Vetiva Capital Management Limited has unveiled its annual list of 10 High Conviction Stocks, that present strong fundamentals and are forecasted to outperform the market in 2021.
According to Vetiva Research, while equity market’s gains in 2020 largely benefitted from global expansionary monetary policies orchestrated by central banks, the support factors for equities remain strong in 2021.
The report noted that equity markets are projected to benefit from still-low interest rates, resurgence in business activity and crude price recovery. It added that even as broad-based equity demand was anticipated, investors would continue to cherry pick fundamentally sound stocks with dividend payment potential.
Thus, the selection criteria considered intrinsic valuation upsides and dividend yield expectations. Specifically, the report highlighted Zenith Bank Plc as consistently outperforming the banking and broad market indices in the past three years, leveraging on an impressive profitability ratio to out-earn larger banks with larger deposit and loan books.
Also, the Oil and Gas Analyst at Vetiva, Luke Ofojebe, anticipated demand recoveries in the downstream sector as well as price increases due to the deregulation as key valuation drivers for Ardova Plc and Total Nigeria Plc.
Although the reopening of Nigeria’s land borders seems to threatens to increase competition in the Consumer Goods space, the Consumer Goods Analyst at Vetiva, Chinma Ukadike, remained confident that Dangote Sugar Refinery Plc and Flour Mills of Nigeria Plc would respectively hold on to market leadership statuses in the sugar and flour milling subsectors, with positive valuation upsides.
Overall, Vetiva listed Zenith Bank Plc; Guaranty Trust Bank Plc; Access Bank Plc; FCMB Group Plc; Dangote Sugar Refinery Plc; Flour Mills of Nigeria Plc; Lafarge Africa Plc; Seplat Petroleum Development Company Plc; Ardova Plc and Total Nigeria Plc as its 10 preferred stocks for 2021, with a potential weighted investment return of 59 per cent.