Investing in the Nigerian Stock Market – Sectors and Stocks to Watch in 2009

Think back to the year Nigerians made obscene profits in the stock market. It’s 2008. The same year rated as the worst year investors have ever had. The power of greed was so great that it pushed up stock prices beyond their true values.

Those who are well informed and experienced make the most profit and exit the market. Others who were moved by the herd effect were not so lucky. They were stranded when prices crashed. It was a painful experience for speculators. Statistics reveal that investors have lost about 3.9 billion naira.

Now share prices on the Nigerian stock market look very attractive, but investors are too afraid to take the risk of putting fresh funds on the market. The emotion of fear is really reigning now. Smart investors know that this is the right time to buy cheap and buy big. But, on what premise would you base your investment impulse this time?

There is widespread concern about the global recession, the freezing of margin facilities by banks, the devaluation of the naira and the general slowdown in the economy. What criteria should you use to choose stocks at this difficult time as a forward-thinking investor?

That is the question I want to answer in this article.

Factors to consider

1. Historical stability

Companies with a track record of profitable performance over the years will, barring unforeseen circumstances, continue to improve best practices to make investors happy. Remember that First Bank some time ago took the risk of investing in the emerging communications market in Nigeria through ILL. That deal fell through, but the bank did not fail as a result. Years later, it continued to post favorable results and paid investors bond issues and dividends. Currently, this stock is the delight of investors. The first bank has been consistent over the years and has a strong reserve base.

2. Competitive advantage

Companies that outperform their competitors in the market have a good chance of surviving this difficult time. Strong brands like Cadbury and UACN will continue to make waves in the market. Its products have permanently registered in the minds of consumers in Nigeria. These products will continue to be sold. They are even restructuring and introducing new products that consumers have been buying. The more people frequent these products, the greater the profitability with good management of human and material resources.

3. Solid financial foundation

Companies that have been accumulating reserves over the years from profits made have something to fall back on in this down season to finance projects that will add value to their markets and give investors a good return. UBA and GTB are financial powerhouses for building reserves. The strong reserve base is largely responsible for its expansion into foreign markets. You can see pure gold here. When those foreign branches start turning a profit, what do you think investors will enjoy? Good timing and high return on investment, of course, especially on the return of the bulls.

4. Highly profitable

Not all companies have the ability to manage resources well to obtain the maximum benefit. The fiscal management of certain institutions is so poor that it profoundly reduces their profit margin. In the banking industry, Oceanic Bank stands out in terms of fiscally prudent portfolio management. Making a profit is not all that matters. Having enough to hold is the skill that investors love.

5. Very underrated

Stocks that are undervalued are the first to bounce in a bull market. You are not going to profit from the return of the bulls. Your profit margin is decided at the time of your investment. Taking the risk of investing when the company is undervalued guarantees high returns when the market recovers. Unity Bank currently enjoys an agricultural facility on loan terms from the World Bank. At a current market price of less than 3 naira, the stock is seriously undervalued

Winning Attitude for Predictable Earnings

* Continue to be fully invested

* Invest in fundamentally sound stocks

* Ignore the economic forecast and be determined to excel in any economy. The stock market always outperforms in the long run and is the only solution to inflation when it comes to your money.

* Continue to acquire more financial and investment skills.

* Be less emotional in your decisions

Sectors and Stocks to Watch

1. Agriculture

This sector is on the rise as one of the major contributors to Nigeria’s gross domestic product and profits. New frontiers in ranching and cocoa processing are yielding positive results. Companies on the list, for example cocoa processor FTN, Livestock Feeds and Okomu Oil offer good prospects.

2. Food and drinks

Even in a recession, people will continue to demand food and their sweets. The logic of why this sector will work is simple. As long as man lives, the demand for food and drink will continue. Coupled with good management, companies in this sector such as Dangote Sugar, Tantalizer, Flour Mills and Honey Well will continue to delight investors by paying dividends.

3. Banking

Nigerian banks are currently aggressive in their drive to expand into Africa and beyond. Income and profits will soon start to show up on the balance sheet. Some banks such as First Bank, UBA, GTB, Zenith and Bank PHB have performed well and will continue to reward investors as bears reign.

4. Communications

Nigeria’s communications sector is one of the fastest growing in the world. Despite all the infrastructure challenges, companies operating in this sector have made obscene profits and investors will benefit more from their operations in 2009. Starcom is the only stock listed in this sector so far on the US stock market. Nigeria. Investing in it now will not be a bad idea.

5. Conglomerates

History is in favor of this sector. In particular, they have the ability to restructure and reshape their businesses in difficult times. A stock like the UACN will continue to delight investors

6. Transportation

Talk about monopoly. ABC transport is the only listed company in this sector on the stock market. It has been consistent in paying dividends since it was listed in 2006.

7. Insurance

The insurance industry is currently enjoying goodwill and patronage as investors continue to position themselves for long-term profits. Companies like International Energy Insurance and Cornerstone are very attractive.

Learn how to commit the majority of your available fund to the food and beverage industry to minimize your risk. Thinking long-term is a surefire strategy that will ensure your success in 2009 and beyond.