The Nigerian Exchange Limited (NGX) concluded 2023 on a positive note, buoyed by restored investor confidence in listed companies.
This momentum has instilled optimism for a potentially bullish market in 2024, fueled by the equities index approaching 80,000 points.
While cautious near-term approaches remain prudent due to market dynamics, select penny stocks could offer attractive entry points for discerning investors seeking capital appreciation.
However, careful research and risk management are paramount when considering such stocks.
Investment analysts in an exclusive chat with Nairametrics suggest focusing on penny stocks with strong fundamentals and a history of consistent dividend payments.
These stocks, they believe, can provide good returns on investment due to their potential for share price appreciation in the medium term.
Examples of such stocks, according to the analysts, include Sterling Bank, FCMB, Wapic Insurance, Jaiz Bank, AIICO, FTN Cocoa, Chams, Japaul Gold, Universal Insurance, Royal Exchange, and Verita Kapital.
Furthermore, they emphasize the importance of thorough due diligence and a long-term perspective when investing in penny stocks. Investors should consider factors such as a company’s financial health, growth prospects, and management team before making any investment decisions.
What financial experts are saying
The Managing Director of Crane Securities Limited, Mr. Mike Eze in a chat with Nairametrics said
Mike Eze, Managing Director of Crane Securities Limited, observed in an exclusive chat with Nairametrics that during bullish market phases, investors tend to rotate out of overvalued stocks nearing their peaks and seek opportunities in sectors with relatively lower prices.
- “When the market is bullish, the tendency is for investors to move from stocks where their prices are very high-almost reaching their peak to other sectors where the prices of stocks are still relatively low and take a position,” he said.
He noted that this behaviour echoes the market boom witnessed about two decades ago, where investors actively explored diverse sectors and astute players identified value in penny stocks. Numerous such stocks experienced significant price surges, even without strong fundamentals.
- “What we are witnessing is almost equivalent to when there was a market boom about two decades ago. The tenets then were that investors are just roaming around the different sectors of the market -from one stock to another.
- The astute investors then anchored on penny stocks. And many of these penny stocks moved from 50 kobo to N20.00 without any fundamentals,” he said
However, Mr. Eze cautions against generalizations and emphasizes the need for careful analysis. While the current market trend might suggest potential in penny stocks, investing solely based on past performance or general market sentiment can be risky.
He advises investors to prioritize due diligence and focus on identifying penny stocks with strong underlying fundamentals and growth potential.
He noted that while regulated markets offer a degree of capital protection, it’s crucial to remember that no investment is guaranteed.
- “The good thing about investing in stocks is that it is a win-win affair, there is safety of capital because it is a regulated environment.
- Investors should look at penny stocks like AIICO Insurance, AXA-Mansard, Jaiz Bank, and Chams as stocks that will do well in 2024.
- The current market development suggests that penny stocks are where to go in 2024 for investors to smile at the banks because it offer good returns on investments. They will be better at the end of the year for a bountiful return,” he said.
Stressing this point, Mr. Eze encourages investors to conduct thorough research and adopt a long-term perspective to maximize their chances of success. By meticulously selecting stocks with promising potential and managing risk diligently, investors can potentially achieve significant returns in 2024.
Victor Chiazor, Analyst and Head of Research at FSL Securities Limited, has projected a potential normalization in response to recent government policy statements in 2024.
Consequently, he anticipates that the equities market will be influenced by both company performance and the implementation of new pro-market policies.
- ” In light of this, investors are advised to exercise caution as the second quarter approaches.
- The prevailing trend is expected to see a shift towards investments in penny stocks, with notable considerations including Sterling Bank, FCMB, and Wapic Insurance.
- Additionally, we recommend keeping an eye on larger entities such as Fidelity, Access, Wapco, and MTN for potential investment opportunities,” he said.
Kasimu Garba Kurfi, the Managing Director/CEO at APT Securities and Funds Limited, shared insights with Nairametrics, highlighting the potential significance of Penny stocks and small-cap investments in 2024 in terms of capital gain and share appreciation.
He cautioned, however, that the initial surge in the Banking Sector may not sustain itself due to primary concerns arising from most banks seeking to raise capital to meet new requirements set by the Central Bank of Nigeria (CBN).
This impending need for capitalization is anticipated to impact the sector’s performance throughout the year 2024.
In terms of recommended penny stocks, Kurfi suggested considering options such as AIICO, FTN Cocoa, Chams, Japaul Gold, Universal Insurance, Royal Exchange, and Verita Kapital, among others. Investors are advised to thoroughly evaluate these opportunities for potential investment.
However, Mr. David Adonri, Executive Vice Chairman of Hicap Securities Limited, highlighted that due to the prevailing sustained bull run across the market, finding penny stocks with solid fundamentals has become a challenging task.
He emphasized that investors prioritizing safety, liquidity, and profitability of their investments can achieve their diverse investment objectives through stocks, regardless of their capitalization status—be it highly capitalized or low-cap.
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.
Good jod Chris