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GTBank, Zenith Bank, Nestle emerge Renaissance Capital’s top stock picks

Renaissance Capital Analyst, Soji Solanke, holds that some of the most compelling stock picks lie in the banking sector.

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Why Nestle Nigeria’s return remains strong - EFG Hermes, Nestle Nigeria Plc appoints new Director, Nestle Plc: FY 2019 Revenue beats estimate; but profit underperforms, GTB, Zenith Bank, & Nestle emerge as Renaissance Capital’s top stock picks

Even with many Nigerian institutions already grappling with a difficult regulatory environment prior to the Covid-19 pandemic, Renaissance Capital Analyst, Soji Solanke, holds that some of the most compelling stock picks lie in the banking sector. These stocks include:

Guaranty Trust Bank (GTB)

The analyst believes the bank is a quality name that has sold off more than warranted. Some of the reasons he cited include the fact that the bank has the highest RoE in the Nigerian banking landscape, the highest breakeven cost of risk buffer, as well as the largest net long FX position, placing the bank in a good position to benefit from a naira devaluation. Also, the company’s diversification into the fast-growing payments space makes it a good opportunity to leverage for growth.

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Zenith Bank  

A formidable name in the banking sector, Zenith Bank is expected to perform well in a quick recovery scenario as a result of its highly liquid balance sheet, the fact that it pays dividends consistently, as well as its high stock liquidity in the markets.

Stanbic IBTC  

Another bank expected to be able to withstand a protracted slowdown is Stanbic IBTC and this is as a result of its diversified business model largely due to its large asset management business – the largest in Nigeria. According to the analyst, it makes the company’s earnings somewhat more defensive compared to its peers.

(READ MORE: Zenith Bank: No major threat to earnings in the near term; Buy recommendation maintained)

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In FMCG, Nestle emerged tops as well:

GTB, Zenith Bank, & Nestle emerge as Renaissance Capital’s top stock picks

Nestle Nigeria 

The company’s SSA consumer analyst, Dayo Ayeni, believes Nestle Nigeria is compelling, also as a result of its strong balance sheet, its resilience, quality management; and its three strong brands, Maggi, Milo and Golden Morn.

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As at 28th May 2020, before markets opened, the share prices of GTB, Zenith Bank, Stanbic IBTC, and Nestle Nigeria are N24.85, N17.90, N35.80, and N995, respectively.

 

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Commodities

Gold rises above $1,800 amid COVID-19 surge, weaker dollar

Gold still targets $1,831, as it has broken a resistance at $1,796 per ounce.

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Gold Up as U.S. hits Record Number of COVID-19 Cases, Gold stands firm above $1,800 over increasing virus fears and weaker dollar , Gold stands firm above $1,800 over increasing virus fears and weaker dollar

Gold prices rose on Monday, standing firm above the major level of $1,800 per ounce, as increasing COVID-19 cases across the world, as well as a weaker dollar, underpinned the safe-haven metal.

Gold futures increased by 0.52% at $1,811.52 per ounce by 08.21GMT while the U.S dollar index that tracks the greenback against major currencies fell by 0.2%, making gold less expensive for holders of other currencies.

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Stephen Innes, chief market strategist at financial services firm AxiCorp explained that “The COVID-19 narrative is not going away and we don’t think the U.S. Federal Reserve is going to change course on the rates anytime soon, which should support gold prices. The medium-term outlook for the economic recovery still looks very uncertain and this continues to provide ample room for gold to float higher.”

Over 12.83 million people have reportedly been infected by the pandemic globally and 565,626 people have also died. COVID-19 cases in the U.S. have continually increased as well; Florida reported a record increase of more than 15,000 new cases within 24 hours on Sunday.

READ MORE: Gold shines on as investors rush to safe haven assets

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Reuters’ technical analyst, Wang Tao, explained that spot gold still targets $1,831, as it has broken a resistance at $1,796 per ounce.

Further worsening the economic worries, U.S. President Donald Trump on Friday mentioned that he was not currently thinking about negotiating a “Phase 2” trade deal with China. With gold being a safe-haven asset particularly to mitigate risks of economic uncertainty, investors and speculators have increased their bullish positions on it, causing the price to rise.

