Africa’s best performing stock market ended the past trading week cumulatively on a bullish note.
- The All-Share Index and Market Capitalization appreciated by 5.42% to close the week at 38,800.01 and N20.279 trillion respectively.
- Investors at the Nigerian Stock Exchange gained N1.04 trillion in the past four trading sessions.
Nigerian’s crude, selling at $51/barrel, kept stocks rally up. Stock experts anticipate the present bullish run currently playing out at Africa’s best-performing equity market will remain long term, albeit alongside profit-taking seen lately at its last trading session.
What they are saying
Abiodun Keripe, Managing Director, Afrinvest Research, in a note to Nairametrics, spoke on his expectations of the best performing Stock market in Africa for next year as he dug deeper into the macro giving Nigerian equities an edge.
- “The equities market presents attractive opportunities for investors in form of capital appreciation and dividend return given the low yield environment in the fixed income space. Nigerian stocks are currently undervalued and present an opportunity for growth in the short to medium term. The current ROI in the equities market is positive with a YTD return at 44.6% compared to the inflation rate at 14.9%.
- “We believe stocks in the financial services (mostly banks), ICT, and the industrial sectors present strong prospects for growth given their resilience to the economic recession.”
Abayomi Oyeti, an Insurance expert at NLPC Pension Fund Administrators Limited, in an exclusive interview with Nairametrics, spoke on prevailing macros that could take shape in Nigeria’s pension industry including the Retirement Saving account transfer
- “The trending thing in the pension industry is the RSA transfer which commenced on 16th November 2020. The first week in January 2021 will be when the first transfer of the pension assets will be done and the successful and seamless transfer of these pension assets will trigger the furry of activities in the industry.
- “Pension Fund Administrators will lay emphasis on rendering quality service delivery and ensuring wise investment decisions to retain their RSA holders amidst competition from other PFAs, this will be the focus for PFAs in 2021.”
Keripe elaborated on the current situation at Nigeria’s debt market not forgetting that most Nigerian institutional investors are still actively involved amid an ultra low-interest-rate environment as lacklustre yield prevails in the Nigerian treasury bills market, on the consideration that the present 1-year treasury yields trade at 0.65%.
Yields are currently very low in the domestic fixed income market due to the policy actions of the CBN which restricted local investments in OMO securities, inducing huge demand for Treasury bills.
- “Investments in domestic bills and bonds will earn a negative real return when compared with the inflation rate. For emphasis, the 5-year and 10-year bonds currently trade at 5.2% and 6.3% respectively and the 1-year Treasury bill trades at a 0.65% yield. The Sub-Saharan Africa Eurobonds market presents opportunities for attractive yields and serves as a currency hedge at current pricing.”
Furthermore, he opined on the second wave of COVID-19 impact on Africa’s largest economy amid increasing caseloads prevailing at record levels.
- “There are risks to our outlook on SSA instruments due to the susceptibility of commodity prices to global economic uncertainties. A prolonged new wave of the pandemic especially in developed countries and delay in deployment of vaccines may adversely impact commodity prices and drive sell-offs in SSA instruments.”
Analysts pick Nigerian stocks Warren Buffett may likely buy
Financial market experts talk on what Nigerian stocks Warren Buffet may likely consider, based on his unique principles.
Warren Buffett’s strategy as regards investments has earned him the popular nickname the “world’s greatest investor.”
The global investment community holds the 90-year-old man with so much high esteem when his successful investment strides is considered and the fact that he is now worth about $88.4 billion, and seats on the boards of so many blue-chip companies.
Buffet has long believed in the value-based investing model, as he only invests in companies that exhibit solid fundamentals such as strong earning power, the potential for continued growth, and most importantly, selecting those with low or no debt.
Consequently, Nairametrics has sought the opinions of selected financial market experts on what Nigerian stocks the world’s most powerful investor may likely consider, based on his unique principles.
Angela Aya, Head, Institutional Sales at Alonati in an exclusive interview with Nairametrics spoke on key insights Buffett usually looks out for when selecting stocks.
“Warren Buffet’s investment philosophy centers around traditional yet intricate qualities like company debt profile, profitability, historical performance, exposure to commodities, product offerings, and historical dividend payouts.
“He is considered a value investor focusing on high dividend-paying blue-chip companies that show robust earnings characterized by strong balance sheets holding investments over the long term,” Aya said.
She elaborated on the impressive performance of the Nigerian Stock market in relation to the value they bring in the long haul by stating;
“Despite the Nigerian All Share Index outperforming the rest of the world in 2020, Nigerian stocks are relatively cheap from a purchasing power parity standpoint.
“Therefore, in a long-term strategic value investment play, bellwether stocks that offer stability, show profitability, and are resistant to systemic shocks will be the picks. They may not be trendy or might seem out-right boring, but they are reliable and proven to outperform given time. “
Adetayo Teluwo, a Portfolio Manager at one of Nigeria’s most valuable firms spoke on key metrics accustomed to Warren Buffet’s investment style;
Teluwo said, “I will focus on the long term, adopt a buy-and-hold mentality and prioritize blue-chip dividend-paying stocks that have proven their worth over decades.
Since I do not have bottomless pockets, I will make out time to shortlist based on ROE, D/E, and a blend of perceived ‘intrinsic value’
ROE = Net Income ÷ Shareholder’s Equity
Debt-to-Equity Ratio = Total Liabilities ÷ Shareholders’ Equity
Following Buffett’s investment principle, Adetayo went further by revealing the type of Nigerian stocks he would select. He said;
“According to Warren, if you aren’t thinking about owning a stock for ten years, don’t even think about owning it for ten minutes.
