The Nigerian stock market is lately at its newest lows but it might sound like a joke that those who want to make money from the market, buy low, sell high when it starts rising should begin to buy now.
“Buy low, sell high” is possibly the most famous adage about making money in the stock markets. It is simply the practice of buying a security when its price is (or is perceived to be) low and selling it when its price is high.
While this may sound like a tale in Nigerian context, there are still value stocks trading at their record lows that have the potential to appreciate in the near future. What if you don’t buy them now? You follow the crowd later when it starts to appreciate.
It is worth noting that though the law of supply and demand determines the direction of the market, but sometimes investors’ emotions and perceived greed also contribute in determining the level of wealth or losses they record in the market.
It is true that many stakeholders have underscored the need to intensify advocacy in order to draw government and other market regulators’ attention to the benefits of pro-market policies.
Your ability to buy low and sell high requires you to be able to determine roughly when the low and high prices for a security occur.
In their investment recommendation for this week, Vetiva Research analysts placed “Buy” rating on stocks like Zenith Bank, UBA, Access Bank, FCMB, Stanbic, Nigerian Breweries, Guinness, UACN, PZ, Dangote Sugar, Nestle, Seplat, Total, and Forte Oil Plc.
For Afrinvest Research this week, investors should “buy” Fidelity Bank and Continental Reinsurance. They should also “hold” FCMB, “accumulate” Wema Bank, NASCON, Mansard and Forte Oil.
Though the Nigerian stock market has negative return of circa -13.9 percent year-to-date ( Ytd) as at Tuesday August 20, 2019, meaning that many stocks are at record lows, but it took-off this week on a positive note as more investors rallied around market bellwethers in a bid to take position in fundamentally sound stocks.
As an investor, why do you go with the crowd when you have the opportunity to take earlier position? …and possibly take little margins when more investors go for the same stocks which results in corresponding price increase.
Stock investors buy into the future of the listed companies on the expectation of higher shareholder value.
“Astute and professionally guided investors should take position now that most stocks are trading lower than their net realisable asset value and expect handsome returns when the market shall eventually rally. A mere study of most of the company’s performance figures is most informative and points in the direction of a market that will definitely rally as soon as the economic team of government is in place”, Patrick Ezeagu, chairman, Association of Securities Dealing Houses of Nigeria (ASHON) had said last month.
He stated that a trend analysis of corporate earnings in recent time indicates that many companies across sectors have posted higher earnings with good returns but this has not significantly reflected in the upward movement of their share prices.
“Those who are selling off their shares right now are speculators and not real investors. Every stock market needs speculators for liquidity but they can change investment decision in one second. Our stock market is forward looking. Investors need not be nervous. They should consult professional stockbrokers for sound investment decision. There is no basis for panic sale of shares. Many companies have announced strong financial performance with prospects of increased future earnings. Why should a shareholder of such a company embark on panic sale of shares?”, he had stated.
