BEST PERFORMING STOCKS ON EARNINGS REACTION

Looking at the stock market situation, the year to date oscillating performance revealed low valuation of equities in a weak economy, especially with the negative macroeconomic indices that reflects low liquidity, low production output and high unemployment rate.

Investors are still worried that the government has not taken a serious step yet to address the present economy realities, particularly the current economic recession. 

With the coming of the last quarter of the year, one of the expected factors to trigger the seasonal pattern ahead of year-end is the Q3 earnings season that kicked off last week with United Capital Plc and Infinity Trust Mortgage Bank releasing their Q3 numbers to the market.  There is optimism that the current quarter will show better growth than the previous quarters, despite the ongoing recession, owing to expectations that government will reflate the economy by introducing stimulus packages beneficial to players in the real sector as an incentive to encourage serious economic activities that will boost national output. 

The earnings season is the period when listed companies are expected to release their score-cards, which is 30 days after the end of a quarter and 90 days after the end of a financial year.

At the end of the Q2 earnings season, it may surprise you to noted that of the over 180 listed equities that released their earnings, only 22 recorded three straight days of positive earnings reaction. The others simply recorded negative reactions, as their prices decline within the period under consideration, while some remained unchanged for days. 

As revealed on the table, Conoil  ranks first in the league of the few that recorded positive investor sentiments, recording a huge 27.56% within three days of presenting its earnings report. This goes to support the argument that investors typically react to impressive numbers, especially when there is improved payout or when the numbers point to higher possibility of juicier dividend payment at the end of the day.  Eterna Oil ranks second, gaining 14.70%, followed by Air Service,Total Nigeria Plc and Access Bank. 

The table below shows the stocks that have gained the most on their earnings reaction days for that season.    

SECURITIES	Released Date	Period	3 Days % Chg
CONOIL	16-Sep-16	Q2	27.56
ETERNA	1-Aug-16	Q2	14.89
AIRLINE SERVICES AND LOGISTICS	29-Jul-16	Q2	14.70
TOTAL NIGERIA	29-Jul-16	Q2	10.41
ACCESS	18-Aug-16	Q2	9.94
UNITED CAPITAL	13-Jul-16	Q2	8.57
FBNHOLDINGS	26-Jul-16	Q2	8.50
PRESCO	27-Jul-16	Q2	7.92
CONTINENTAL REINSURANCE	28-Jul-16	Q2	6.67
CUSTODIAN & ALLIED INSURANCE	22-Jul-16	Q2	5.26
FORTE OIL PLC	28-Jul-16	Q2	5.14
GLAXO SMITHKLINE	26-Jul-16	Q2	4.97
MRS OIL NIGERIA	29-Jul-16	Q2	4.95
TRANS-NATIONWIDE	14-Jul-16	Q2	4.95
OANDO	1-Aug-16	Q2	4.51
SKYE BANK	29-Jul-16	FY	4.48
FCMB GROUP PLC	25-Jul-16	Q2	4.44
CAP	25-Jul-16	Q2	4.17
GUARANTY	17-Aug-16	Q2	2.60
OKOMU OIL PALM	28-Jul-16	Q2	2.18
U A C N	26-Jul-16	Q2	1.12
NIGERIAN BREWERIES	13-Jul-16	Q2	0.20
ECOBANK TRANSNATIONAL INC	26-Jul-16	Q2	-0.54
UNITY BANK	1-Aug-16	Q2	-0.98
UBA	26-Aug-16	Q2	-1.36
STANBIC IBTC HOLDINGS	29-Oct-15	Q3	-1.51
NPF MICROFINANCE BANK	29-Jul-16	Q2	-2.20
DIAMOND	28-Jul-16	Q2	-2.99
FLOUR MILLS	28-Jul-16	Q1	-3.37
DANGOTE FLOUR MILLS	1-Aug-16	Q3	-3.69
WEMA	27-Jul-16	Q2	-3.90
NESTLE NIGERIA	29-Jul-16	Q2	-3.98
FIDSON HEALTHCARE	25-Jul-16	Q2	-3.98
AXA MANSARD INSURANCE	27-Jul-16	Q2	-4.02
ZENITH INT'L PLC	12-Aug-16	Q2	-4.03
CUTIX	29-Aug-16	Q1	-4.85
CEMENT CO. OF NORTHERN NIG.	29-Jul-16	Q2	-4.86
RED STAR EXPRESS PLC	29-Jul-16	Q1	-4.96
JULIUS BERGER	28-Jul-16	Q2	-4.99
7-UP BOTTLING	29-Jul-16	Q1	-5.00
UNION BANK	28-Jul-16	Q2	-5.00
SEPLAT	29-Jul-17	Q2	-5.13
LAFARGE W A P C O	20-Jul-16	Q2	-5.23
DANGOTE CEMENT	20-Jul-16	Q2	-5.53
VITAFOAM NIGERIA	1-Aug-16	Q3	-6.35
INT'L BREWERIES	4-Aug-16	Q1	-6.48
DANGOTE SUGAR	29-Jul-16	Q2	-6.72
FIDELITY	29-Jul-16	Q2	-6.72
CADBURY NIGERIA	20-Jul-16	Q2	-6.83
GUINNESS NIG. PLC	20-Sep-16	Q4	-7.00
STERLING BANK	28-Jul-16	Q2	-7.03
AFRICA PRUDENTIAL	20-Jul-16	Q2	-7.69
LIVESTOCK FEEDS	27-Jul-16	Q2	-8.08
UACN PROPERTY DEV. CO.	27-Jul-16	Q2	-8.31
NEM INSURANCE	27-Jul-16	Q2	-8.33
P Z CUSSONS NIGERIA	4-Oct-16	Q1	-9.95
TRANSNATIONAL CORPORATION	29-Jul-16	Q2	-13.14

As you would notice on the list, petroleum stocks were the top five best performing stocks on earnings reaction.  

Let the tables above guide you in this period, when another earnings season beckons, particularly amidst the low prices, owing to low liquidity and dwindling confidence.

When positioning for expected earnings, set your target so that when the results finally hit the market, knowing that where it is positive or negative market will react to it.  

It is very important to set target because every investment is against expectation, if your expectation are not met exit early to cut loss and protect your capital. It is important that I repeat: Should a result not meet your expectation, do not over stay, know when to use the exit door quickly before the bazaar is over.

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