The Nigerian Exchange (NGX) Limited All-Share Index (ASI), rose by 45.9% to close at 74,773.77 points on Friday, December 29, 2023, from 51,251.06 points in 2022.
The positive market sentiment observed among investors can be attributed to various factors, with a key influence being the favourable policies implemented by President Bola Tinubu’s administration.
This optimism stems from several factors, including strong market performance. The bullish trend, driven by increased buying pressure in key sectors like Oil and gas, Telecommunication, and Industrial Goods, indicates investor confidence.
Resilience amidst challenges, the market navigated headwinds such as the Central Bank’s interest rate hike and rising inflation, demonstrating underlying strength.
Ebbing pre-election uncertainty, with the 2023 elections concluded, domestic and foreign investor sentiment is expected to improve, potentially fueling further growth.
Investment Outlook
While the outlook for 2024 appears promising, caution remains warranted. Investors should prioritize:
- Fundamentals-driven selection: Focus on companies with robust financial performance, strong leadership, and clear growth prospects.
- Portfolio diversification: Spread investments across various sectors and asset classes to mitigate risk and maximize potential returns.
- Active portfolio management: Continuously monitor holdings and adjust positions as market conditions evolve.
Investment analysts’ recommendations: Investment analysts who spoke to Nairametrics said the Oil and gas sector, industrial goods sector, consumer goods sector, and telecommunications sector are sectors to invest in this New Year.
- According to them, these sectors are expected to do well given that they will make more revenue and profits, thus leading to good return on investment and better dividends for investors.
- They noted that given that most share prices of the companies quoted on the Exchange are still trading low it is more attractive, hence this is the time for investors to accumulate the stocks to reap bigger dividends and capital gains.
Below are the recommendations on stocks to invest N2 million in right now, according to the investment analysts.
What financial experts are saying
In an exclusive interview with Nairmetrics, Mr. Mike Eze, Managing Director of Crane Securities Limited, demystified the key factors to consider when investing in the Nigerian capital market. He identified four pillars guiding investment decisions: return on investment (capital gain), dividend payout, bonus issue, and stability of capital.
Stressing the importance of understanding individual investment goals, Eze cautioned against solely chasing high-priced equities.
- He emphasized: “If your objective is capital gain, focus on stocks with growth potential and undervalued fundamentals, not simply high prices.”
- “If an equity is high in price, there is no need to invest in it because it will not yield expected capital gain.
- If your major reason for investing in the capital market is the return on investment, you don’t need to invest in stocks that have high prices, you have to look for equities that have a propensity for capital gains.
- You need to look for those equities that their prices are low and have good fundamentals and move in”.
Eze further differentiated strategies for capital gains and income-oriented investors.
- He noted: “Dividend payouts and bonus issues often require a patient investment horizon, whereas capital gains can potentially be realized sooner.”
- If you are investing for dividend and bonus issues, you have to wait for a long period because those benefits don’t come in immediately,” he said.
Acknowledging the current market dynamics, Eze pointed out that many banks’ shares might not guarantee short-term returns due to elevated prices.
- “Presently most of the bank’s shares are trading higher in prices and unless they shed weights before the end of the year investing in them will not guarantee a good return on investment in the short term,” he said.
Eze listed stocks like BUA Foods Plc, Dangote Sugar Plc, PZ Cussons Plc, Unilever Plc, MTNN Plc, Total Energies Plc, Seplat Energies Plc, BUA Cement Plc and Julius Berger Plc as good stocks to buy at the beginning of the year 2024.
According to him, the reason is that the stocks are still very attractive and still have the propensity to go higher in price which will enable investors to have a good capital gain.
Mr. Olatunde Amolegbe, Managing Director of Arthur Steven Asset Management Limited, also shared his perspective on promising sectors and specific stock picks with Nairametrics.
Mr. Amolegbe sees robust potential in two key sectors, oil and gas and telecommunications.
In the oil and Gas sector, he identified Seplat Energies Plc (SEPLAT) and TotalEnergies Plc (TOTAL) as attractive plays while in telecommunications he picked MTN Nigeria Plc.
- “SEPLAT’s strong exploration and production track record makes it well-positioned to benefit from rising oil prices. TOTAL, with its global expertise and diverse Nigerian operations, offers stability and growth potential,” he said.
- “MTN Nigeria Plc (MTN) stands out as a compelling choice. Its dominant market position, vast subscriber base, and continuous investments in technology make it a prime beneficiary of Nigeria’s booming telecoms market,” he said.
He noted that the stocks are still very attractive and have the tendency to go higher in price which will enable investors to have a good capital gain.
- “Their established track records of consistent dividend payments make them strong contenders for consideration.
- Owning shares in these companies allows your loved ones to participate in their future success, potentially generating a passive income stream for years to come.
- However, approaching this financial gesture with prudence is paramount. While dividend-paying stocks offer undeniable allure, thorough research and careful consideration are key,” he said.
While acknowledging the appeal of dividend-paying stocks, Amolegbe urges caution.
- “Thorough research and careful consideration are key,” he emphasizes.
He advised that investors should meticulously evaluate a company’s financial health, dividend payout history, and sustainability before basing decisions solely on dividend yields.
Mr. David Adonri, executive vice chairman, of Hicap Securities Limited, while acknowledging the traditionally higher dividend yields in the banking sector, highlighted the growth potential of telecoms giants like MTN Nigeria Plc, the dominant player in the Nigerian mobile market, boasting a vast subscriber base and continuous investments in network expansion and technology.
He noted that the company offers investors the opportunity to participate in the ongoing digital transformation of Nigeria, potentially generating significant capital appreciation alongside moderate dividend yields.
Adonri also picked stocks in the industrial sector such as Dangote Cement, Lafarge Cement, and BUA Cement as having good potential.
According to him, these companies are expected to report strong earnings in the final quarter, driven by increased construction activity and rising demand for cement.
- “Dividend yield in the telecoms industry may not be as high as in the banking sector but stocks like MTNN and Airtel offer growth potential. Industrial goods are also good to pick for the last quarter earnings; Cement companies like Dangote Cement, Lafarge Cement, and BUA Cement have good potential”.
- Investors seeking both income and capital appreciation may find these stocks attractive options,” he said.
What you should know
It’s crucial to remember that investing involves inherent risks, and careful consideration is essential before making any decisions.
Consulting with a financial advisor can be a powerful tool for making informed investment decisions, achieving your financial goals, and securing a brighter financial future.
By understanding promising sectors, conducting diligent research, and employing prudent risk management strategies, investors can navigate the exciting opportunities that lie ahead. Remember, knowledge is power in the market – use it to make informed decisions and unlock your investment potential in the coming year.