 

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Best Mutual Funds in Nigeria

These are the best mutual funds in Nigeria to invest in based on performance.

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Best Mutual Funds in Nigeria

Mutual Funds are a great form of investing especially if you are a passive investor. According to data from the Security and Exchange Commission, Nigeria has about 107 Mutual Funds cut across several Fund Types. Here is a breakdown of the Fund Types available for investors according to SEC.

TYPES Number
BOND FUNDS 9
EQUITY BASED FUNDS 13
ETHICAL FUNDS 6
EXCHANGE TRADED FUNDS 10
FIXED INCOME FUNDS 21
INFRASTRUCTURE FUND 1
MIXED FUNDS 21
MONEY MARKET FUNDS 23
REAL ESTATE FUNDS 3
TOTAL 107

To determine the best performing Funds, we looked at the Fund Prices as of the last business day in December 2019 and compared to the fund prices as of the last trading day of June 2020. These are the top 5. We also included profiles of the funds as described in their websites.

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Explore useful research data from Nairametrics on Nairalytics


New Gold ETF

Vetiva’s The NewGold Exchange Traded Fund (NewGold) is an Exchange Traded Fund that was listed on The Nigerian Stock Exchange (NSE) in December 2011. It tracks the price of gold and offers institutional and retail investors the opportunity to invest in a listed instrument (structured as a debenture) that is fully backed by gold bullion. Each NewGold security is equivalent to approximately 1/100 ounces of real gold bullion held in a secured stockpile of gold bullion. All gold is kept in the form of London Gold Delivery Bars and Good Delivery Standards are prescribed by LBMA.

December 27th

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Fund Price – N5,220

June 26th

Fund Price – N8,000

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Return –  53.3%

Ranking – First

Commentary: Gold prices have been on the up since the Covid-19 pandemic took hold of the global economy. Investors are uncertain and as history shows gold prices are always up during market uncertainty. If you are looking for protective investment in times of uncertainty then this is the best performing fund so far.

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READ ALSO: FOCUS: These companies aren’t generating wealth for shareholders


FBN Nigeria Smart Beta Equity Fund

FBNH owned The FBN Nigeria Smart Beta Equity Fund is a pure equity fund that invests money predominantly in a portfolio of Nigerian companies, using a rigorous, research-based and tested evaluation system.

The fund provides long-term capital preservation by investing at least 75% of the fund’s assets (excluding cash and cash equivalents) in a diversified portfolio of high-quality companies listed on the Nigerian Stock Exchange. In order to manage liquidity, the fund may also invest up to 25% in short-term money market instruments and deposits with financial institutions.

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December 27th

Fund Price – N129.17

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June 26th

Fund Price – N197.29

Return –  52.7%

Ranking – Second

Commentary: For a fund that is predominantly focused on equities, this a pretty much impressive performance by all standards. For example, the NSE All-Share Index is down 9.8% year to date. If you are worried about investing in stocks and don’t have the heart for it and you are looking for a mutual fund, then this is the best performing fund out there.

READ ALSO: How to build a portfolio fit for 22nd Century


Vantage Balanced Fund

Investment One’s Vantage Balance Fund (launched in 2002) is a fund focused on long term capital appreciation, which is achieved by maintaining a flexible diversified portfolio of equities, fixed income, money market, and real estate investments. Assets are high-quality equity instruments quoted on The NSE while the bond issuers have an investment-grade rating from a credit rating agency registered by SEC.

December 27th

Fund Price – N2.21

June 26th

Fund Price – N2.87

Return –  29.9%

Ranking – Third

Commentary: This is a Mixed fund as it invests in a diverse pool of assets. Interesting to note that the managers of this fund also have an Equity-Based Fund, a Dollar Fund, and a Fixed Income Fund. But none of them come close to the Balanced Fund. If you are looking for a portfolio with a good mix of investment assets then this is the best performing as of June 2020.

READ ALSO: Why interest rates on treasury bills, bonds crashed


Legacy USD Bond Fund

FCMB Asset Management Owned Legacy USD Bond Fund (launched in 2018) is a SEC-registered US Dollar-denominated Collective Investment Scheme, structured as a high-yield mutual fund. The Fund seeks to generate stable income over the long-term. Legacy USD Bond Fund invests in credit-rated US Dollar-denominated fixed income securities issued by the Nigerian Government, Supranational bodies, and Corporate entities.

