Bearish Market: How to take advantage of low priced equities with strong fundamentals

The Nigerian stock market last week continued its southward journey, bringing the prices of many stocks to their year low. Year to date the market has returned 15.58% as the All Share Index and Market Capitalization stands at 49,370.62 points and N26.629 trillion respectively.

Should investors be worried as the bear continue to dominate the equity space? When will the market go back up again?

Capital market experts have said that the current downtrend in prices of stocks is only creating entry opportunities for discerning investors.

Commenting on the current market mood, the MD/CEO of Global View Capital Limited, Aruna Kebira, stated thus:

“If you have put all your money in the market, you need to worry. But if you have not put all your money in the market, you can hold forth until the market is good.

What you should be looking at is to try as much as possible to average down on what you have bought because market does not go down and stay down. Whatever goes down, comes up and whatever comes up, goes down.

We saw it that in February this year when Ukraine and Russia engaged themselves in war that has actually thrown the whole world into a lot of economic crisis. This brought shortage in the supply of energy and commodity; which we saw that drove the price of bread, gas and diesel through the roof. Because of that, inflation began to be on the upward journey. And that moves Central Banks across the globe to increase the rates in order to check the rise in inflation.

As we speak Ukraine and Russia are yet to call a truce to the war, and the supply side of the war has spiked tremendously. Be that as it may, CBN has increased rate two times this year from 11.50% to 14%, thereby making the money market very attractive. And this is leading to capital flight from the market, whereby investors scramble to exit to other investments. Foreign Direct Investors will always want to put their funds to where is less risky.

Also our foreign reserve that has been looking down is putting a lot of pressure on the reserve. The resultant effect is what we have seen in the Naira falling. The Naira recently traded about N720 per Dollar at the black market. The inflation figure for July climbed to 19.64%. All these accumulated to flight for safety for investors. So the market is taking the heat, due to losses from day to day”.

How to take advantage of the current market mood:

Most stocks have touched their 52 weeks low and some are tending towards their year low. This is creating new entry opportunities for discerning investors.

The capital market guru, Aruna Kebira stated thus:

“Q2 2022 results of companies released so far beats market expectation as some of them will pay interim dividend. This will trigger the comeback of the market and prices will begin to go up

When the market is good, for those who have taken positions now will smile to the bank.

Remember what happen during the Covid-19 era, that Zenith got to as low as N9.00. When the market became good, Zenith Bank went as high to N28.

Most stocks have touched their 52 weeks low and some are tending towards their year low.

I will just advice that people should take their positions in stocks with strong fundamentals and those that have good dividend payout history. The lower the price now, the better. So it is a matter of sitting down and looking at the Q2 results. Look at their performance history, dividend payout and then take position.

A number of investors that have the courage take position in the market at a particular time like this, if the market becomes good, they will become the champion”.

STOCKS TO WATCH

Most stocks have touched their 52 weeks low and some are tending towards their year low. This is creating new entry opportunities for discerning investors.

We have always advised investors on this platform to take position in fundamentally strong stocks because they stand the test of time. Just to mention a few, the following stocks can be considered for strategic positioning:

ACCESS HOLDINGS

The share price of Access Holdings Plc is currently trading at N8.30. In the past 52 weeks, the stock has touched a high of N10.60 and a low of N8.

It is trading 21.7% away from its 52 weeks high of N10.60, which implies an uptrend potential of about 22% for Access Holdings.

With the Book Value of N30.84, Access Holdings is considered very cheap, relative to its current share price of N8.30.

ZENITH BANK

Zenith Bank is currently trading at N21.95 and has touched a high of N27.5 and N18.90 in the past 52 weeks.

It is trading 20.18% away from its 52 weeks high of N27.50, which implies an uptrend potential of about 20% for the share price of the bank.

Going by its Book Value of N42.37, relative to its current price of N21.95, Zenith Bank is very cheap and embedded with growth potentials.

GTCO

The share price of GTCO is currently trading at N20.30 and it has touched a high of N30 and a low of N18.90 in the last 52 weeks.

It is trading 32.33% away from its year high of N30, which implies an uptrend potential of 32% for GTCO.

The Book Value of N30.88, relative to the current price of N20.30 is a confirmation that GTCO is underpriced.

FBNH

The share price of FBHN is currently trading at N10.75. Within the last 52 weeks, the share price of the big elephant has touched a high of N12.90 and a low of N7.30.

It is trading 16.67% away from its year high of N12.90, which implies an uptrend potential of about 17% relative to its year high of N12.90.

With the Book Value of N24.51, relative to its current price of N10.75, FBNH is underpriced.

UBA

UBA is currently trading at N7.10 with a 52 weeks high of N8.85 and a low of N6.7. It is trading 19.77% away from its 52 weeks high of N8.85, implying an uptrend potential of about 20% for UBA.

Considering its Book Value of N24.14, relative to its share price of N7.10, UBA is grossly underpriced. A position in UBA has uptrend potentials.

FLOUR MILLS

Flour Mills is currently trading at N29.05 with a 52 weeks high of N41.45 and a low of N27.5.

It is trading 29.92% away from its 52 weeks high of N41.45, implying an uptrend potential of about 22% for Flour Mills.

Considering its Book Value of N47.78, relative to its share price of N29.05, Flour Mills of Nigeria is considered cheap and has uptrend potential.

PRESCO

Currently trading at N142.60, the share price of Presco with a year high of N200 and year low of N73.

There is an uptrend potential of 28.7% in the share price of Presco, relative to its 52 weeks high of N200.

NIGERIAN BREWERIES

The share price of Nigerian is currently trading at N47.15 and it has touched a high of N78.5 and a low of 39.9 in the past 52 weeks.

It is trading 39.94% away from its 52 weeks high of N78.5, suggesting an uptrend potential of about 40% for Nigerian Breweries.

GUINNESS

Currently trading at N84, the share price of Guinness has touched a high of N110 and a low of N29.05 in the past 52 weeks.

Guinness has an uptrend potential of 23.64%, relative to its 52 weeks high of N110.

Source: Bearish Market: How to take advantage of low priced equities with strong fundamentals – StocksWatch (stocksng.com)

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