The capital market has been bearish for a while now and investors have seen the value of their investments go down seriously. My esteemed readers would recall that I warned on this blog sometimes in February about the need for people to be careful where they put their money .I had warned then under the caption ‘caveat emptor’ because I noticed that most of the stocks had appreciated beyond their fundamentals. The chips are down now and most investors who bought some of these stocks without considering the fundamentals are now crying because they have lost a lot of money to the market correction.
I am however, confident that the market is not going to crash. In fact the market will pick up again very soon but investors have to be careful this time around. They must look before they leap.
I want to tell you authoritatively and with responsibility that this is the best time to invest in the capital market because most stocks promise superior returns. .This is because stocks with sound fundamentals are not spared out of this price depreciation. How else could one explain GTB’s price @N22 naira? What of Oceanic Bank that has an EPS of close to N2 doing at less than 20 naira.
This is an indication that the good times are here for those who will invest now and wait to reap handsome rewards in future.
Investors who know their onions know that the best time to invest is when prices are down. By this I mean you should buy when others are selling and you should sell when others are buying.
I want to tell you authoritatively that very soon the bears would give way to the bulls very soon.
Keep investing !
.
Wednesday, July 23, 2008
Friday, February 29, 2008
CAVEAT EMPTOR-BUYERS BEWARE
I have been extremely busy lately with some stuffs and that is why I am just posting today.I would have left what I am about to write till next week but it might be too late by next week.
I feel i should let you know what I feel about the rapid appreciation in price of most stocks on the floor of the exchange for the past two weeks.You would recall that I predicted in my last post that the appreciation in price of most securities will continue this year. I am however of the opinion that the price of some of the stocks that are appreciating rapidly does not justify the increase.A phenomenon which I have chosen to refer to as 'appreciation without fundamentals'.What is a stock like Avon crown caps and container doing at N14 ,Oando @ 200naira in my own opinion is expensive and what of Nigerian wire and cable that is only a strolling distance from my house.This company just opened again for business after it went to sleep for more than a year.Don't forget that the company is not enjoying a monopoly and a price of 12naira is laughable.
Note: The fact that I believe these and many other stocks are expensive does not mean they are not going to appreciate further but I am only saying caveat emptor...Don't get your fingers burnt.
I feel i should let you know what I feel about the rapid appreciation in price of most stocks on the floor of the exchange for the past two weeks.You would recall that I predicted in my last post that the appreciation in price of most securities will continue this year. I am however of the opinion that the price of some of the stocks that are appreciating rapidly does not justify the increase.A phenomenon which I have chosen to refer to as 'appreciation without fundamentals'.What is a stock like Avon crown caps and container doing at N14 ,Oando @ 200naira in my own opinion is expensive and what of Nigerian wire and cable that is only a strolling distance from my house.This company just opened again for business after it went to sleep for more than a year.Don't forget that the company is not enjoying a monopoly and a price of 12naira is laughable.
Note: The fact that I believe these and many other stocks are expensive does not mean they are not going to appreciate further but I am only saying caveat emptor...Don't get your fingers burnt.
Thursday, January 24, 2008
WHERE TO PUT YOUR MONEY IN 2008
Happy new year to everyone.Year 2007 was a great year for many investors:sophisticated or novice.Not too many people got their fingers burnt last year because of the continuous injection of public funds by pension managers and other institutional investors.This led to the upsurge in the prices of almost all the 300 equities listed on the exchange.This led to increase in the P/E of most stocks and a reduction in their Earnings per share.Most banks also came to the exchange the second time in three years to shore up their capital base.
Having given a brief review of the activities in the capital market,I will now give my advice on where to put your money in year 2008.
The surge in the prices of companies will continue as more and more funds find it way into the capital market.I am, however, confident that the sector that will benefit the most this year is the insurance sector.Most insurance companies will appreciate rapidly this year(the price rally has started)because they now have more money to play with.Do not forget that the Federal government just released the money that was raised by them to meet the new capital base.This is expected to have a positive effect on their financials.Insurance stocks generally will experience a rally in their prices.I will, however , recommend some that I can place my money on:
STACO insurance:This company is managed by a proactive management that is bent on catapulting the company to greater heights.The company is also gearing up to raise more funds on the exchange.If you can quickly take position in this stock before a ban is placed on its price.
AIICO INSURANCE:this company also has a sound management and it just beefed up its capital base.A share reconstruction is likely, to reduce the number of outstanding shares.Expect a price rally in this stock immediately the technical suspension is lifted on its price.
