September 24, 2018

Q3’18: Investors advised to invest in stocks with good revenue, dividend history

equities,week, Stock market

Nigerian Stock Exchange

By Nkiruka Nnorom

ON the back of the persistent decline in the equities market and anticipation of release of third quarter 2018 (Q3’18) earnings reports by quoted companies, operators in the market have urged investors to adjust their portfolio to accommodate stocks with history of resilient revenue growth and consistent dividend payment.

They also advised investors to seize opportunity presented by low prices of stocks to buy more, saying that the bearish outlook presents an opportunity for bargain hunting.

The counsel comes as the stock market took a breather last week, halting three weeks of consecutive losses, which resulted in 0.66 percent increase in the All Share Index, ASI, to 32,540.17 points.

Similarly, the market capitalisation appreciated by the same margin to close at N11.880 trillion from N11.802 trillion the previous week.

In their reaction, analysts at Cordros Capital said that the bearish outlook that characterized the market has also been followed by recoveries.

“Hence, the crystallisation of the potential risks, especially in relation to pre-election uncertainties, presents an opportunity for investors with a medium to long-term horizon to hunt for bargains immediately the market bottoms out.

“Also in buying the dip, we recommend choosing stocks which have demonstrated a solid history of resilient revenue growth, earnings stability, dividend consistency, and positive market sentiment,” they said.

They observed that despite the pressure in the polity, Q3’18 corporate earnings are unlikely to be excessively negative in light of the recovery in the broader economy, adding that bottom line numbers for some of the companies are set to improve.

“Accordingly, notwithstanding the distraction in the political climate, we are of the view that investing in stocks with consistent dividend payment profile, stable earnings, and stock market liquidity is clearly strategic,” they said.

Also, Mrs. Toyin Sanni, CEO, Emerging Africa Capital Group, said: “The fact that prices are depressed now actually gives the opportunity for bargain hunting and ultimately the value of stocks will go up as the tension in political space begins to go down.”

Meanwhile, analysis of trading activity last week shows that all major sectors with the exception of the insurance sector closed in green with the banking sectors leading the rebound with 2.67 percent increase. Oil and gas sector followed, rising by 2.60 percent, while the industrial goods and consumer goods sector went up by 2.43 percent and 0.96 percent respectively.

Conversely, the insurance sector depreciated by 4.90 percent on account of losses in Standard Alliance Insurance.