The Nigerian Equities Market gained 8.72% in the month of November after a disastrous October that had stocks fall by about 10%.
Stocks seem to perform very well in November and have returned positive gains in the All Share Index for the 4th straight year respectively.
Whilst, the above observation is factual, we also understand investors moved it to take advantage of undervalued stocks across several sectors, following the battering that occurred in October.
Despite the positive performance recorded in November, only about 22 stocks posted double-digit gains during the month, suggesting they may also be opportunities for better gains this year.
So, are there stocks out there that might provide positive gains for investors? A buy, sell or hold report from Meristem suggests there are. But before you delve into it, remember to also perform your own research and do not take any recommendations as investment advice.
Zenith Bank: The stock closed the month of November with a 9.5% gain closing at a share price of N21.5. However, the stock is still down by about 13% year to date suggesting it has some room to go.
- Meristem suggests the share price should be around N29.59 per share which translates to a gain of 30% if you buy at that price
- Zenith Bank’s price is trading at about N22.7 suggesting investors are already looking forward to a price spurt.
Nigeria Breweries: The stock closed the month of November flat and did not report any gain. The stock is also down 16% YTD as investors react to the risk of inflation hitting consumer goods products.
- Meristem is however recommending a share price of about N79.51 from N45 per share in its recommendation.
- This portends an upside gain of 77% for the stock.
- The stock is currently trading at about N46.15 per share.
Fidson: The pharmaceutical manufacturer posted a 2% loss in the month of November 2022. However, the share price is up 42% year to date.
- Meristem is however projecting an upside of 77% based on an entry price of N8.85 per share
- This suggests they expect the stock to rise to as high as N15.7 per share.
LafargeWapco: The cement maker has had a stellar year with pre-tax profits of about N53.9 billion compared to N43.9 billion same period last year.
- The share price lost 1% to close the month of November to N22.05 per share and is unchanged as of when this article was written.
- Meristem is recommending a 75% gain from the current share price which will take it to about N38.65 per share.
Presco: Agro-processing giant, Presco has had a productive 2022 both in terms of its share price return as well as its fundamentals.
- The company reported a pre-tax profit of N21.3 billion year to date September 2022, compared to N18 billion same period last year.
- However, its share price fell by 14% in November but has nevertheless, gained 25% year to date.
- Meristem believes there is a huge upside with the stock projecting a whopping gain of 92% thus a share price of N216.54.
Commentary: Whilst we agree some stocks are relatively undervalued, Nigeria’s stock market is often affected by sentiments than fundamentals.
- For example, while stocks may be relatively undervalued, investors could still consider them risky and will prefer investing in other assets such as treasury bills or FGN Bonds.
- Stocks don’t also do very well in a high inflationary environment because companies are not expected to post higher profitability growth. And even if they do, they like to conserve capital rather than payout dividends.
- Speaking to dividends, stocks in Nigeria are sensitive to dividends especially if the yield to purchase price are higher than inflation.
