Following the free-fall in prices of stocks, which has depressed their respective value, investors have been asked to target stocks with good fundamentals and currently trading below their fair value.
Analysts at FSDH Merchant Bank Limited that gave the advice, added that investors should take position in stocks that have a history of good dividend payment. According to the analysts, they see opportunities in the banking, consumer goods, building materials and oil and gas sectors of the market.
The firm allayed fears of investors who were worried about the decline in the market, saying the market had depreciated an average of 2.6 per cent in the last years between July and August.
“Looking at the historical trend, the equity market has depreciated in the last six years between July and August. The market is clearly oversold and is close to the bottom. FSDH Research expects the bulls to take over from the bears very soon, However, the recent downward trend in the crude oil price may lead to a downward pressure in the equities market,” they said.
The market fell by 4.39 per cent between July and August in 2013, shed 1.34 per cent in 2014 and 1.64 per cent in 2015. The market went down by 1.47 per cent in the same period of 2016; 0.9 per cent in 2017 and 5.86 per cent in 2018.
Looking ahead, the analysts said the market would be driven by some factors in the month of August.
“We expect the following factors to drive performance of the equities market in the short-term. A possible increase in the yield of fixed income securities; downward trend in the price of crude oil, bargain hunting by investors taking advantage of lower prices and stability in the foreign exchange market,” they said.
A stockbroker and Chief Executive Officer of Sofunix Investment and Communications, Mr. Sola Oni, recently said many shares were trading below their intrinsic values and this was a buy signal for any investor that wants to take position and beef up portfolio.
He said: “This is a buyers’ market where investors should contact their stockbrokers for informed investment advice. Market has never been static, hence, bull run is at the back of the door. As ministers commence operations, there will be activities in all facets of the economy and this is expected to impact positively on the capital market.
Informed investors are quietly taking advantage of the current bearish run to increase their holdings. No time to buy stocks is better than this moment. Investors buy into future of companies. The current results of many of our quoted companies are heart warming but they are historical. Expectation of every buyer is that the company will perform better and churn out higher returns.”
Some of the stocks are trading over 30 per cent below their year’s opening prices. For instance, Okomu Oil Palm Plc is selling 32 per cent below its year’s opening price, while Presco Plc is trading 30.9 per cent lower than its opening price.
Transcorp Plc is selling 44 per cent lower than the price it was at the beginning of the year, while UAC of Nigeria Plc offers 44 per cent discount below its opening price.
Guinness Nigeria Plc is 42 price lower, just as International Breweries Plc, Nigerian Breweries Plc and Dangote Sugar Refinery Plc are 60 per cent, 42 per cent and 35 per cent lower respectively.
PZ Cussons Nigeria Plc is 50 per cent lower than its opening price, while Ecobank Transnational Incorporated, Fidelity Bank Plc, Jaiz Bank Plc, United Bank for Africa Plc, Unity Bank Plc and Zenith Bank Plc are 48.2 per cent; 26.1 per cent; 23.1 per cent; 27.9 per cent; 40 per cent; and 29.1 per cent in that order.
Investors buying the shares of FBN Holdings Plc, Stanbic IBTC Holdings Plc and United Capital Plc are doing so 37.7 per cent, 20.5 per cent and 32.6 per cent cheaper respectively.