The Nigerian equities market finished 2022 on a bullish note as the NGX All-Share Index appreciated by 19.98% to close with 51.251.06 index points.
Investors increased their buying pressure, especially on blue-chip stocks in the Oil & Gas, Telecommunication, and Industrial Goods sectors, thus spurring the gains in the local bourse.
The positive performance was despite the pressure caused by the Central Bank of Nigeria’s decision to increase the interest rate to 16.5%, even as the build-up to the 2023 election depressed investors’ appetite for equities.
Current realities in 2023: This New Year, the equities market presents attractive opportunities for investors to take a position to increase capital gains and reap big dividends.
- However, domestic and foreign investors’ sentiment is usually weak as they seek to reduce their market exposure whenever elections draw closer.
- The intensity of the impact is usually a function of the degree of political tension and uncertainty generated by political activities.
The best strategy to shield the headwinds is to stay with securities that have solid fundamentals. It is also recommended to ensure a well-diversified portfolio of investments, particularly during electioneering periods.
Investment analysts’ recommendations: Investment analysts who spoke to Nairametrics said the banking sector, industrial goods sector, and telecommunications sector are sectors to invest in this New Year and the election period.
- According to them, these sectors are expected to do well given that they will make more revenue and profits from political activities, thus leading to better dividends for investors.
- They noted that given that most share prices of the companies quoted on the Exchange are still trading low makes it is more attractive, hence this is the time for investors to accumulate the stocks to reap bigger dividends and capital gains.
Below are the recommendations on stocks to invest N1 million in right now, according to the investment analysts.
Kasimu Garba Kurfi: The Chief Executive Officer of APT Securities and Funds Limited, Kasimu Garba Kurfi, listed stocks to buy this election season including banks, industrial goods, telecommunication, breweries and oil, and gas.
- According to Kurfi, banking stocks are good to buy because, with the naira redesign, many things will work in their favour which includes more revenue with more profits.
He added that industrial goods stocks especially the cement companies are also good to buy and hold because it is expected that the new president coming to power will likely address many infrastructural challenges which will lead to the high demand for cement.
- “More infrastructural constructions are likely to be awarded by the government and this will help shore up revenue of cement companies quoted on the Exchange.
- “Also about 26 Governors who will be coming for the first time to form a government in their respective states are expected to do the same and come up with new projects that will lift the activities of industrial good companies,” he said.
On telecommunications stocks, he noted that the use of data and voice calls will increase astronomically during the elections adding that electoral officers and party agents will leverage on data of telecom firms to send information.
- “Using data to send electoral information means more money will go to the telecom firms and make the stocks more liquid and attractive to investors and also potential for a better dividend payout,” he said.
- “Breweries companies are also good stocks to pick because after elections, there would be a wide celebration all over and this means more revenue to brewers. Oil sectors are also a good buy as expected free market will give them the freedom to earn more.”
Mike Eze: The Managing Director of Crane Securities Limited, Mr. Mike Eze, said bank stocks are still good stocks to reap capital appreciation adding that the major reason for investing in these stocks is the stability of capital gains and consistent dividend payout and if possible bonus issues.
- “That’s what investors look out for. Bank stocks remain a veritable area for investing.
- “Investors should also look at penny stocks that are under N1.00.
- These are areas some potential investors overlook and others make huge cash consistently. Food and beverages stocks like Nestle and BUA Foods are also a good area to invest,” Eze said.
Eze explained that as the election is around the corner and new leaders are expected to emerge, there are expectations that the emergence will boost activities of the industrial sector as new contracts on roads and other projects will be awarded across the country which will increase the demand of building materials and boost the companies’ revenues.
- He advised Investors to leverage these stocks for a better dividend payout this year.
Johnson Chukwu: The Managing Director of Cowry Asset Management Limited believes there will be some rush to complete roads and infrastructure projects as a campaign strategy to return to power by the political office holders.
- “This will increase demand for industrial materials and boost their earnings.
- “So industrial goods companies are areas that will perform well during election hence investors should look out for them for investment this period,” he said.
Tajudeen Olayinka: The Chief Executive Office of Wyoming Capital and Partners Mr. Tajudeen Olayinka, said that given that 2023 will be a year of two administrations with possible different economic agendas, it is difficult to predict the exact behaviour of the market.
- He, however, noted that some fundamentally strong stocks in the banking sector, agriculture, consumer goods, telecoms, and industrial goods will do much better than others.
Stocks in these sectors: Based on the comments of some of our experts we narrow down the possible stocks that fall into the sectors mentioned to the following;
- Industrial goods stocks are Dangote Cement, BUA Cement, and Lafarge.
- Brewery Stocks are Guinness, and Nigeria Breweries
- Oil and gas stocks include the likes of Seplat, TotalEnergies, and Ardova. We also include Geregu Power which is the only electricity sector stock listed.
- Food and beverages stocks like Nestle and BUA Foods
- Example of Telecom stocks includes MTN and Airtel.
