Bargain Hunting For Cheap Stocks With Strong Fundamentals May Continue On NGSE

Market Update for the week ended December 7 and Outlook for Dec. 10-14

The first trading week on the Nigerian Stock Exchange (NSE) for the first week of December 2018 ended mixed, with the benchmark index closing marginally lower on profit booking in blue-chip stocks ahead of year-end rally while selling pressure remained relatively high. This was amidst bargain hunting that extended four consecutive weeks of bear-run which has further created new entry opportunities in the market.

The reduced momentum in the losing magnitude of the market and low volume traded signal resistance to further decline as Santa Claus rally draws closer.

Despite the mixed sentiment in the short-to-medium term as political tension persists ahead of the general election in Q1 2019, the coast is becoming clearer for discerning investors, considering the presidential candidates of the two major political parties. Add this to the recent economic data which appear to be positive with activities gradually looking up to further impact corporate earnings of many listed companies that are currently cheap on the strength of low Price-Earnings that is a function of company third quarter earnings positions. This reveals that many stocks with high potential upside ahead of reward earnings reporting season as an incentive, knowing that companies with strong earnings power will grow their dividend payout for financial year ended 2018.

During the week under review, the Nigerian market joined its counterpart as major markets across the globe were down, despite the earlier news about the U.S-China agreement to a temporary ceasefire boosted investors’ confidence and markets recorded significant gains in the first two trading sessions of the week under review.

However, soon after the report of the arrest and possible extradition of the chief financier officer of Chinese tech giant, Huawei filtered the market on Wednesday, global stock futures slides into negativeterritory. As such, U.S. major indexes – DJIA, S&P 500 and Nasdaq, all shed 1.65%, 1.74% and1.42%respectively, while Japanese NIKKEI and UK FTSE 100 lost 3.01% and 2.73% respectively. The news of oil price rebound was depressed as it closed in the negative.

Back home, it was a very volatile week as the NSE All-Share index opened on a negative note, losing 0.20% before rebounding on Tuesday and Wednesday, with gains of 0.7 and 0.5% respectively. It turned red on Thursday losing 1.07% on profit taking, before retracing up on Friday, gaining 0.15% to bring cumulative loss during the period to 0.02% on declining volume and value.

The market before now has the insight of economic performance of the nation as revealed by mixed Q3 corporate earnings performance, where sales revenue of many companies dropped, but the expected Q3 GDP reports this morning from NBS will confirm the actual position to further guide investment decision. As we expect implementation of 2018 budget, election spending and oil price to rebound and impact the economy in this last quarter of the year.

The high selling pressure in the insurance and industrial goods sectors as reflected in the negative market technicals, on low volume traded in the midst of negative market breadth and strong selling pressure. This was revealed by Investdata’s weekly Sentiment Report, showing a sell volume of 70% and buy position of 30%. The volume index of total transactions within the week was 0.88.

The energy behind the week’s performance was weak and flat as low and medium cap stocks recorded gains which reflected on the money flow index at 24.69bps, from 23.78bps in previous week, an indication that funds are entering some stocks and market despite the prevailing low liquidity.

Equity Indicators Last Week
The composite index for period was marginally down by 7.35 basis points to close at 30,866.82 basis points, after opening at 30,874.17bps, hitting a high of 31,180.32bps, from low of 30,732.76bps on low volume. Similarly, market capitalization dropped by N2.69 billion closed at N11.27 trillion, from N11.28 trillion, representing 0.02% value loss.

NSE INDEX WEEKLY TIME FRAME

The advancers’ table was dominated by Low and medium cap stocks as bargain hunters took advantage of the prevailing low price to accumulate position as many stocks hit their new 52 week low ahead of year-end rally.
Meanwhile, the NSEASI’s year-to-date negative returns dipped to 19.29%, just as market capitalization dropped to N2.38tr, or 18.53% below the year’s opening value.

Mixed Sectors Indices
The sectorial performance for the period was largely bullish, except for the NSE Insurance and Industrial Goods indices that were down. Market breadth was negative, with decliners outnumberingadvancers in the ratio of 38:30, to continue the previous week’s down market.

Activities in terms of volume and value weredown by 11.15% and 9.02%% respectively to 1.11 billionshares worth N11.19 billion, from the previous week’s 1.20 billionunits’ value at N14.28 billion boosted by trading in financial service, and Oil/Gas industry.
The best performing stocks for the week were Diamond Bank andIkeja Hotel that topped the advancers table after gaining56.92% and 11.31% respectively to close at N1.02 and N1.87 per share, on low-price attraction and market forces. On the other hand, Continental Reinsurance and Prestige Assurance lost12.50% and 10.11% respectively, close at N1.75 and N0.49 on profit taking and marketforces.

Market Outlook
We expect overall market sentiments to remains mixed with rekindled buying interest coming from banking, and oil& gas stocks amidst rebound in oil price in the international market that continues to trigger investors sentiment. However, we expect the bargain hunting for cheap stocks with strong fundamentals to continue this week.

while watching the political space, since Q3 numbers have given insights into what the expected Q3 GDP and full year company earnings power will be.
As the presidential campaign kicks off, Nigerians are expecting new strategy, new roadmap to address the economic issues, rising poverty level, development of human capital, infrastructure and education with timeframes for delivery. These campaigns are likely to drive prices north, or south, while determining market direction before or after Presidential election. Investors should review their positions in line with investment goals, strength of the company numbers and act as events unfold in the global and domestic environment.

However, we would like to reiterate our advice that investors should go for equities with intrinsic value,
We advise investors to allow numbers guide their decisions while repositioning in any stock, especially now that stock prices remain volatile amidst mixed company, economic and market fundamental.

Meanwhile, we say a big thank you to all facilitators and participants at our INVEST 2019 TRADERS & INVESTORS SUCCESS SUMMIT, which held at the weekend in Lagos. It was yet another successful, insightful and educative outing that not only offered direction as to where investors should look to for a profitable 2019, but industries, sectors and companies to look for worthwhile returns.

Ambrose Omordion
CRO|Investdata Consulting Ltd
info@investdataonline.com
info@investdata.com.ng
ambrose.o@investdataonline.com
ambroseconsultants@yahoo.com
Tel: 08028164085, 08032055467

https://investdata.com.ng/2018/12/bargain-hunting-for-cheap-stocks-with-strong-fundamentals-may-continue-on-ngse/