Think of the year when Nigerians made indecent profits in the stock market. This is 2008. The same year qualifies as the worst year investors have ever had. The power of greed was so great that it pushed stock prices above their true values.
Those who are well informed and experienced have made maximum profits and left the market. Others who were excited by the effect of the herd were not so lucky. They were blocked when prices fell. It was a painful experience for the speculators. Statistics show that investors have lost nearly 3.9 billion naira.
Nigerian stock market prices now look very attractive, but investors are afraid to risk putting new funds on the market. The emotion of fear really reigns now. Smart investors know that this is the right time to buy cheap and acquire large volumes. But on what premise would you base your investment aspirations this time?
There are widespread concerns about the global recession, the freezing of bank margins, the devaluation of the naira and the general economic slowdown. What criteria should you use to select stocks at this difficult time as a prospective investor?
This is the question I want to answer in this article.
Factors to consider
1. Historical stability
Companies with a history of winning performance over the years, except in any unforeseen circumstances, will continue to improve best practices to make investors happy. Remember that First Bank some time ago took the risk to invest in the emerging communications market in Nigeria through ILL. This deal failed, but as a result the bank did not fail. Years later, he continued to report favorable results and pay dividends and bonuses to investors. Currently, this action is a delight for investors. First Bank has been consistent over the years and has a strong reserve base.
2. Competitive advantage
Companies with first-class market performance compared to competitors have a good chance of surviving this difficult time. Strong brands such as Cadbury and UACN will continue to make waves in the market. Their products are permanently registered in the minds of consumers in Nigeria. These products will continue to be sold. They even restructure and introduce new products that consumers buy. The more people patronize these products, the greater the profitability of good human and material resources management.
3. Strong financial base
Companies that have built up reserves over the years from their profits have something to turn to in this bearish season to fund projects that will add value to their markets and give good returns to investors. UBA and GTB are reserve buildings for financial power. The strong reserve base is largely responsible for their expansion in foreign markets. Here you can see pure gold. When these foreign branches start making profits, what do you think investors will be happy about? Good weather and high return on investment, of course, especially with the return on bulls.
4. Highly profitable
Not all companies have the ability to manage resources well for maximum profit. The tax administration of certain institutions is so bad that it eats deep into their profit margins. In the banking industry, Oceanic bank stands out in terms of prudent tax portfolio management. Profit is not everything that matters. Having enough to keep is a skill that makes investors happy.
5. Strongly underestimated
Shares that are undervalued are the first to recover on an upward market. You will not win when you return the bulls. Your profit margin is determined from the moment of your investment. Taking the risk of investing when the company is undervalued ensures your high return when the market recovers. Unity Bank currently benefits from agricultural facilities in terms of a loan from the World Bank. With a current market price below 3 naira, the shares are highly undervalued
Winning attitude for predictable profits
* Continue to be fully invested
* Invest in fundamentally strong stocks
* Ignore the economic forecast and be determined to excel in any economy. The stock market always outperforms in the long run and is the only solution to inflation when it comes to your money
* Continue to acquire more financial and investment skills
* Be less emotional in your decisions
Sectors and actions for monitoring
1. Agriculture
This sector is booming as a major contributor to Nigeria’s gross domestic product and profits. New frontiers in animal husbandry and cocoa processing are yielding positive results. Listed companies such as FTN Cocoa Processor, Animal Feed and Okomu Oil offer promises of good prospects.
2. Food and drink
Even in a recession, people will continue to look for food and confectionery. The logic of why this sector will work is simple. As long as the person is alive, the search for food and drink will continue. Combined with good governance, companies in the sector, such as Dangote Sugar, Tantalizer, Flour Mills and Honey Well, will continue to delight investors with dividend payments.
3. Banking
Nigerian banks are currently aggressive in their quest for expansion in Africa and beyond. Revenues and profits will soon begin to be reflected in the balance sheet. Some banks, such as First Bank, UBA, GTB, Zenith and Bank PHB, have performed well and will continue to reward investors while the bears rule.
4. Communications
The Nigerian communications sector is one of the fastest growing in the world. Despite all the infrastructure challenges, companies operating in this sector are making indecent profits and investors will benefit more from their operations in 2009. Starcom is the only stock listed in this sector so far on the Nigerian stock market. Investing in it now will not be a bad idea.
5. Conglomerates
History is in favor of this sector. In particular, they have the ability to restructure and restructure their business in difficult times. Stocks like UACN will continue to delight investors
6. Transport
Talk about a monopoly. ABC transport is the only registered company in this sector of the stock exchange. He has been consistent in paying dividends since he was registered in 2006.
7. Insurance
The insurance sector is currently enjoying goodwill and patronage as investors continue to position themselves for long-term profitability. Companies like International Energy Insurance and Cornerstone are very attractive.
Learn to set aside most of your available fund in the food and beverage sector to minimize your risk. Thinking in the long run is a sure strategy that will ensure your success in 2009 and beyond.