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A Review of Nigeria Stocks in First Half 2021 and My Top Picks for Q3

Congratulations, guy! we’ve made it to the second half of 2021 and I am so excited that my portfolio is already looking good – the land is really green.

The ASI (All share Market Index) lost 1.38% of its value in June 2021 to extend its year-to-date performance to -9.9%, 38, 212 basis points. This isn’t unconnected to the rising yield in the fixed income market.

Since the beginning of the year, the yield on fixed income instruments offered by the CBN has increased from 2.4% to 8.7% in mid-June. Following the attractive returns from this market, fund managers have looked away from the higher-risk markets (equities) to take on risk-free assets.  So, the fall in the stock market should come as no surprise.

As of March 2021, Nigeria’s total domestic public debt was N20.64 trillion. The bulk of this debt was incurred through the issuance of government securities (via CBN). There are concerns that a higher yield for the instruments would mean higher debt service obligations. (As culled from BusinessDay Newspaper, 30th, June 2021: Flat Fixed Income Yield, Debt Service Concern Renew Hope of Market Rebound)

With the yield moderating at 8.86% in June 2021 from 8.89% in the previous month, it only shows that CBN might be planning a gradual slow down to help cushion the effect of rising debt. While I can’t totally conclude that it’s bullish for stock, the trend is likely going to spur fund flows back to the equities market in Q3 and for the rest of the year.

Despite the bearish trend witness in the last 6 months, some stocks have defiled the sell-off to reward investors who invested in them.  For example, Morison gained 108% between January and June 2021, LinkAssure appreciated by 162%, Champions went up by 156%, Royalex gained 120%, Chiplc increased by 114%, Vitafoam reward shareholders with 107%, while Regalins, Seplat, Tripple G, Eterna added 104%, 71.51%, 54% and 51.21% to their share price respectively.

Interestingly two of the stocks are Energy companies, one of the top sectors that have been attracting the most attention this year, thanks to the strong rebound in oil price this year, from an opening price of $48.19 in January 2021 to $74.48.

Vitafoam remains a solid pick but the timing may not be great as the stocks look extremely overbought right now, I have placed the stock on my watchlist – and if you did miss the rally, there will always another dip.

What should we expect in Q3?

  • Corporate Earnings – I anticipate market reactions on stocks that will deliver better than expected results in their Q2 numbers. This is a key determinant of companies that are on track to beat their previous financial years’ results.
  • Inflation Rate – With insecurity impacting food supplies, I expect food prices to remain high, making consumer goods stocks attractive, especially companies that sell inelastic products.
  • The yield on Fixed Income Securities – If the yield hovers between 8-9%, the equity market might be pressured but a downward slope in yield on CBN’s planned sale of N722 billion worth of Treasury Bill in Q3 may support the equities market.

What I am doing right now

My strategy is to quickly jump on fundamentally sound penny, mid or large-cap stocks that have been ignored due to extreme sell-off with a potential of big bounce in coming weeks or months as investors look forward to its quarterly results.

In my NSB Ready-made stocks, I have updated the sheet with companies that are well-positioned to appreciate as investors await another impressive Q2 result.

As we head into July, these stocks stand out as particularly attractive – from fundamental, technical to sentiments analysis – and I believe they have genuine shot at making investors, who key in earlier richer.

What makes these NSB Ready-made stock on Google sheet unique? 

  • Maximum Entry Price – I understand that subscribers can come in at different times, so this column lets you see if a stock is still a buy or not.
  • Comment – Because stocks don’t go up forever, I have formatted this column to immediately alert you once a stock goes past my target exit price, after all, no one goes broke for taking a profit.

There is no preference for one stock over the other, BUY ALL, DIVERSIFY AND GROW YOUR PORTFOLIO.

Access to this sheet is subscription-based (N45,750/annum for new members).

If you are interested in this sheet, chat me via Whatsapp – +234-808-421-9399

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