Value Investing Strategies For Picking Stocks In A Down Market

The prolonged down market on the Nigerian Stock Exchange (NSE) has further eroded the confidence level of many investors, even as the air of uncertainty continues to heighten on a daily basis. This is due to the weak economic and market fundamentals that have reflected on the up and down movement of the NSE’s benchmark index over the past 15 months.

Despite the current illiquidity in the market, analysts at Investdata Consulting foresee a market that is recovery bound in this second half of the year, especially in September and October that will then usher in a stable market in 2020. We see this ongoing volatility continuing in this third quarter, despite the fact that most companies would publish their Q2 earnings reports before this month end in line with the post-listing requirement of the NSE.

Investing wisely in the second half of 2019, therefore, means buying cheap stocks that are near, or have reached resistance and not likely to slide further. Ability to identify this category of stocks is therefore key.
While the sharp appreciations may not come immediately, due to the prevailing high volatility, we believe that the time is ripe for those who can start entering the market, accumulating value stocks most of whose prices have gone ridiculously low.

In equity investments like we know, price movements are a function of earnings in the short to long run, also the lower the price of a stock from its highest level, the lower the possibility of future losses keeping other variable constant.

The table above shows the price and earnings movement of the stocks year to date.
This would tell you how low prices have gone. Despite this, you will see that some stocks are still defensive during this down market. You will also agree with me that most of the stocks are within that price range we can start positioning for the medium and long-term as we expect catalysts that would stimulate the bull-run. Some investors that probably bought high will notice from the table that the prices have fallen to or even below their fair values. Should we not be buying now?

With the Central Bank of Nigeria (CBN) releasing its five-year blueprint, with one of the major highlights being a planned banking sector recapitalization is one of its agenda to consolidate to solidify the financial nation’s financial system, following the devaluation of the Naira since the last exercise ended in 2005. The need to strengthen the nation’s banks, given their role as engine rooms of economic growth and development and we note the sector’s positive influence on the nation’s stock market.

One other factor that will guide investment decisions this month as companies present their accounts is the expectation of interim dividend from some first-tier banks and a few others in the consumer goods and insurance sectors.

Attention: If you haven’t signed up for Investdata buy and sell signal setup, don’t delay. We have just added another risk management feature and new favorite stocks of the most revered traders and investors in corporate Nigeria to our watchlist, these stocks are with double potentials. To become a member, send ‘YES’ or ‘STOCKS’ to the phone numbers below. Take advantage of this service to buy right and sell right during this portfolio reshuffling and repositioning ahead of Q2 numbers and fiscal stimulus.

Ambrose Omordion
CRO|Investdata Consulting Ltd
info@investdataonline.com
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https://investdata.com.ng/2019/07/value-investing-strategies-for-picking-stocks-in-a-down-market/