Lassaco insurance; it has the second highest EPS in the industry.Watch out for this stock.
LAW union and international emery insurance are also good stocks that will not disapoint investors this year.
Investors should also put their gaze on the following stocks :Wema bank,Chellarams,UBA,Zenith bank,Access bank,University press as their earnings will improve significantly this year.
I will complete the topic I started last month"investing with dates and with numbers"next week by the grace of God.
Keep investing!
Having given a brief review of the activities in the capital market,I will now give my advice on where to put your money in year 2008.
The surge in the prices of companies will continue as more and more funds find it way into the capital market.I am, however, confident that the sector that will benefit the most this year is the insurance sector.Most insurance companies will appreciate rapidly this year(the price rally has started)because they now have more money to play with.Do not forget that the Federal government just released the money that was raised by them to meet the new capital base.This is expected to have a positive effect on their financials.Insurance stocks generally will experience a rally in their prices.I will, however , recommend some that I can place my money on:
STACO insurance:This company is managed by a proactive management that is bent on catapulting the company to greater heights.The company is also gearing up to raise more funds on the exchange.If you can quickly take position in this stock before a ban is placed on its price.
AIICO INSURANCE:this company also has a sound management and it just beefed up its capital base.A share reconstruction is likely, to reduce the number of outstanding shares.Expect a price rally in this stock immediately the technical suspension is lifted on its price.
Lassaco insurance; it has the second highest EPS in the industry.Watch out for this stock.
LAW union and international emery insurance are also good stocks that will not disapoint investors this year.
Investors should also put their gaze on the following stocks :Wema bank,Chellarams,UBA,Zenith bank,Access bank,University press as their earnings will improve significantly this year.
I will complete the topic I started last month"investing with dates and with numbers"next week by the grace of God.
Keep investing!
Sunday, December 30, 2007
INVESTING WITH DATES AND NUMBERS1
In this edition , I will be treating two crucial ways of getting the best from your investment decisions.
Investing with numbers has to do with making your investment decision based on the values of some numeric fundamentals.The popular among them are the turnover,Earnings per share(EPS),the price per earnings ratio(P\E),the profit after tax(PAT),no of outstanding shares,etc.I will discuss this numeric fundamentals one after the other.
Turnover:The turnover of a company represents the amount of goods and services sold by a company in a particular year.An increase in the turnover of a company means that the company was able to generate more business in the period under review.A reduction in the turnover of a company means that the company lost some business in the period under review.A reduction in turnover could also be caused by disturbances in the economy such as strikes,political upheavals,etc.An increase in turnover may not translate into an increase in profits of the company if cost of production increased in the year.
Earnings per share;EPS is the ratio of profit after tax of the company and the number of shares in issue.It tells us how much dividend the company is able to pay based on its earnings.An increase in EPS is usually a reflection of increase in profit after tax of the company and it can also occur when shares of a company are reconstructed.A reduction in EPS could result from either a reduction in the PAT or procreation of shares through bonus issues.
Price per earnings ratio:It is the ratio of price to EPS. It tells us how long it will take for an investor to recoup his initial investment.
Profit after tax(PAT):An increase in profit after tax could result from an increase in turnover or a reduction in cost.
Number of outstanding shares in issue: This is the number of shares in issue .The larger the number of shares in issue the lower the EPS and the higher the P|E ratio.Therefore, if two companies with the same profit level but different no of outstanding shares in issue.The company with a lower no of shares will have a lower EPS.
Investing with dates involves making decisions based on dates.The important dates are the 1st ,2nd 3rd ,4th quarter and the date of closure of register of members.One unique attribute of these dates is that they differ across companies .The end of year of AP is December while the end of year of First Bank is March.
This information is readily available on the pages of newspapers and in Annual reports of companies.I will discuss how to profit from these dates and numbers in the next edition.
Investing with numbers has to do with making your investment decision based on the values of some numeric fundamentals.The popular among them are the turnover,Earnings per share(EPS),the price per earnings ratio(P\E),the profit after tax(PAT),no of outstanding shares,etc.I will discuss this numeric fundamentals one after the other.
Turnover:The turnover of a company represents the amount of goods and services sold by a company in a particular year.An increase in the turnover of a company means that the company was able to generate more business in the period under review.A reduction in the turnover of a company means that the company lost some business in the period under review.A reduction in turnover could also be caused by disturbances in the economy such as strikes,political upheavals,etc.An increase in turnover may not translate into an increase in profits of the company if cost of production increased in the year.
