Guide to Profitable Investment Decision

• Stocks to Watch

The Nigerian stock market last week continued its southward journey as profit taking persist by investors. The All Share Index closed at 44,396.73 points on Friday 21, October 2022. Year to date, the market has returned 3.93%.
Most stocks have touched their 52 weeks low and some are tending towards their year low. This is creating more entry opportunities for discerning investors.

Investment in the stock market requires deliberate effort to ensure more wins and fewer losses. At that, it is important for investors to know what to do per time relative to the seasons and times in the market.

There are seasons and times in every stock market community. There is the earnings season when results are released; this happens at least 4 times in a year. There is the bullish season when prices are generally up, even if there are no results being released. There is also the bearish season when prices are generally down. For sure, there are periods when the market is sideway; that is, when the market is neither bullish nor bearish.

A few companies have published their Q3 2022 reports. We expect many reports to hit the market this week as the month of October is winding up, being the dead line for the submission of Q3 report for quoted companies.

How do you invest in earnings season?

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.

How are expectations formed?

How do you make up your mind to invest against that expectation? The following should form the basis of your expectation:

• Listen very carefully to news about the organisation. It could come through the pages of newspaper. It could come on the social media. It could come among your friends. It could come from people working within the organisation. When you are interacting and relating, also keep your ears on the ground because some of the information that filters to your ears could actually be processed and make use of to benefit you as you invest in stocks.
• Look at the product and services of the organisation.
• Look at the Board and Management of the organisation
• Consider the previous results of the institution; that is, quarterly reports, audited reports and history of dividend payout.

So for you to invest well in stocks, seek to lay hold on what the company’s earnings always look like. Is it improving yearly? Is it declining, fluctuating or stagnant? You need to get these information in order to make profitable investment decision.

STOCKS TO WATCH

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

ZENITH BANK

Zenith Bank is currently trading at N20.20 and has touched a high of N27.5 and N18.90 in the past 52 weeks.
It is trading 26.55% away from its 52 weeks high of N27.50, which implies an uptrend potential of about 27% for the share price of the bank.
Going by its Book Value of N40.52, relative to its current price of N20.2, Zenith Bank is very cheap and embedded with growth potentials.

FBNH

The share price of FBHN is currently trading at N9.70. Within the last 52 weeks, the share price of the financial institution has touched a high of N12.90 and a low of N8.20.
It is trading 24.81% away from its year high of N12.90, which implies an uptrend potential of about 25% relative to its year high of N12.90.
With the Book Value of N24.70, relative to its current price of N9.70, FBNH is underpriced.

ACCESS HOLDINGS

Access Holdings is currently trading at the share price of N8.15. In the past 52 weeks, the stock has touched a high of N10.60 and a low of N7.50.
It is trading 23.11% away from its 52 weeks high of N10.60, which implies an uptrend potential of about 23% for Access Holdings.
With the Book Value of N30.18, Access Holdings is considered very cheap, relative to its current share price of N8.15.

GTCO

The share price of GTCO is currently trading at N18.5 and it has touched a high of N30 and a low of N16.80 in the last 52 weeks.
It is trading 38.33% away from its year high of N30, which implies an uptrend potential of 38% for GTCO.
The Book Value of N28.73, relative to the current price of N18.5 implies that GTCO is underpriced.

UBA

UBA is currently trading at N7 with a 52 weeks high of N8.85 and a low of N6.55. It is trading 20.90 % away from its 52 weeks high of N8.85, implying an uptrend potential of about 21% for UBA.
Considering its Book Value of N23.05, relative to its share price of N7, UBA is underpriced. A position in UBA has uptrend potentials.

FLOUR MILLS

Flour Mills is currently trading at N30.30 with a 52 weeks high of N41.45 and a low of N27.
It is trading 26.9% away from its 52 weeks high of N41.45, implying an uptrend potential of about 27% for Flour Mills.
Considering its Book Value of N47.78, relative to its share price of N30.30, Flour Mills of Nigeria is considered cheap and has uptrend potential.

NIGERIAN BREWERIES

The share price of Nigerian Breweries is currently trading at N42 and it has touched a high of N78.5 and a low of 39.9 in the past 52 weeks.
It is trading 46.5% away from its 52 weeks high of N78.5, suggesting an uptrend potential of about 47% for Nigerian Breweries.

PRESCO

Currently trading at N128.35, the share price of Presco with a year high of N200 and year low of N85.
There is an uptrend potential of 35.83% in the share price of Presco, relative to its 52 weeks high of N200.

GUINNESS

Currently trading at N82.9, 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 24.64%, relative to its 52 weeks high of N110.

Source: Guide to Profitable Investment Decision – StocksWatch (stocksng.com)

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