Human nature as we already know is to follow the crowd, so it is normal for you as an investor in the stock market to exhibit similar characteristics.
When I started trading stocks as a beginner, I always hurry up to buy stocks that were going up, thinking that the price will keep going up so I could sell at a profit. However, this often means that I was rushing to buy stocks (let’s say N120 per share) that could have been mopped up at lower prices earlier (let’s say N90) than the day I bought them.
When you think about stock market investment that way, the current purchase price of rising stocks seems more expensive and less attractive.
As you witness sell-off of great stocks because prices are dropping so fast due to uncertainties surrounding COVID-19 pandemic, you can take advantage of the bearish trend by having a watchlist of high-cap companies that are likely to profit from the crisis and buy-in should their stock prices begin to recover from support levels.
Here are some of the COVID-19 stocks I am following right now:
Aside from the stock being at the oversold region, the telecom is expected to benefit from the current global pandemic due to the essential nature of voice and data services which will be more required at a time like this – for instance, medium and larger companies have adopted the remote work model in their business continuity plan, the lock-down is driving banks’ customers to e-channels like mobile app and internet banking portals, and people are more engaged on social networks like Facebook, Whatsapp, Instagram, Nairaland and Twitter as they connect with their loved ones and stay informed of latest updates.
All these are some of the biggest drivers of MTN earnings in 2020 which should add up to its Revenue and Profitability, growing at a compound annual growth rate of 14.8% and 57%.
MTN stock price rejected N90.4 region twice before it started trending up, now at N100, with more upside potentials expected in the coming days.
Based on the fundamental and technical analysis, MTN is a buy for (at a price not more than N105) growth investors seeking a modest capital appreciation of 15-22%; this implies that I will likely exit at the 50-day moving average of N122.48.
Despite the unimpressive performance of this consumer goods stock, I strongly believe Unilever Nigeria will benefit from the panic buying caused by the lock-down of major cities hit by COVID-19. The company sells essential items like Close-Up and Pepsodent toothpaste, Lipton tea, Lux soap, Omo washing powder, Blue band margarine, Vaseline, etc. These are household products people use every day, hence I expect the surge in demand to continue online – from major retail and groceries stores.
I don’t expect the company to suddenly declare profit but it’s certain that Q1, 2020 financials will beat its Q1, 2019 figure especially revenue from its essential items which should impact profitability too and investors’ sentiment.
Unilever stock is heavily oversold on the weekly chart and here is something interesting, I see a bullish RSI divergence on the same timeframe; the index is a showing a higher low while the stock price forms lower low – this is a sign that we might see a short term rally very soon. The daily chart seems to be aligning with the weekly chart as the Relative Strength Index is also rising, now at 44.2, and getting close to 50.
As of this update, Unilever stock sells for N10.5, and I think a close above N11 on higher than usual volume, means the consumer goods stock is set to rally to N18-N20, which represent an upside potential of 71% from the market price.
Disclaimer: The analysis shared here are based on my personal check, kindly contact your financial advisor for a guide on how to pick stocks.