 
Stock investing is big business and you don't go into a big business without a well-thought out strategy for success. In the stock market, this is even more compelling because of the random movements and noise which could confuse and disorient the untutored. The market is driven by information, but a lot of what floats about may just be rumour. An investor not rooted in strategy and running without a game-plan, could get badly buffeted by the contending forces of the market. The pros, on the other hand, operate in the market with an investment strategy. They also develop a stock evaluation and selection strategy on the strength of which they choose what to buy or sell. Though their investment strategy may not be firmly cast in iron, having a modus operandi provides the focus and sanity to pursue set goals amidst the hoopla of the market.
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NSE DASHBOARD - Market Indices, Highlights & Insight
Market Review for The period 16th - 31st May, 2007
Our last edition reviewed the market for the first half of May, 2007. In the second half, the market proved more bullish, with the NSE Allshare index rising by 2602.73 points to close 49930.19 from 47327.46. This overall performance was driven by significant appreciation recorded by several stocks. While 91 stocks powered up (gaining a total of 200.03 naira units), only 34 shed weight (losing a total of 74.17 naira points).
Mobil was top of the gains, appeciating by N10.38 (closing N170.00) while on its heels were: AP N10.36 (N76.21), Flour Mills N10.00 (N84.00), UACN Property N8.72 (28.87), Chevron N8.42 (N160.05), Union Bank N8.09 (N31.40) and Ashakacem N8.00 (N75.00). Top losers were marked-down NAHCO N26.66 (N38.89), Guinness N9.99 (N126.00), Nestle N7.73 (N220.20), Ecobank Trans N7.50 (N161.20), Total N3.18 (N165.01), Nig Enamelware N3.09 (N2.59), NN Flour Mill N1.88 (N26.00). See full chart here. Our relative price movements chart (showing % changes) is also revealing as to stocks that out-performed in terms of rate of returns. Afroil, in the top spot, has zoomed from N2.92 at beginning of May to N7.96 by May 31st, 2007 (172.60% appreciation). See chart here.
INVESTMENT BASICS
From The Masters (1): The Gospel According to Warren Buffett, Acclaimed Investment guru.
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Mr Warren Buffett is the worlds' second richest man (Forbes, 2006). Yes, he's so rich he easily decided to give away $37 billion in donations to The Bill and Melinda Gates Foundation and other charities in 2006. Fondly called " the Oracle of Omaha" (after Omaha, Nebraska, USA - his hometown and residence), he piled up his fortune investing through his Berkshire Hathaway company. It is said that $10,000 invested in that company when he took it over about 41 years ago (1965) is worth over $30 million today. Its share price, in October 2006, set a record as the first to hit the $100,000 per share mark on the NYSE. Mind-boggling figures, you'd say.
Lessons to Learn?
What did Warren Buffett invest in and what investment strategy, if any did he engage? Has there been a pattern to his investment actions? Are there things he did that could, to some extent be replicated? In short, can you engage his technique and achieve good results, even if not as deafening? And if things are looking a bit late for you, is it possible to groom your kids with some ideas from this investment sage?
This article is definitely too short to delve into the investment strategies of The Oracle. In fact, the study of his investment successes and those of other similarly massively successful investors will regularly feature here, as we seek to learn from their accomplishments. We hope you find value in that. But back to the strategies of our guest investor for today, Warren.
His Strategy
Simply put, Warren Buffett has been a value investor. Value investors aim for securities that are significantly under-priced - where the intrinsic value is much higher than what the market has currently priced the security. Value investing was the hallmark of Benjamin Graham (1894 - 1976), investment authority and seminal Wall Street figure. Warren readily accepts the influence of the former. Value investing is rooted in fundamental analysis - that search for the true value of securities in the belief that the market may not have priced them correctly.
Value investors discover value stocks and dig in, waiting for the market to see its error and respond.
