; you don’t have to hold a stock for months or years when you can sell for profit, wait for a correction and re-enter at a lower price. This is the summary of my strategy on Access bank’ stock. I keyed into the stock last year (N6.9-N7.2), sold at N10.5 which was 45% ROI, then bought again after a major correction to N9.3, exited at N12 (via a pending order ahead of another correction), 29% return on my investment. That’s like 87% compound return on my initial investment.

You will agree that this strategy tends to reward smarter investors more than risk-averse who had held the stock at N7.2 to today’s market close at N9.8, 26%.

This strategy works for traders that use the daily chart to spot swing trading opportunities amidst a confirmed bullish run.

Here is a screenshot of how Access bank stock had reacted to MACD crossover on the daily chart with another emerging cross to watch. With a successive bullish close in the last 3 days after a 23% correction from N11.95, I think Access bank’s stock is set to appreciate again.

The bank has delivered impressive double-digit growth on both top and bottom-line figures in the last 3 quarters and as investors await its Q4 2019 result, it makes sense to grab a share of this bank at N9.8, today’s close or less for 20-25% return (exit at N11.7-N12).

Flourmill Nigeria Plc

This stock is one of my favourite non-banking stocks. I recommended Flourmill in January but asked my blog readers to wait for a major correction as it was overbought then (N23). In line with my forecast, the stock shed some value to close at N19-N20 but quickly recovered to N22.8.

With the impressive growth recorded in Q3 volume and profit, the stock is a good buy right now.

The chart above highlights the bullish potential of Flourmill using the MACD indicator. Going by historical price performance, the stock has appreciated by 22% on average in the last two (2) crossovers and I think an emerging MACD cross and recent Q3 supports my call to top up this stock at N22.8 or less.

Disclaimer: The information shared here is my personal opinion, you are advised to do your due diligence.

This strategy highlights another way you can still make money from Nigeria stock market.

One of the biggest challenges of a beginner in the stock market is “how to pick the first stock and become profitable“. I receive related questions like this from beginners and amateur traders who are finding it extremely hard to select good stocks with upside potential.

Today, I will be exposing you to a big money-making system – you can adopt in the new year and beyond – that can add more figures to your current portfolio, no complex financial ratio analysis – you only need to wait for earning seasons every three months, do a quick market scan and pick a few stocks that are gaining momentum on big volume.

The idea is what I call Turnaround stocks – these are companies that have fallen out of favour, stumbled badly, whether because of bad management decision or outside events but are staging a bigger comeback and trade at a cheaper price than their projected earnings. Another way to look at turnaround stocks is their previous financial performance; they have been reporting losses in previous quarters but had justed released impressive results in their latest quarter, hence changing investors sentiments and expectations, sometimes you would see analyst upgrade their ratings from sell to buy.

In spotting stocks like this, due diligence is highly required as some companies that were believed to be on track to profitability could fall back to their previous loss position. With this in mind, I always probe the reason a company had just declared a profit and if such could be a one time proceed from asset sales or a result of a strategic move that will continue to impact future earnings.

A solid reason you should embrace this stock investing strategy is that the returns could be big for investors who choose well – Some investors have made 50%, 100%……250% or more from such stock.

Some of the turnaround stocks we’ve had in the past were Cadbury, and UACN – These stocks lost their momentum as a result of weak financial performance but eventually turned around after a major restructuring. From this scenario, we can deduce that most turnaround starts with board restructuring, new management decision, then government policies or economic events.

How can one spot good turnaround stocks?

Like I said earlier, you can either keep track of stocks investors are dumping until they bottom out or have a system that alerts you immediately a stock shows a sign of reversal. While the first option can be tedious as no one knows when a reversal is in sight, the second option employs stock screener to scan for companies that have declared their first quarterly profit after a series of previous losses.

