For more than a decade, investors have always focused on the next stock that will likely post monstrous growth on both the top and bottom line That’s because the market will always reward good results with higher share prices which sometimes could go as high as 20%, 40% or even 50%+.
As a smart trader, I don’t wait for results but always have a way of anticipating rallies before it happens. And I am sure you have heard of BUY THE RUMOR, SELL THE NEWS.
Now that we have finally emerged from the pandemic recession, I guess you’d still want to know if there are Nigeria stocks that could go up faster in 2021 irrespective of NSE market index trading in the overbought region. Well! I have a solid pick I recently added to my portfolio today and the stock is …… (Sorry, this is for NSB subscribers – if you had subscribed and are yet to access my picks, drop a comment and I will get back).
Why did I pick this penny stock?
Aside from the fact that most top-performing stocks this year are in the small-cap category, this company has successfully turned the recent FG’s billion naira intervention in one of the critical sectors of the economy into a major revenue driver. In its latest Q1 2021 result, they reported top-line growth of over 45%, amidst cost pressure. But here is the juicy part, operating profit, profit after tax, and EPS grew by triple digits of up to 600%.
Do you know what it means when these core metrics are on steroids? it tells you that the sector this company belongs to enjoys a unique advantage other sectors don’t have (at least for now) which will could attract more buyer’s interest for the rest of the year.
Another reflection of a solid fundamental is the company’s cash flow from operating activities, a figure that lets you see how management is generating and burning cash quarter on quarter. It’s not enough to get excited about sales and profit growth, dig deeper and probe cash flow.
This company moved from negative cash above N10 million to a positive figure of N450 million, which’s like 4600% growth.
Return on equity in the same period increased from less than 1% to 3.3%.
I may feel unease if this is a one-time growth but a quick glance at the previous financial year 2020 showed that the stock had been growing so fast in the last 12 months amidst the pandemic – from a 34% increase in profit after tax and EPS, 16% increase in the top line. to significant growth of 21% on operating cash flow.
EPS on trailing twelve months is already 21% above the previous financial year, so it’s clear that this stock passed my fundamental check.
Technical and Sentiment Analysis
In the last 1 year, the stock has not only rewarded shareholders who keyed in at the peak of the pandemic by 55% but is also outperforming the NSE All-share index with a wide margin in the last 6-month, in the same double-digit range.
And as the 20-day moving average continues to rise strongly above the 50-day moving average, the trend is considered a bull.
With the price closing higher in the last 5 days, and today’s trading session, after an extreme sell-off from its February high, I consider this penny stock a great buy right now.
The best stocks in my portfolio have always been the companies I buy when they are less favoured, oversold and are about to attract fresh buying interest from the bottom. This is a rinse and repeat strategy that can make anyone richer in the stock market.
This is what the NSB stock basket is designed for, I do the analysis, recommend the best stocks that are poised to beat the NSE index and guess what? you pick my brain and keep the profit.
And my target price is…?
I am a prudent trader who had mastered the power of compound return in the stock market. The moment a stock in my portfolio picks up and is above 20%, I quickly put up a sell order in tranches, until I dispose of the stock at my own price. That’s why I tell my students, “the best time to sell a stock is when it’s on a massive uptrend because you can sell at your own price”