The Nigerian stock market gained 8.72% in the month of November after a disastrous October in which shares fell around 10%.
Stocks seem to be doing very well in November and have posted positive gains on the All Share Index for the fourth year in a row, respectively.
While the above observation is true, we also understand that investors moved it to take advantage of undervalued stocks in various sectors, following the battering that occurred in October.
Despite the positive performance posted in November, only around 22 stocks posted double-digit gains for the month, suggesting there may be opportunities for better gains this year as well.
So are there stocks that could provide positive returns for investors? A Meristem buy, sell or hold report suggests so. But before you dive into it, remember to also do your own research and not take any recommendations as investment advice.
Zenith Bank: The stock closed the month of November with a gain of 9.5%, closing with a share price of N21.5. However, shares are still down around 13% year-to-date, suggesting there is still room to go.
- Meristem suggests that the share price should be around N29.59 per share, which translates to a 30% gain if you buy at that price.
- Zenith Bank’s price is trading at around N22.7, suggesting that investors are already expecting a price surge.
Nigerian Breweries: The stock closed the month of November flat and did not report any gains. Stocks are also down 16% year to date as investors react to the risk of inflation hitting consumer goods products.
- However, Meristem recommends a share price of around N79.51 from N45 per share on its recommendation.
- This carries a 77% upside gain for the stock.
- The stock is currently trading at around N46.15 per share.
LafargeWapco: The cement maker has had a stellar year with pre-tax profit of approximately N53.9 billion compared to N43.9 billion in the same period last year.
- The share price lost 1% to close the month of November at N22.05 per share and has not changed since the time this article was written.
- Meristem recommends a profit of 77% of the current share price, which will take you to around N39 per share.
preco: Agricultural processing giant, Presco, has had a productive 2022 both in terms of its share price performance and its fundamentals.
- The company reported a pre-tax profit of N21.3 billion in the year to date of September 2022, compared to N18 billion in the same period last year.
- However, its share price fell 14% in November, and yet it has gained 25% year to date.
- Meristem believes there is a big upside with the stock projecting a whopping 92% gain, so the share price is N216.54.
Comment: While we agree that some stocks are relatively undervalued, the Nigerian stock market is often affected by sentiment rather than fundamentals.
- For example, while stocks may be relatively undervalued, investors may still view them as risky and prefer to invest in other assets, such as Treasury bills or FGN Bonds.
- Stocks also don’t do very well in a high inflation environment because companies are not expected to post higher profitability growth. And even if they do, they like to hold onto the capital rather than pay dividends.
- Speaking of dividends, stocks in Nigeria are sensitive to dividends, especially if the purchase price yield is greater than inflation.
… An investment house expects these shares to earn 92% if you buy now Read more at … Naijaonpoint.