To help us find potential turnaround stocks, we will pick four (4) criteria:

• EPS (FY) – We want to see Earnings Per Share in the Previous Year to be less than 0. This automatically displays all the companies that reported a loss in their 12 months period.
• EPS (TTM) – We also want to see Earnings Per Share for last four (4) quarters in the negative territory (less than 0); this means that the companies are not posting profits for at least the previous four quarters.
• EPS (MRQ) – This is where the turning point starts; EPS (MRQ) implies Earnings Per Share in the most recent quarter. We want to screen for companies that had just reported their first quarterly profit. This may vary; some might have held an impressive run with history of quarterly profit, but for whatever reason (economic events or policies) fell into the negative territory and now seeing their first profit or it could the company’s first profit since inception.

The EPS (MRQ) should be above 0.1 – a quarterly profit tells you that the company is on its way to a full year’s profit.

The final search criterion is to look at the monthly performance.

• Monthly Performance – This is optional but to an extent it lets you measure investors sentiment towards the companies because such could validate your assumptions. The idea is straight forward; if the next quarterly result is expected to be impressive, there is a solid chance the share price should increase after earning announcement and will continue to surge higher in coming months.

When I applied this screener to our local stock market, the result showed two stocks:

• Cornerstone Insurance – The stock declared a loss of 23kobo in 2018 financial year. Right now, its loss per share in the previous four quarters is 4k while its recent quarterly result indicates a profit of 16kobo. The stock is up by 129.63% and 16.98% in the last 3 and 1 month respectively.
• Royal Exchange Insurance – This insurance provider just declared an impressive quarterly result of 11kobo per share which is far high than its previous full year’s loss per share of 3kobo and trailing 12 months loss of 7kobo. With a share price of 28.57% and 35% in 1 and 3-months period, Royal Exchange plc is no doubt another example of turnaround stocks to watch.

In trading turnaround stocks, it is best to buy earlier than the big volume traders or else, you might end up buying at the top of the roof. Technical analysis of price is highly required to avoid buying high and selling low.

Buying a stock is as easy as signing up with a registered broker, verify your information, fund your account and then tell your broker the stocks to a buy but buying the right stock for real profit is incredibly hard. This is one of the reasons timing is so powerful in the stock market; it can help you swing into profit immediately your orders are executed or fall into share price fall;

Let’s look at these two scenarios; you bought a fundamentally sound stock like GTB at N38.09 on the 18th Feb 2019 and keyed into another penny stock on the same date like Cornerstone at 20k. We already know that GTB is more stable, stronger and resilient to a sudden economic shock, but when you compare their share prices, Cornerstone stock has delivered 200% gain while GTB is down by 17% – this doesn’t mean the insurance stock is better, the only difference is in “investors sentiment towards both stock in the last 10 months“.

Understanding Sentiments: the force behind stock prices

Investors’ sentiment, otherwise known as Investors emotion, is the most powerful force behind a bullish or bearish market; it is driven by a combination of financial results, market news, policy directions and expectations, without it, you may be missing out on the single tool to spot your next best trade. As a retail investor, your decision might be limited to what you know and have read in the financial statement of your choice stocks but sentiments cover what you might not be privy to; insider information or pending market-moving breaking news.

Here is how I applied inventors’ sentiments on Cornerstone insurance and shared the call on my Whatsapp group before the stock appreciated by more than 30%:

Interestingly, a lot of beginners have not mastered the act of following sentiments when buying their first short term stocks and as such, get discouraged when their portfolio becomes red. This is the reason, I will be sharing stocks that might go up on sentiment using some proven technical tools; my pick will come from weekly top gainers; stocks that are up by at least 10% which I think might still go up in 4 – 6 weeks.

Royal Exchange:

The insurance stock closed the week at 27k, up by 17.39% (from 23k). While I anticipate a share price reversal on profit-taking (RSI on the daily chart is 91.29), this week, it still has the potential of running by 30% ( 37- 40k region ) in the next 4 – 6 weeks.

The stock is on the verge of recovering its lost value this year as YTD – it started the year at 30k, fell to 20k but then recovered to 27k – The stock is up by 35% and 22% in the last 1 and 3-months respectively, besides, investors sentiment on this stock is very strong on the weekly chart with RSI at 65.

Recommendations:

I’d advise you to wait for the price to fall below the current price or you spilt your money; buy at market price and average down, then take profit at 37 – 40k

Disclaimer:

The idea shared here is my personal opinion about this stock and shouldn’t be taken as a buy or sell advice, please do your due diligence.