December 27th

Fund Price – N306.5

June 26th

Fund Price – N360.5

Return –  24.4%

Ranking – Fourth

Commentary: The Legacy Bond Fund is the best performing mutual fund if you are looking for dollar-denominated fixed-income debt securities like Eurobonds. At 24.4% they seem to be holding bonds with good yields and market values respectively. Apart from the Bond Fund, managers of the Legacy Bond Fund also manage a Fixed Income Fund, a Money Market Fund and an Equity Fund. If you are looking to invest in Eurobonds then this mutual fund is the best performing.


Vantage Dollar Fund

Investment One’s Vantage Dollar Fund (launched in 2018) is a SEC registered open-ended Unit Trust Scheme in Nigeria. The Fund seeks to provide investors with a bias for Dollar-denominated securities access to such securities, which ordinarily would be inaccessible to them by virtue of the minimum amount typically required to make such investments. It will invest primarily in Corporate and Sovereign Eurobonds.

December 27th

Fund Price – N401.02

June 26th

Fund Price – N469.2

Return –  17.0%

Ranking – Fifth

Commentary: This is the second dollar mutual fund on the list and the second from Investment One to make the list of best 5. It appears they have a hang on fund management. Dollar Mutual funds are a great source of investments and it is great to see another in the top 5. Thus, if you want another option, then this is one you can also go for. 


Bubbling Under: The following funds make up the rest of the top 5 on our list and in descending order.

6. AIICO Balanced Fund
7. VI ETF
8. Coronation Fixed Income Fund
9. CEAT Fixed Income Fund
10. United Capital Euro Bond Fund

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Commodities

Crude oil prices fall lower, oil traders focus on OPEC meeting

Brent Crude lost about 0.62% to trade at $42.94 a barrel, at 6.05 am Nigerian time.

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Crude oil prices dropped on Monday morning at London’s trading session, as oil traders placed their focus on an OPEC technical meeting scheduled to hold on Wednesday. The meeting is expected to recommend an easing in the curb on oil production that has helped rally crude oil prices in recent months.

Brent Crude lost about 0.62% to trade at $42.94 a barrel, at 6.05 am Nigerian time, also the American benchmark for crude, WTI, lost about 0.72% to trade at $40.26.

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Crude oil prices remained relatively unchanged in the previous week as the resurgence of COVID-19 caseloads soared in the world’s largest oil-consuming economy, and the plan to impose travel restrictions in some global economies. These factors could most likely trigger a decline in the demand for oil.

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Quick Fact: Brent crude is the leading global benchmark for Atlantic basin crude oil. The international benchmark is used to set the price of about two-thirds of the world’s traded crude oil including Nigeria’s crude.

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The importance of crude can’t be ignored; it is used mainly in fueling aircraft, vehicles, and trucks that facilitate economic lifestyles and activities in the modern world. Derivatives from refined crude are used in the production of polymers, as well as the production of waxes, tars asphalts, and lubricants.

READ ALSO: The odds against Bitcoin- Goldman Sachs

Stephen Innes, Chief Global Market Strategist at AxiCorp in a note to Nairametrics explained the macros, which oil traders are presently monitoring. He said:

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“The recent surge in coronavirus infection numbers in the US and elsewhere have brought demand risk back into focus.

“The planned easing of OPEC+ production cuts next month after a one-month extension of the initial phase of the production cut plan and a potential rebound in US production could add pressure on the supply side of the equation.

“And factor in Libya lifting the force majeure, it adds another unwanted level of supply-side uncertainty at an extremely critical point in the oil price recovery phase.

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READ ALSO: Global oil prices drop after reports of unexpected inventory build

“While the evidence suggests we are past the trough for oil and that supply and demand are rebalancing, near-term headwinds remain as the short-term fundamentals are about as muddy as possible.”

However, crude oil prices rallied more than 2% on Friday after an upward forecast by the IEA in its 2020 oil demand by 400,000 barrels per day.

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