With global markets seen reeling from the Covid-19 outbreak, investors are constantly looking for safe-haven stocks to weather the storm. There are two ways to profit in the equities market – capital gains and dividends.
Though dividends are important to many, most investors buying growth stocks hope to gain an additional return in the form of capital gains. The Nigerian stock market has not impressed some investors this year but to some other smarter ones, no doubt it has paid off in the form of capital gains seen year-to-date (ytd).
Despite a negative return of circa 4 percent which the entire equities market has yielded this year, some of the shares investors still hold as evidenced in trading data as at Monday, June 7 have yielded over 10percent capital gain.
The stocks and the rate at which their prices increased include: Champion Breweries (+122.1percent), CHI Plc (+143.8percent), Eterna Plc (+52.9percent), Lasaco (+297.1percent), Mutual Benefit (+63percent), and Morison (+143.1percent).
Also, the stock price of Academy Press Plc has increased this year by 10percent, while as at last Monday that of Ardova Plc rose by 13.7percent year-to-date. Other stocks and the rate at which their prices have risen this year are BOC Gas (+10percent), Fidson Healthcare (+13.3percent), May & Baker (+14percent), NCR Plc (+15.8percent), NEM Insurance (11.2percent), and Total Nigeria (+11.5percent).
Investors who bought these stocks and others listed below in anticipation that their per-share value will increase over time as the companies prosper no doubt didn’t miss it this time.
Others are: Regency Alliance (+122.7percent), Royal Exchange (+196.2percent), Seplat (+69percent), UACN (+51.7percent), Prestige Assurance (+10.9percent), and Livestock Feeds (+30.9percent).
When buying shares, an investor typically hopes that the perceived value of the company will rise, producing a capital gain when the shares are sold later to someone else at a higher price.
Read Also: Nigeria stock market dips by 0.10%
Also, stocks like these have impressed those who bought them at the beginning of this year: Sovereign Trust (+40percent), United Capital (+29.5percent), University Press (+31.3percent), John Holt (+13.7percent), Veritas (+30percent), Vitafoam (+44.2percent), and Wapic (+45percent).
In stock investment, capital gain results from an increase in the value of the stock due to price appreciation. In other words, the gain occurs when the current or sale price of the stock exceeds its purchase price.
Negative sentiment continues… but record dip presents buy opportunities
The record bargain hunting by investors on the Nigerian Exchange Limited (NGX) last week (market gained on four of the five trading days) was visible on counters in the Industrial and Insurance sectors which offset profit-taking activities on counters in the Oil & Gas, Consumer Goods and Banking Sectors.
Some analysts’ mixed feeling on equities amid the market’s negative take off this week signals the possibility of not repeating last week’s positive close.
After the negative sentiment that dominated the Nigerian market on the first trading day this week, Vetiva Capital analysts, against their earlier expectation, said they foresee a slight rebound “as investors buy up some of the down beaten stocks” still anticipate a mixed session with a positive tilt.
“We expect mixed sentiment to persist”, according to GTI research analysts, who added that the Bull will take advantage of the low prices of the recently depreciated stocks while the Bears will take profits from recently appreciated stocks.
Afrinvest analysts said their weekly sentiments indicator strengthened recently to 1.8x (from 0.6x) as investors began to take a position ahead of second-quarter (Q2) earnings results. Overall, they expect trading sessions to be a mix of bargain hunting and profit-taking activities.
“We expect negative sentiments to dominate the equities market as knee-jerk reactions to the Federal Government’s decision to suspend the operations of Twitter in Nigeria kicks in. That said, we think the possible dips created by sell pressures may present decent entry points for buy orders”, Lagos-based United Capital said in the recent note.
“Buying interest on heavyweight tickers, particularly Dangote Cement which gained about 3.53percent last week played a major role in determining the market’s direction. We suspect that the movement on Dangote Cement is inspired by the recent decision of the company’s shareholders to reinstate the share buyback programme.
“We also see the scope for the stock price to rally further this week. Barring any negative shocks, we expect the positive momentum from last week to filter into the new week. Thus, we expect the equities market to close positive territory this week”, said Meristem research analysts.