The Nigeria stock market has had a rough year, with the NSE Index, in particular, shedding nearly 14% so far.  While most of the key sectoral indices are down by double-digits – NSE Banking Index (-10.53%), NSE Insurance (-5.79%), NSE Consumer Index (-26.42%), NSE Oil and Gas (-22.59%), and NSE Industrial Index (-13.63%) – some stocks have also delivered more value to shareholders that held on through the market uncertainties. For instance,  Cornerstone insurance has appreciated by 215%, Chams’ stock is up by 85%, BOCGAS is up by 52.31%, AccessBank has done 36.03%, Jaiz Bank’s stock price increased by 32%, Caverton made shareholders 30.21% richer, Union Bank gained 25%, while Wema bank and AIICO did 11.11& and 17.46% respectively.  When you match these performances with the latest rally, you would agree with me that there’s plenty for investors to be thankful for this holiday season.

We are just weeks away from the year-end, so it’s normal for everyone’s return to reset to zero as 2020 kicks off. As such, it’s common to see questions like, which Nigeria stock will deliver in 2020?.

While momentum sometimes continues for some of the stocks that performed in 2019, the market will definitely switch focus to sectors that may benefit from regulatory policies. With that in mind, I would like to summarize some of the key events that will drive the market in 2020.

• The increase in loan to deposit ratio to 65% is expected to drive private-sector lending and consumer credit.
• The complete restriction of local investors from the OMO market, which has switched interest to the Treasury bill hence pushed the 364-day, 180-day and 90-day yields to low levels last seen in 2016, might attract more customer deposit to bank’s coffer in form of term deposit.
• The border closure in August 2019 might add to inflationary pressure and at the same time increase demand for local products.
• The passage of Finance bill and accompanied 50% VAT increase to 7.5%

Best Stocks to Buy and Hold in 2020 – My Recommendations

Based on these economic events, here are my personal stock picks for next year and why I think they could add more value to shareholders that key into them right now:

Access Bank

Banks make their money from the interest they charge customers on lending,  fees and commission and investments in financial instruments. While all are great, the money generated from loan and advances to customers is considered a core income and if anything goes wrong with this line of business,  it could flash a red sign which is why they are mandated to provide for any impaired loan. Of all the Tier 1 banks, Access Bank has demonstrated its capacity to generate more returns in the retail lending space; going by its quarterly results, up to September 2019.  While most of the banks delivered marginal and lower returns on their interest income amid lower yield, Access grew its net interest income the most by 34.6%, 92.8% and 74% in its first quarter, half-year and 9-months unaudited reports. Overall its 9-month profit is up by 44.1%. So, you shouldn’t be surprised that the bank was investors’ toast this year.

See – How to Analyze Banking Stocks

Will the trend continue in 2020, you ask? When you look at the bank’s aggressive drive to shore up its loan book (now N2.7 trillion, up by 42% from N1.9 trillion in 2019) coupled with the lower cost of funds on increased term deposit and CBN’s use of BVN to recover non-performing loan, I think the bank will continue its momentum.

As of this write-up, Access bank sells for N9.25.

With PE ratio at 3.98 and average year on year earnings growth of 15% – 20% in 2020, Access bank is still considered a cheap growth stock –  PEG ratio prints 0.19 and I anticipate a further rise to N12 in 9 – 12months, that’s like 32% upside potential from today’s close.

Jaiz Bank

A lot of investors don’t understand the business model of Jaiz bank – they think the bank operates like every other bank, No! Jaiz bank is a non-interest bank; they take a deposit from customers but don’t give loan to customers rather they invest the funds in revenue-generating activities or assets and share the proceeds of the investment with their customers. This is a departure from the normal model we are used to.

The bank, from its 9-month result, grew its Sukuk bond investment to N37.9b and if you compare this with N19.8b and N6.3b in 2018 and 2017 respectively, it implies a 500% increase. This rubbed off it proceeds from the investment – investment income between 2017 to 9-month, 2019 expanded from N684 million to N4.2 billion, that’s like 513%. On average the bank earns 10-11% return on its investment. The strategy the bank is adopting is to add more funds to Sukuk bond portfolio so it can generate more returns while cutting down impaired assets.