Disciplined Approach
It is important, too, to state that Mr Buffett has approached the market with strict discipline and focus. He has worked with his own chosen rules, almost completely ignoring the din of the market. Such was the case during the boom of tech stocks in the USA: it didn't fit his investment criteria, so he ignored the industry and its boom, until it eventually went burst by 2001/2002, causing undiscerning investors to lose heavily.
In effect, Mr Buffet accepted the principle of value investing, developed his set of investment rules (his people talk of 'tenets') anchored in it and faced the market boldly with that framework. The result has been
outstanding.
The Rules or Tenets
Let's just scratch these. Firstly, there's a fundamental criterion of business model: if he doesn't understand the business (interprets as inability to
project its performance), he wouldn't invest - dot-com example. Besides, the competitiveness of the business is of major interest: it should have a strategic advantage. Warren Buffett also doesn't go for the short haul price gains. He picks companies that have the potential, based on his analysis, to generate excellent earnings in the future and buys into them. The management of the business gets strict evaluation as to its quality and bent for working to raise shareholder value. There's then the analysis of the financial performance potentials. Measures to judge profit margin, return on equity, gearing, etc are applied. The objective, in the end, is to from his opinion as to the intrinsic value of the stock as a basis to determine if it boasts an attractive under-valuation.
Though technical analysis has worked for some, Mr Buffett's has chosen a non-charting system.
What to Note
It's good to note that he didn't make his staggering wealth without working hard on his investment selection process. He set his strategy
and applied it in a disciplined manner. Being a value investor, he gave things time to mature, once he believed in his investment decisions. It wouldn't be that he never made mistakes or lost money. He has worked for the long haul and that has paid big dividend. You wouldn't doubt that if you approach even our own market with the same commitment, focus, patience and discipline, whatever your technique, you can also achieve outstanding results! Finally, it's good to learn that Warren Buffett does not believe in dynastic wealth. Like Bill Gates, he believes that much money to your children becomes some burden, not blessing.
Unlike those who would loot the public treasury to reserve for their generations unborn, these men are giving out tonnes of money they legitimately earned and wanting their children to work themselves up too.
PROPERTY INVESTING
6 Simple Ways to Pick a Killer Property Location
You've probably heard before that the three things that count most in property investment are: location; location; and location. Location is said to be everything in property investing, on the score that if location is right, you just need time to reap good profit from a real estate investment. What this simply says is that you must properly choose the location when you invest, if you hope to reap handsome returns.
The big question is: how do you choose this killer location that guarantees a great deal? Put differently, what really counts in defining a good location? If you are beginning to think of chart-breaking property deals, we have a set of rules here, developed by property pros, to help you decide which locations are undisputed winners.
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PRIMETIME INVESTING - Youth and Everybody
16 Money Principles to See You Through Thick and Thin
We all desire to live comfortably through our working life and to retire into sustained comfort when we become inactive due to old age. Even in the challenging circumstances of inactivity induced by illness or accidental incapacity, the expectation of reasonable comfort does not diminish. The reality, however, is that maintaining a comfortable lifestyle necessarily costs money, which unfortunately, is not freely available. Building sustainable financial capacity is hardly a chance occurrence - it is programmed and worked for.
So, if you are hoping to live a financially stable, fulfilled and comfortable life, you need to get programmed early for that success. Much of the failing in this respect is because people hardly learn early to take the right steps. This article provides a foundation of sixteen proven financial principles that you can leverage to achieve long term financial success.
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INSURANCE - TOOL FOR WEALTH PROTECTION
What You Shouldn't Fail to Know About Disability Insurance
Injury or illness could result in one's inability to remain in an active productive condition, meaning the person loses the ability to generate income. An auto accident, for instance, could result in a spinal cord injury, which, for all practical purposes, could mean becoming physically dependent for a long time. A stroke or certain other illnesses could also result in being bed-ridden for a long time. The capacity to earn active income in such circumstances will, at best, be severely limited. As a complication, the expenditure profile will significantly rise in such situations: medical bills, the cost of required care, etc. Even when disability is only partial or temporary, the implications for one's well-being and support to dependants could be overwhelming.