Earnings per share;EPS is the ratio of profit after tax of the company and the number of shares in issue.It tells us how much dividend the company is able to pay based on its earnings.An increase in EPS is usually a reflection of increase in profit after tax of the company and it can also occur when shares of a company are reconstructed.A reduction in EPS could result from either a reduction in the PAT or procreation of shares through bonus issues.
Price per earnings ratio:It is the ratio of price to EPS. It tells us how long it will take for an investor to recoup his initial investment.
Profit after tax(PAT):An increase in profit after tax could result from an increase in turnover or a reduction in cost.
Number of outstanding shares in issue: This is the number of shares in issue .The larger the number of shares in issue the lower the EPS and the higher the P|E ratio.Therefore, if two companies with the same profit level but different no of outstanding shares in issue.The company with a lower no of shares will have a lower EPS.
Investing with dates involves making decisions based on dates.The important dates are the 1st ,2nd 3rd ,4th quarter and the date of closure of register of members.One unique attribute of these dates is that they differ across companies .The end of year of AP is December while the end of year of First Bank is March.
This information is readily available on the pages of newspapers and in Annual reports of companies.I will discuss how to profit from these dates and numbers in the next edition.
Tuesday, November 20, 2007
SETTING INVESTMENT OBJECTIVES
One of the reasons why people lose money on the stock market is that they do not set investment objectives.Myles Munroe once said:"if the purpose of a thing is not known ,abuse is inevitable".This is the same way with investing on the stock market.If you have not set an objective for investing then you are likely going to fall into error.One of the questions you must ask yourself before you buy any stock is : why am I buying this stock?This is because your objective of investing will determine the kind of stocks you buy and the time you buy it.Here are some of the investment objectives I believe you can set for yourself before you buy any stock.
Regular income(Dividend)If your reason for investing in the capital market is to get dividend and regular income then you should consider stocks of companies that pay dividends regularly to their shareholders .It is advisable to buy these stocks when they are selling at their all time lowest or when you feel the EPS of the company has increased considerably and the price of the company is still low.Another tip for picking stock for regular income is to buy stocks during bearish period i.e when the price of the stock is under priced.
Bonus issues:If your objective of investing is to get bonus issues then you should buy stocks of companies that give out bonus issues regularly.There are some "crazy" companies like Guinness,Guaranty trust ,First Bank ,etc that have demonstrated an unparalleled commitment to shareholders wealth.These companies have it as a policy to give out bonus issues regularly. First Bank and Union Bank have given bonus issues for over 5 years consistently.You should however, note that procreation of shares or additions to shares reduces the ability of the company to pay higher dividends except the company is able to increase the profit of the company significantly.
Capital Appreciation:An investor who has capital appreciation has his objective for investing will do well by investing in under priced stocks or in stocks that have growth prospects.By under priced I do not mean penny stocks only because some stocks are actually not worth more than a penny.The investor will also do well by investing during bearish period and wait for the market to pick up.The EPS and the P/E ratio is very important here .If you know that the EPS of a company is higher than the intrinsic value of the stock, then it might be advisable to buy the stock.I will dwell more on this under "investing with numbers".
Directorship/control:sometimes you find out that the price of a stock is very high and people are still buying into the company.The large volumes and demand might be as a result of the quest of some people to clinch a directorship seat on the board of the company or those whowant to take control of the company.These people are usually ready to buy the stock at a premium because of the prospects or the intrinsic benefits of control.
Regular income(Dividend)If your reason for investing in the capital market is to get dividend and regular income then you should consider stocks of companies that pay dividends regularly to their shareholders .It is advisable to buy these stocks when they are selling at their all time lowest or when you feel the EPS of the company has increased considerably and the price of the company is still low.Another tip for picking stock for regular income is to buy stocks during bearish period i.e when the price of the stock is under priced.
Bonus issues:If your objective of investing is to get bonus issues then you should buy stocks of companies that give out bonus issues regularly.There are some "crazy" companies like Guinness,Guaranty trust ,First Bank ,etc that have demonstrated an unparalleled commitment to shareholders wealth.These companies have it as a policy to give out bonus issues regularly. First Bank and Union Bank have given bonus issues for over 5 years consistently.You should however, note that procreation of shares or additions to shares reduces the ability of the company to pay higher dividends except the company is able to increase the profit of the company significantly.