Also, its net share of profit after accounting for impairments has maintained steady growth, it increased from N5.3b in 2017 to N5.8b in 2018, the latest figure released in its 9-month report already covers 2018 full year – N6.7b which represents an average annual growth of 13%.

Profit after tax in the last 2 years has expanded by 61% on average – from N537 million, N946 million and N1.2 in its latest 9-month.  Earnings attributed to the bank’s shareholder isn’t left out as it grew by more than 100% in the same period.

When you compare all these double-digit growths with a forward price-earnings ratio of 9.42, you will agree with me that Jaiz bank is still cheap at today’s market close of 66k. I had placed a call on the banking stock when it traded below 47k and the stock delivered, besides it reached 85k before reversal.

Dangote Sugar Refinery

The consumer stocks lost its momentum to smuggling and Apapa gridlock in 2019 but I think the story is about to change; thanks to the border closure, we might see a better financial result going forward.

Even though the stock is down by 1.6% on a yeat to date basis, 44.9% and 71.43% share price appreciation in the last 1 and 3-months respectively might be a strong sign that investors are gradually mopping up the consumer stocks ahead of a bumper harvest in 2020.

Besides, I think Dangote Sugar is one of the strongest non-banking stocks to watch as it could appreciate by 41%, from today’s close of N14.6 to N20 – the MACD indicator (monthly chart) shows a potential bullish run to that level, last seen in 2017. We await the stock’s Q4, 2019 result to validate this forecast.

At the time of this analysis, I own Jaiz bank, Access bank and have placed a buy order on Dangote Sugar Refinery, you are advised to do your due diligence.

When it comes to investing and building a lasting wealth, professional investors advise that you spread your money around different assets classes – that’s, “diversify” your investment. Why? because it’s often believed that diversification protects you from losing all your money during unexpected market swings.

Besides, the pending devaluation of our local currency against major foreign currencies means that your investment in Naira denominated assets alone – stock, properties, or bond – may expose you to the high risk of putting your eggs in one basket. Just recently, it was all over the major newspaper headlines that the CBN had subtly devalued the Naira from N360 to N380 to the US dollar which 5.5% fall in value.

As of this update, the US dollar, in the parallel market, sells for N420, 16.6% fall with the futures market already reflecting a further fall by as much as 38.3% to N500+. No thanks to the COVID-19 pandemic that has crippled business activities across the globe, hence drive oil demand to historic low as countries follow the lock-down rule.

This is just one of the unexpected events that expose us to sudden economic shocks. The truth is whether you own stocks, treasury bill, bond, or real estate, as long as your assets are in Naira, your portfolio is still in one basket and exposed to exchange rate shock.

Having a lot of investments doesn’t mean diversifications, you need to understand the real diversifications beyond equities, real estate, and fixed income securities. This is diversifications away from local currency assets to the US dollar-denominated assets.

As Nigeria economic risk worsens, it makes more sense to suggest foreign assets diversifications; where one diversifies and build short or long term foreign currency portfolio.

4 reasons you should diversify into US dollar portfolio:

If you want to know why putting your money into foreign currency assets matters, there are interesting reasons:

1. We are oil-dependent and are largely exposed to sudden shock that follows lower prices. Based on historical antecedents, lower oil prices always exposes the economy; equities, real estate, even banks’ asset qualities are wiped out.
2. Different types of investments are affected differently by world events and changes in economic factors such as interest rates, exchange rates and inflation rates, so it makes sense to diversify into assets to take advantage of longterm USD/NGN exchange rate appreciations; we call this hedging.
3. Foreign diversification enables you to build a portfolio with generally less risk than the combined risks of one-currency assets.
4. If your portfolio is not diversified, it may carry the unnecessary risk of being affected by inflation.

Private Investors is here to help you diversify and build USD assets. We are a community of traders that trade US stocks for capital appreciation.

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”

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”