In just seven weeks, we will be saying our goodbye to 2019 but one thing remains sticky in our mind as investors, it wasn’t a favourable year for the stock market, full of patches, ups and down and unimpressive index performance, no thanks to economic and policy uncertainties. The broad-based NSE index is down by more than 15% (as of this update) with the banking sector worst hit by CBN’s stiff regulatory policies.
I can go on and on to discuss all the specific policies that dragged the stock market from its high point in 2017 to where it is now but that’s not the reason for this content. Just because the calendar is about to change over to a new year doesn’t mean we should carry the pessimist over, we might witness a forced bullish run as corporate and individual investors on account of limited access to low risk, high yielding fixed income securities begin to buy fundamentally strong stocks with positive sentiments.
As I share this new stock to buy, Jaiz Bank and Access bank’s shares, after I placed a call on the banking stocks, have appreciated past their market price, now selling for 49k and N9.2, thanks to MACD indicator.
If you’re looking for another intriguing stock ideas before we close the year, consider Law Union and Rock.
Law Union and Rock Insurance of Nigeria Plc offers life and non-life insurance services in Nigeria.
MACD is one of the reliable indicators I use to spot emerging bullish and bearish trend in the stock market and it works well on the higher time frame (Monthly chart).
The screenshot above is the monthly chart of Law Union and Rock Insurance plc showing the MACD crossover to the upside (the blue line represents the 9-day average while the 26-day average is the red signal line). The first previous crossover was followed by 86% stock appreciation, from 51k to 95k between Dec 1, 2015, to July 2018. The second crossover to the downside pushed the stock to the south by 55%, fell from 86k to 38k.
Here is another potential crossover to the upside starring at us, should we buy Law Union and Rock now?
Let us look at the fundamentals of the insurance company:
On the 9-month period, the company reported a net premium income of N2.3b compared to N2.1b which is a 9.5% growth year on year, profit after tax fell by 34%, from N521m to N324m. You might ask, why the stock is considered a buy despite the unimpressive result? I think the quarterly result justified the recent bullish run, while the net premium between July-Sept rose went up by 9%, profit after tax increased significantly by 52% pushing the EPS to 5.58k from 3.67k.
The stock might also benefit from the ongoing recapitalization of the insurance sector by NAICOM.
In the last 3 and 6 months, investors optimism around the insurance company has helped increased share price by 17% and 10.0% respectively and I think this trend will continue.
I’d advise an entry below 60k with exit price between 80k-90k which is 50% upside potential.
Disclaimer: This is my opinion on this stock and shouldn’t be taken as a buy or sell signal. Please do your due diligence.
Thank you Mike
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