Most retail investors—those who are not investment professionals—lose money every year. Though there could be a variety of reasons why, but there is one that every investor with a career outside the investment market understands –they don’t have time to research a large number of stocks.
When you decide to try your hand at stock picking, it is essential to do your homework – thorough research, review a stock’s fundamentals to monitor its viability and check if it still has room in your portfolio.
So, taking that your say N1million and dropping it into different investment vehicles like stock may seem easy but if you want to be a successful investor, it can be really tough.
It is recommended that you spread that money across different asset classes to minimize risks and potentially increase returns over the next 12-month.
Investors are expected to take advantage of bargain hunting opportunities in cheap, fundamentally strong names with track records of shareholder wealth creation. It is better investors follow volatilities in these names and take advantage of mispricing when they occur.
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Likewise, investors positioning in high dividend-yielding stocks, which have managed to come out of the 2020 financial year mostly unhurt, could mean a tactical masterstroke before full-year (FY) numbers begin to roll in.
Analysts believe that a decision to embark on such a dividend play could make sense amid broad expectations of sustained low yield levels in the fixed income (FI) space in the first quarter. The knowledgeable investor should be cautious of potential corrections in some overpriced stocks that could reduce total returns.
Following last week’s positives, most fundamental indicators pointed towards an extension of the bullish performance this week.
Analysts say these stocks are good BUY with upside potential…
A critical look at some of analysts’ recommendation shows stocks that have upside potential that are significantly high over the next 12-months when compared to their current price. Hence, investors may take positions on these stocks.
Likewise, there are stocks which have upside potential over the next 12-months ranging between 5percent and 9.9percent when their current price is compared to analysts fair value. Hence, investors may either hold on to current unit or sell them.
Cardinalstone analysts want investors interested in banking stocks to BUY shares of FBN Holdings, GTB, Stanbic, UBA, and Zenith while they are asked to Hold Access, ETI and Fidelity. For them, Lafarge is another good buy as well as Seplat.
For the banking sector, GTI Research analysts want you to BUY shares of Access, FCMB, Sterling, Union Bank, while the want you to hold GTB, Zenith, UBA, Wema, FBN and Fidelity. For consumer good, GTI Research said you should Hold Nigerian Breweries and Guinness. For the conglomerates, they see UACN as a good Buy, in the Telcos sector the shares of MTNN are given Hold rating; while in the Oil & Gas sector investors are advised to hold Seplat.
Vetiva sees upside potential in GTB, Zenith, UBA, Access, FBN, and FCMB. Others seen as good BUY are Unilever, Lafarge, Julius Berger, Seplat, Ardova, and Total.
For Meristem, investors should BUY shares of ETI, Fidelity, FBN Holdings, Stanbic, AIICO, Axa Mansard, NEM Insurance, Custodian, May & Baker, Fidson, Chemical & Allied Products, Conoil and MRS.
In the same vein, United Capital sees value in GTBank, PZ Cussons, Flour Mills, Dangote Sugar, and Lafarge. They want you to Buy these stocks.
Though, some of the gainers last week might record a bit of declines this week as short term players take advantage of recent gains, these stocks seen re-occurring in analysts “Buy” list should be your next bets.
Worthy to note that the persistent increase in inflation (15.75percent year-on-year (y-o-y) in December 2020) and the bearish sentiment in the secondary market for treasury instruments suggest that equities could continue to witness strong buying interest.
Analysts speak
“We, expect sustained bullish momentum this week, without ruling out possible selloffs at the start of the week”, Meristem research analysts said.
“Investors’ sentiment was largely positive last week, evidenced by the positive sectoral performances. Though most fundamental indicators point towards an extension of the bullish performance into this week, we expect short-term players to take profit, due to recent gains made in previous sessions”, according to Vetiva analysts.
“Our position remains that proactive investing in targets of restructurings and corporate actions is likely to improve equity returns of portfolios. For this to work, proper market timing with a keen eye on oil market developments are likely to be sin qua non. Passive investors who seek to replicate the NGSE may experience only modest returns in 2021, in line with the new yield realities that investors appear to be pricing into valuations,” said Lagos-based CardinalStone analysts.
In CardinalStone’s view, the second-wave of Covid-19, its potential pass-through to commodity prices, and the legroom for yield reversal are palpable 2021 risks that could stoke renewed anxiety among investors.
They noted that between July and December 2020, the CardinalStone Hypothetical Power (CHP) portfolio recorded a weighted price return of 53.7percent (versus projected total return of 42.5percent). The unique selection criteria adopted for the CHP portfolio did not support inclusion of BUA Cement and MTNN despite our standalone BUY rating on the latter. That said, cement titans (Dangote Cement and Lafarge Africa) accounted for 17.7percent of the 53.6percent weighted return of the CHP. Allocations to banking tickers contributed a further 23.6percent while agric exposures recorded 8.6percent, with Presco outperforming Okomu Oil over the period”.
“Therefore, investment in stocks with track records of high-consistent profitability and strong balance sheets (relative to the market) may still be a good bet to improve capital preservation if one must play equities. In our view, to boost shareholder wealth, a stock should boast a forecast return-on-equity (ROE) that exceeds the cost of equity of the market (circa 20.2percent in our estimate) and its 3-year average ROE. The former satisfies investors’ minimum condition for taking equity market risk, while the latter demonstrates value accretion capacity”, they noted.
“We expect to see mixed investors’ sentiment in the coming week amid the outcome of the next week MPC meeting and last week scarcity of low priced stocks”, said GTI Research analysts.
For United Capital Research analysts, while they expect investors to book some profit from last week’s gains, demand for high-yield dividend names (in anticipation of full-year earnings) should sustain the market’s bullish momentum.