“If I had the conviction of Warren, these will be my top stock picks:
“Julius Berger, UBA, Zenith Bank, GTBank, Custodian, NAHCO, CHI Plc, NEM, Jaiz Bank, WAPIC, Unilever, GSK, MANSARD, Dangote Sugar, Afrinsure”
Silas Ozoya, President/CEO, SUBA Capital adds up to our remarkable respondents as he discloses that Nigeria’s stock market’s most liquid sector would be on Buffett’s top list, not forgetting his love for consumer staple stocks;
“Banking stocks for a start would be his first pick because he has a history of investing in financial institutions.
“So, he would go with stocks like Zenith Bank, GTBank, and FCMB because of profitability in the case of Zenith. Cutting edge technology in the case of GTBank, and versatile banking products in the case of FCMB.
“Warren Buffet is also big with daily consumables and beverages. So, he would go with the stocks of Nigerian Breweries Plc, Dangote Sugar, and Guinness Nigeria Plc.
“I’ve been following Warren Buffet’s investment strategy for a while and three things I’ve noticed are that he says the money would always exchange hands, financial institutions would always make money, and people would always consume daily consumables.”
- It’s key to highlight the rarity of Warren Buffet’s tenets in selecting stocks on the account that he has remained relatively consistent over many decades.
- Still, it remains critical for readers to understand that applying Buffet’s strategy takes a whole lot of discipline and patience.
- However, the few who have followed the founder of the world’s biggest conglomerate, (Berkshire Hathaway) on applying his analytical investment tools have had no regrets in the long term.
Netflix gains 17% after beating investors expectation
Netflix for the first time ever passed the 200 million subscriber mark and had an impressive reserve of $8.2 billion in cash.
Netflix’s share price bounced about 17% higher after it beat market expectation, powering the video streaming stock to close high after adding more customers than expected and revealed it no longer needs debt in building its entertainment empire.
The positive upbeat guidance on free cash prompted bullish remarks from Wall Street analysts, though some questioned how much of the subscriber growth was pulled forward.
Stock traders increased their buying pressure on Netflix stock because of the surprisingly strong growth, as well as news that Netflix balance sheets are solid enough for Netflix considering share buybacks. Shares jumped 17% percent to $586.34 in recent trading Wednesday.
Netflix for the first time ever passed the 200 million subscriber mark and had an impressive reserve of $8.2 billion in cash.
COVID-19 pandemic has aided Netflix’s business, forcing people in spending more time indoors coupled with curbing other traditional entertainment options like movie theaters and concerts.
Netflix added 25.9 million customers in H1, 2020, and ended up adding 36.6 million customers in all – a record.
“Investors come out of the fourth quarter incrementally more bullish on the potential of a powerful developing shareholder return story for Netflix in the coming years,” Evercore ISI analyst, Lee Horowitz wrote in a note to Bloomberg News.
Analysts at J.P. Morgan Securities said the company is likely to begin share buybacks in the second half of the year.
Quick fact: Netflix is an American streaming company that allows subscribers to watch movies, documentaries, different popular TV shows, and many more through internet-connected hardwires.
Stephen Innes, Chief Global Market Strategist at Axi in a note to Nairametrics also spoke on the impressive gains sighted in the $259 Billion valued company;
“Earnings reports also underpinned equity sentiment. Netflix rose 16% after noting its subscriber numbers increased by a record 37 million in 2020. Serenely, it seems lockdowns and TV go hand in hand.
“A testament to the maximum policy overdrive, investors wasted little time getting their feet wet after Janet Yellen espoused by the Biden “go big” policy approach to repair the economic damage caused by the pandemic, which also highlights the importance of helping small businesses and the unemployed.”
What to expect: The Stock market is seeing through longer lockdowns on the premise that COVID vaccinations will lead us out of the pandemic quickly and had helped triggered significant buying pressure on stocks like Netflix taking advantage of reduced social mobility in play
World’s biggest asset manager provides Bitcoin to clients
The world’s largest asset manager BlackRock Inc is adding bitcoin futures as an eligible investment asset class.
The world’s largest asset manager, BlackRock Inc is adding bitcoin futures as an eligible investment asset class according to a recent filing by the leading asset management company in a move to bring crypto to its customers.
BlackRock, in a report credited to Reuters disclosed that it was using such asset class as bitcoin derivatives for its two funds namely; BlackRock Global Allocation Fund and BlackRock Strategic Income Opportunities.
Such funds listed above will invest only in cash-settled bitcoin futures traded on commodity exchanges registered with the Commodity Futures Trading Commission, the company said in a filing to the Securities and Exchange Commission yesterday.
Recall some weeks ago, BlackRock CEO, Larry Fink had disclosed, the flagship crypto is on his company’s radar amid the rapid gains recorded by Bitcoin this year alone.
Speaking recently at the Council on Foreign Relations alongside Mark Carney, former Governor of the Bank of England, Fink said, “Bitcoin has caught the attention and the imagination of many people. Still untested, pretty small relative to other markets.”
- BlackRock is the world’s biggest asset manager with about $7.4 trillion in assets under management as of the end of Q4 2019.
- Its massive size allows it to do what no other asset management on planet earth can do.
Also, the BlackRock CIO of Fixed Income buttressed his bias, on why Cryptos are here to stay, taking into account its role in payments among the world’s millennials.
“I think cryptocurrency is here to stay and I think it is durable and you’ve seen the central banks that have talked about digital currencies. I think digital currency and the receptivity, particularly millennials’ receptivity to technology and cryptocurrency is real. Digital payments systems are real, so I think Bitcoin is here to stay,” he said.