Cheap stocks to consider for strategic positioning

The stock market last week closed on bearish note as profit taking persist by investors, bringing the All Share Index lower by 2.18% week on week. Prices of stocks are coming down, thereby creating another entry opportunities for smart investors.

In a matter of weeks, Q2 results of listed companies will be out, and the best strategy is to take position before the release of these results.

The most mistake people make all the time in the market is a situation where investors do rush to invest with the release of quarterly reports, audited reports or declaration of dividend. That’s actually a wrong way to invest in the stock market. Investment in stocks is done against expectation and not on realities. In other words, you are buying into a company based on what you think you can get; that is expectation. For instance, when you are putting your money in a stock, it is because:

  • You hope that the price of the stock will grow more than it is now along the line.
  • You are buying today because you hope and expect the Company to be there, bigger and better in years to come.

If your expectation is that an institution will soon be gone and out of operation, you will not be investing in it.

Expectation is the mother of all investment strategies. At that, investing only after you have seen the result of a stock is wrong. It is a wrong approach.

How should you be investing?

  • Invest long before the next quarter’s result is released.
  • You must always have an expectation of the outlook of the next quarterly report.
  • Then invest, take position and wait.
  • The next line of action should be first to monitor price direction while you are waiting. Price may be fluctuating. So long as your expectation is intact, wait.
  • Results when released will form the answer to your expectation.
  • If the result is good, then you have passed. You might decide to wait or buy more. You might decide to wait in the stock, buy more or even sell; take out your money and move on to another stock.
  • If your expectations are not met, taking a decision appropriately should be expected.

We have always advised that investors to take position in fundamentally sound stocks as they stand the test of time. To mention a few among cheap stocks with strong fundamentals and uptrend potentials, the following may be considered for strategic positioning:

ACCESS HOLDINGS

The share price of Access Holdings Plc is currently trading at N9.95. In the past 52 weeks, the stock has touched a high of N10.60.

With Q1 2022 earnings per share (EPS) of N1.61, relative to the current share price of N9.95, a low P/E ratio of 6.18x is a pointer to the fact that the stock is cheap.

With the Book Value of N30.84, Access Holdings is considered very cheap, relative to its current share price of N9.95.

FBNH

First Bank of Nigeria Holdings reported fantastic results in its FY 2021 and Q1 2022 financial statements. Growth is recorded in the Company’s top line and bottom line figures for the periods reported.

The Holding Company recovered N141 billion debt from Atlantic Energy Limited in the course of 2021 financial year. This shows that the Group is seriously working on reducing its non-performing loans.

Currently trading at N11, the share price of FBNH has touched a high of N12.90 and a low of N7.05 in the last one year.

With the Book Value of N24.51, relative to its current price of N11, FBNH is underpriced.

UBA

UBA is currently at N7.75 with a 52 weeks high of N8.85. It is trading 12.43% away from its 52 weeks high of N8.85.

With the earnings per share of N1.21 in Q1 2022, a low P/E ratio of 5.17x is indicative that UBA is cheap at the current price.

Considering its Book Value of N24.14, relative to its share price of N7.75, UBA is grossly underpriced. A position in UBA has uptrend potential.

ZENITH BANK

Zenith Bank is trading below trading far below its intrinsic value. It closed on Friday at N23.45

In the last one year, the share price of the financial institution has touched a high of N27.50 and a low of N22.

It is trading 14.73% away from its 52 weeks high of N27.50, which implies an uptrend potential of 14.73% for the share price of the bank.

Going by its Book Value of N42.37, relative to its current price of N23.45, Zenith Bank is very cheap and embedded with growth potentials.

FIDELITY BANK

Fidelity Bank is currently trading at N3.30 and within the last one year, it has touched a high of N4.05 and a low of N2.19.

There is uptrend potential of 18.52% in the share price of Fidelity Bank relative to its 52 weeks high of N4.05.

Considering its book value of N10.65, relative to its current share price of N3.30, Fidelity Bank is considered cheap with uptrend potential.

FLOUR MILLS OF NIGERIA

Flour Mills of Nigeria reported 50.83% growth in its turnover and a marginal growth of 8.94% in profit after tax in its audited report for the year ended 31 March 2022. Earnings per share increased to N6.83 from the EPS of N6.27 achieved the previous year.

At the share price of N35.15, a low P/E ratio of 5.14x and earnings yield of 19.44% makes Flour Mills a bargain.

The Company increased dividend payout by 30.30% to N2.15 from a final dividend of N1.65 declared the previous year.

Currently trading at N35.15, Flour Mills has touched a high of N41.45.  A position in Flour Mills has an uptrend potential of 15.2%, relative to its 52 weeks high of N41.45.

Its Book Value of N47.78, relative to its current price of N35.15 also confirm the fact that the stock is still trading below its fair value, hence it has uptrend potential.

ECOBANK

Ecobank Transnational Incorporated is grossly undervalued as it is trading far below its fair value. Currently trading at N12.5, the share price of Ecobank has touched a high of N13.2 and a low of N4.95 in that 52 weeks.

With the Book Value of N35.83, relative to its current share price of N11.95, Ecobank is considered very cheap with uptrend potential.

GTCO

The share price of GTCO is currently at N22.55 and it has touched a high of N30.25 and a low of N21.45 in the last 52 weeks.

It is trading 25.45% away from its year high of N30.25, which implies an uptrend potential of 25.45% for GTCO.

The Book Value of N30.88, relative to the current price of N22.55 is a confirmation that GTCO is underpriced.

Source: Cheap stocks to consider for strategic positioning – StocksWatch (stocksng.com)

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