Capital Appreciation:An investor who has capital appreciation has his objective for investing will do well by investing in under priced stocks or in stocks that have growth prospects.By under priced I do not mean penny stocks only because some stocks are actually not worth more than a penny.The investor will also do well by investing during bearish period and wait for the market to pick up.The EPS and the P/E ratio is very important here .If you know that the EPS of a company is higher than the intrinsic value of the stock, then it might be advisable to buy the stock.I will dwell more on this under "investing with numbers".
Directorship/control:sometimes you find out that the price of a stock is very high and people are still buying into the company.The large volumes and demand might be as a result of the quest of some people to clinch a directorship seat on the board of the company or those whowant to take control of the company.These people are usually ready to buy the stock at a premium because of the prospects or the intrinsic benefits of control.
Friday, October 12, 2007
COMMON MISTAKES INVESTORS MAKE 2
4.They don't monitor their investment:One of the greatest mistakes an investor can make is not to monitor his investment.Most investors don't put their heart where their treasure is.Some don't even keep receipt of payments to their stockbrokers or tellers used to pay for public offers.They treat their investment with levity.Little wonder some stockbrokers smile to the bank after swindling some careless investors.One way to keep track of your investment is to register for the Trade Alert service offered by the Nigerian Stock Exchange.The Trade 6. Alert is a device that notifies you of any transaction on your CSCS account.It also brings to your notice other vital information such as dates of AGM and other company news.
5.They don't demobilize their share certificates:Another big mistake some investors make is to keep their shareholding in paper or certificate form.Some even laminate it to preserve the quality of the paper.Certificates are not meant to be kept at home.They are meant to be deposited at the Central Securities and Clearing System(CSCS)by your stockbroker.This is aimed at changing it from the paper form to an electronic form.This is because it is only the electronic form that can be traded.
6.They don't trade their shares:I have also observed with keen interest that most investors don't trade their shares.They give different reasons for this. Some say they don't because they don't know when to sell and when to buy while some others say they want to keep for the future.I strongly believe that there is need for you to trade your shares so as to take advantage of price fluctuations on the Stock Exchange.There is no point being sentimental about a stock.
7. They use temporary address:If you go to Universities you will be shocked with the number of dividend warrants and bonus issues that are left unclaimed.They belong to students who have graduated from the university over the years.This account for the huge amounts of unclaimed dividends.It is a very costly mistake to put the address of a place which you know you would soon leave because it could be very difficult to get your mails.If you have made this mistake before,contact the Registrar of the company where you have shares to change your address to a permanent one.
8.They buy names and not fundamentals:One way to quickly spot novice investors is their penchant for 'big names'.They want Guinness stock ,Diamond stock,etc.I am not saying that these companies are not good but most times people buy them because of their past performance when there are better stocks with better prospects and fundamentals selling at a discount.
lest I forget,Japaul and Fidelity offers are in the market.These two stocks have so many things in common:
1.Good and proactive management
2.They were both penny stocks before people discovered their inherent potential.
3.They are very affordable.Japaul is N3.95k while Fidelity Bank is N8.These stocks are good buys.
Avail yourself of these offers and share in the wealth of Nigeria!
5.They don't demobilize their share certificates:Another big mistake some investors make is to keep their shareholding in paper or certificate form.Some even laminate it to preserve the quality of the paper.Certificates are not meant to be kept at home.They are meant to be deposited at the Central Securities and Clearing System(CSCS)by your stockbroker.This is aimed at changing it from the paper form to an electronic form.This is because it is only the electronic form that can be traded.
6.They don't trade their shares:I have also observed with keen interest that most investors don't trade their shares.They give different reasons for this. Some say they don't because they don't know when to sell and when to buy while some others say they want to keep for the future.I strongly believe that there is need for you to trade your shares so as to take advantage of price fluctuations on the Stock Exchange.There is no point being sentimental about a stock.
7. They use temporary address:If you go to Universities you will be shocked with the number of dividend warrants and bonus issues that are left unclaimed.They belong to students who have graduated from the university over the years.This account for the huge amounts of unclaimed dividends.It is a very costly mistake to put the address of a place which you know you would soon leave because it could be very difficult to get your mails.If you have made this mistake before,contact the Registrar of the company where you have shares to change your address to a permanent one.
8.They buy names and not fundamentals:One way to quickly spot novice investors is their penchant for 'big names'.They want Guinness stock ,Diamond stock,etc.I am not saying that these companies are not good but most times people buy them because of their past performance when there are better stocks with better prospects and fundamentals selling at a discount.
lest I forget,Japaul and Fidelity offers are in the market.These two stocks have so many things in common:
1.Good and proactive management
2.They were both penny stocks before people discovered their inherent potential.
