Daily Insight: Equity Investment in a Bear market

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With the performance of the stock market at a YTD return of -15.3%, the Nigerian Bourse is by far one of the worst performings across emerging and frontier markets.

Accordingly, we reiterate our investment strategy for H2-18 below:

Buy the dip! We advise investors not to get derailed by the bearish outlook that has clearly characterized market performance since July 2018. We maintain that these temporary setbacks have typically been followed by recoveries. Hence, the crystallization of the potential risks, especially in relation to pre-election uncertainties presents an opportunity for investors with a medium to the long-term horizon to hunt for bargains immediately the market bottoms out.

Choose stocks with consistent dividend profiles: Despite pressure in the polity, corporate earnings are unlikely to be overly negative in light of the recovery in the broader economy. Hence, bottom line numbers for some companies within our coverage universe are set to improve. Accordingly, notwithstanding the distraction in the political climate, we are of the view that investing in stocks with consistent dividend payment profile, stable earnings, and stock market liquidity is clearly strategic.

Overweight on value stocks: Finally, in buying the dip, we recommend choosing stocks which have demonstrated a solid history of resilient revenue growth, earnings stability, dividend consistency, and positive market sentiment.

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