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WEALTH-IN-HEALTH
Vitamin and Mineral Supplements - Pills to Boost Your Health and Prevent Aging?
The quest for vitamin and mineral supplements intake has heightened globally in the last decade, raising questions as to whether they are totally healthy to consume and whether they truly boost the health and prevent aging. No doubt, our bodies need vitamins and minerals to function properly - we learnt that many years ago even while in the primary school. But that was supposed to come from carefully selected vitamins-rich food sources, part of the much-vaunted balanced diet. Now, 'plug-and-play' delivery of these vital body requirements, mainly via pills, holds sway. A lot of big business has sprung up on the basis of the production and delivery of nutritional supplements, the other name for vitamin and minerals supplements. The question to ask: is it all good for you as a user and if so, how much of what should you consume?
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INVESTMENT Q&A
Q. What is an Investment Portfolio and How Do I Get One?
A. An investment portfolio is a set or collection of investments held by an investor. It may include stocks, bonds, mutual funds, commodities (say gold), real estate or other securities or financial assets. An investment portfolio is built to meet certain investment objectives of the investor. Because each investor's expectations, circumstances and risk outlook are different, there is the need for a portfolio that fits his investment profile. More appropriately, a portfolio reflects the objective of risk diversification - a collection of investment assets selected to minimise portfolio risk or, better put, to maximise expected return for the investors risk preference level.
 The need for a 'portfolio' of investments is rooted in the reality of the riskiness of all investments. If investments were without risk, an investor would more conveniently channel all his resources in one investment outlet, say a particular company stock, which he adjudges as offering the returns potential he expects. The reality is that returns are subject to variability due to factors that affect the market as a whole (systemic risk) or the particular security (unsystemic risk). This variability of returns reflects the risk profile of the investment i.e. the likelihood that the returns will vary from expectation. It is to mitigate the impact of this risk (that is, to hold returns as close as possible to the investor's expectation) that different assets from different classes, companies, sectors of the economy and even regions of globe may be built into a 'basket' that diversifies out some risk, leaving a safer investment bundle. That is, the extremes cancel out, giving a less volatile returns expectation.
Simply put, as investor, you need to select a set of investments that will ensure that you don't easily lose money or earn poor returns. You will carefully decide how to spread your money among stocks and financial assets that are not subject to the same influences. That selection process is called portfolio construction. The idea of correlation of returns is important as the aim is to pick securities that are not positively correlated.
Read more on portfolio construction in our online article What Experts Look For In A Strong Investment Portfolio.
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CORPORATE MIRROR
First Bank of Nigeria Plc (FBN)
...Truly The First |  |
Nigeria's premier bank, First Bank of Nigeria Plc, has proved to be the investor's delight, providing investment returns that possibly exceed many an investor's expectation. Year 2006 was a particularly resounding one which saw investors walking home with a one-for-one bonus issue and cash dividend of N ... per share. The market frenzy that preceded the closure of the register of shareholders spiraled the share price to N72?.. before the mark-down. It was a completely unprecedented performance for the industry and a confirmation of the leadership position of the bank.
FBN has, no doubt, faced major challenges in recent years. As an old financial institution rooted in the core traditional principles of banking, it had to contend with the forays into its market share by the 'new generation' banks which had found newer, faster and smarter ways of getting things done. Interestingly, FirstBank has coped well, dealing with the imperative of renewal and competitiveness. Without losing what it stands for, it today matches the younger banks on their own turf - corporate ambience, tech-driven service delivery, graduate-level staff quality and overall atmosphere of freshness. It's financial muscle remains an edge, enabling it keep the top spot, even while a few other banks aggressively push to dethrone it. However, while a massive branch network across the nation is one of its strengths, it appears to be allowing that advantage slip, as some younger banks pursue a strong network expansion programme that may see them matching or outpacing FBN. All that may change now with the bank's current share offer aimed at raising nearly N100 billion net proceeds. With such fund to invest in expansion, modernisation and technology upgrades, renewed strength is clearly on the way.
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