Nigerian stocks opened the year on a bad note losing for 5 straight days to close the week in a 13% drop. At this rate stocks are on track to reverse all the gains made between December 19 2014 to the end of the year. Stocks are cheap now that so many valuation metrics just don’t matter. Values of companies are taking a hit not necessarily because of their fundamentals but mostly due to the mood of the economy and the polity. At this rate, it’s probably better for those who are risk averse are short on liquidity to avoid the market. However, is you are the type that plays well on volatility or are looking to buy stocks for the long-term then maybe, just maybe there is an opportunity in there. I seem to cut across both sides and have identified these stocks as my picks for my watch list.
Zenith Bank – The stock took a battering last week only for it to recover strongly after it gained about 9% on Friday. The stock seems to be on the ascendancy and is a likely profit-making opportunity. It touched 15 last week before rising to N16.43. The last volatility took it to N19.85.
Dangote Cement – The stock also tanked this week after opening the year with N200 and closed last week lower at N158.6. Profit taking took hold on the stock as investors bided lower against a flurry of offers. Dangote Cement Investors typically have a way of pricing this stock around N200 and I won’t be surprised if this doesn’t occur this week.
Access Bank – This is one stock that has taken a pounding since the boom and bust cycle for stocks began last November. The share price closed the week at N5.25 and just 25 kobo shy of its N5 low which it incidentally touched same Friday. The P/E ratio is just over 2x. Regardless of the controversial circumstances surrounding their delayed Rights Issue the share price looks too attractive to ignore. This is one stock we will be watching closely.
Guinness Plc – The company has performed dismally in the last few years as competition hit its margins. Despite that Guinness still attracts a 20x P/E ratio quite low considering the industry average. Guinness closed at N130 last week gaining 1.3%. Guinness touched N115 when the bears last took over making it attractive for another bearish run. A drop from N130 makes it quite attractive whilst anything above N130 may seem risky on the short-term.
UBA – This is the fourth bank on our radar. UBA currently is embarking on a rights issue that is selling for N4 per share. The share price is now trading at a discount to the rights issue price a territory that isn’t comfortable for the company. Investors may see this as a buying opportunity pushing the share price further up. It gained 1% on Friday to close at N3.79. A further 5% gain will take it to N4.
Others of note – GSK, Seplat, FCMB, Dangote Sugar, Custodian and Allied Insurance