3.They are very affordable.Japaul is N3.95k while Fidelity Bank is N8.These stocks are good buys.
Avail yourself of these offers and share in the wealth of Nigeria!
Friday, September 21, 2007
COMMON MISTAKES INVESTORS MAKE 1
I would like to apologize to my esteem readers for not posting stuffs for a while now. It was due to some circumstances beyond my control.I am now back to feed you with more stuffs on how to make money from shares.
Today's post is dedicated to exposing my dear readers to some of the mistakes investors make.I will be talking about four this week and I will conclude later.
The four common mistakes are:
1.They do not read Prospectus:A prospectus is a document produced by a company that wants to sell shares to the public.I have observed with huge disappointment over the last five years as an active observer of the Nigerian capital market that most investors do not read prospectus of companies they invest in.They just fill out the forms at the back of the prospectus and then drop it with their monies either to their broker or at a bank.While it is true that that the projections in the prospectus is just an estimate and may not come true,we must understand that we would be doing ourselves a lot of good by perusing prospectus.I know the non reading of prospectus is a reflection of the poor reading culture of most Africans.We must however make up our minds to read so that we can be better informed.
2.They do not attend annual general meetings.:It is at the annual general meeetings that directors present the annual reports of the company and all other reports to investors and the general public.They also tell shareholders and the general public their plans for the future.Investors who know their onions do not joke with annual general meeetings because they know that it is always revealing.As a corollary to this mistake is the fact that most shareholders do not read annual reports of their company.Annual report contains the financials of a company ,the Chairman's speech and some other vital information.The future performance of the company can be predicted from the annual reports.So,the next time you get your annual report make sure you read it
3.They do not set investment objectives:There are so many shares you ought not to have bought if you had set an investment objective for yourself.Investment objectives has to do with why you are investing in a company.Each time you want to purchase a stock ask yourself this question:Why am I buying this company's shares,is it for regular income,bonus issues or capital appreciation?I will discuss how to set investment objectives in greater detail on this blog later.
Less I forget, make sure you buy the Dangote Flour offer for sale that is currently in the market. I consider the offer price of N15 a good discount.It is one of the surest ways of making over 100% capital appreciation in less than 6 months.I can predict with the precision of a watchmaker that the price at the end of the public offer cannot be less than N32 .It is one of the ways of sharing in the wealth of Nigeria and a privilege to share ownership of the company with one of Africa"s greatest entrepreneur-Alhaji Aliko Dangote
Be wise.
Today's post is dedicated to exposing my dear readers to some of the mistakes investors make.I will be talking about four this week and I will conclude later.
The four common mistakes are:
1.They do not read Prospectus:A prospectus is a document produced by a company that wants to sell shares to the public.I have observed with huge disappointment over the last five years as an active observer of the Nigerian capital market that most investors do not read prospectus of companies they invest in.They just fill out the forms at the back of the prospectus and then drop it with their monies either to their broker or at a bank.While it is true that that the projections in the prospectus is just an estimate and may not come true,we must understand that we would be doing ourselves a lot of good by perusing prospectus.I know the non reading of prospectus is a reflection of the poor reading culture of most Africans.We must however make up our minds to read so that we can be better informed.
2.They do not attend annual general meetings.:It is at the annual general meeetings that directors present the annual reports of the company and all other reports to investors and the general public.They also tell shareholders and the general public their plans for the future.Investors who know their onions do not joke with annual general meeetings because they know that it is always revealing.As a corollary to this mistake is the fact that most shareholders do not read annual reports of their company.Annual report contains the financials of a company ,the Chairman's speech and some other vital information.The future performance of the company can be predicted from the annual reports.So,the next time you get your annual report make sure you read it
3.They do not set investment objectives:There are so many shares you ought not to have bought if you had set an investment objective for yourself.Investment objectives has to do with why you are investing in a company.Each time you want to purchase a stock ask yourself this question:Why am I buying this company's shares,is it for regular income,bonus issues or capital appreciation?I will discuss how to set investment objectives in greater detail on this blog later.
Less I forget, make sure you buy the Dangote Flour offer for sale that is currently in the market. I consider the offer price of N15 a good discount.It is one of the surest ways of making over 100% capital appreciation in less than 6 months.I can predict with the precision of a watchmaker that the price at the end of the public offer cannot be less than N32 .It is one of the ways of sharing in the wealth of Nigeria and a privilege to share ownership of the company with one of Africa"s greatest entrepreneur-Alhaji Aliko Dangote
Be wise.
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