By Babajide Komolafe
Some people want to invest in shares for a very long time. You can decide to save and invest periodically, quarterly or every six months. It could be for retirement or for a major project like children’s university education or to build your own house. This means a period of more than ten years. What are the shares you should buy?
Buy the shares of conglomerates producing and selling essentials. A conglomerate is a company that has many subsidiaries or produces so many things. Most of the time, they produce essential goods that people will always need and consume. Think of Nestle, Unilever, PZ Nigeria Plc, First Bank Holdings etc.
Why should you focus on such companies? The possibility that such companies will collapse or fold up is very slim. The rate of failure of such companies is very low. Yes, like other businesses and the economy in general, these companies do have their good and bad times when they would barely make profit either due to decline in sales or rising costs. But fold up, liquidated is not likely at all. Such companies could be acquired, merged with another company but not collapse.
For example, during the global financial crises between 2008 and 2010, many businesses collapsed or just closed shop, the biggest being Lehman Brothers. What happened to most conglomerates was declining sales, which made profit to drop.
Many of them that should have collapsed were either bailed-out by government and the regulators or were acquired by competitors or new investors. An example in Nigeria is Union Bank, former Intercontinental Bank, Oceanic Bank. Yes, the value of what people invested dropped but over time, they will regain the value.
Why is it important that you buy the stock of such companies? You are saving and investing for the long term; the safety of your investment should be your first consideration when you are making this kind of investment. You need to ask, “Which company should I invest in today that would still be in existence and performing in 10 years or 20 years when I am going to need the money?
This is important because you must avoid a situation whereby, when you retire and you need the money or when you need it to fund your children’s education, the company has folded up or closed, and you have lost your investment. That is why, while making profit on your investment is desirable, it should not be the number one criteria in this instance. Otherwise, your case may be like that of people that collected their retirement benefits and used them to speculate in unknown companies and investment schemes.
Top 10 performing stocks
By NKIRUKA NNOROM
Among the top ten performing stocks last week are Costain W/A Plc, Cadbury Nigeria Plc, Evans Med, Northern Nigeria FlourMills, McNichols and Glaxosmithkline.
Others are Dangote Sugar Plc, Ashaka Cement, PZ Cusson, and Cement Company of Northern Nigeria, CCNN.
Costain Plc, which recorded the highest price gain in the week, added 58.51 percent or N0.55 to its share price to close at N1.49. it opened at 94kobo. Costain listed in construction/real estate sector of the Nigerian Stock Exchange, NSE, is Nigeria’s leading construction company, which specilaises in civil engineering, roads and rail, furniture and joinery. It also operates in oil and gas sector.
Costain seems to still be struggling with the effects of the market crash as its share price just crossed two digit level only last week. Todate, the company has recorded return of 106.9 percent. Costain was incorporated in 1948 as a private limited company in Nigeria; it took over the various works being undertaken by John Holt and some others.
Confectionery and food drink manufacturing giant, Cadbury Nigeria Plc, emerged the second most patronised stock in the week with 45.01percent or N20.03 capital appreciation. From its opening price of N44.50, it closed at N64.53 per share.
Cadbury returned to profitability for the first time after seven years of being in the woods following the forgery of its accounts by the then managing director and others.
For the 2012 financial year, the company paid N1.564 billion dividends, while its profit before tax for the year grew from N5 billion in 2011 to N5.5 billion in 2012. It also recorded a profit after tax of N3.4 billion. The share price has risen tremendously by 674.67 percent from N8.33 at the beginning of the year to N64.53, the closing price on Friday.
Evans Med, listed in medical supplies sector, also one of Nigeria’s largest pharmaceutical manufacturing companies, gained 44.44 percent or N0.80 from N1.80 it started the week to N2.60. Starting the year at 50kobo, the share price has so far risen by 420 in comparison to the present market price.
The Product ranges of Evans Med are well over thirty and are household names across Nigeria and the West Africa sub region. Amongst them are Multivites, Cofta, Vanclox, Calamine Lotion, and Allenburys glucose-D among others. It started business in Nigeria in 1954 and has since then been committed to research, development and manufacturing of safe and effective medicines.
NNFM followed with 20.96 percent or N4.49 gain to close at N25.91 from N21.42 it started. Beginning the year at N17.51, the company has therefore delivered 47.97 percent return to its shareholders this year. Listed in food products sector of the NSE, and engaged in milling business, NNFM produces flour and semovita. With a current milling capacity of 1,750 mt per day, NNFM is a leading mill in the North, producing premium quality Golden Penny Flour and Golden Penny semovita. Flour Mills of Nigeria Plc is a majority stakeholder in the company.
McNichols Plc, which was the fifth most patronised stock, garnered 20.28 percent or N0.29 to close at N1.72 from N1.42 it started. It is listed in consumer goods sector and has so far risen by 138.89 percent in the year from year low of 72kobo to the present price.
Others are Glaxosmith, which added 18.37 percent or N9.00 to close at N58.00 from N49.00, while Dangote Sugar followed with 16.61 percent or N1.41 capital appreciation to close at N9.90 from N8.49.
Ashakacem, PZ Cusson and CCNN were the last three on the top ten gainers in the week with 13.64 percent or N3.30, 13.60 or N6.12 and 13.40 percent or N1.30 price gains to close at N27.50, N51.12 and N11.00 in that order.