Nigerian Stock Exchange in 2008: Looking Back, Looking Ahead - 1
By SmartProInvesting.com Stock Investing Team.
January 11, 2008
We’ve just spent a little time taking an overview of stock performance on the Nigerian Stock Exchange, over the past year. Not that it is what matters now. Certainly not – the business is in the future and the concern now should be about 2008 and beyond: what expectations to have, what positions to take and what money to aim to make.
A Perspective From the Past
Yet it’s always helpful, even humbling, to sit back and see how events have panned out over a period. Soaked into the boil of the daily activities, it’s often difficult to sense the cumulative impact. That’s why it’s positive to spend some time to assimilate the consolidated impact of the series of daily activities of the stock market in a past period. Who knows, that could inspire, caution or somehow influence your approach to the market, going forward. Because we are not dwelling on the past, we will also, in this piece, take a future perspective on the market, going into the year.
2007: Synopsis
Our primary interest was in the returns earned by stocks (mainly from price performance): most of the readers seem to be looking for stocks that double in value even in shorter than one year (as if anybody could pinpoint such) and it was good to see the overall picture for 2007. We think the outcome is both awe-inspiring and instructive. The picture is laid out, first in this table of total returns of listed stocks, ranked in descending order of performance.
- That table readily shows a market that was largely on a cruise in the past year. While the All-share index rose by 75%, stocks that clocked stupefying rates of total return would seem legion. Well, the figures speak for themselves, so spend some time to take them in, analyse their message and see what that tells you about the opportunities of the market. Complement that table with this table of absolute gains for 2007.
- One factor to draw some attention to is the price loss category in that table (that’s the lower rung stocks). It’s interesting to see that just a handful (far below 20 stocks) of the entire listed bunch ended the year with some value loss against year-opening price. Most losses were relatively moderated. Transcorp’s 68% loss (the major one) was certainly a chunk off investors’ pockets, but that doesn’t compare to the kind of gains you see in that table. While future replication is not guaranteed, the picture here would seem an index of the overall risk potential (danger of substantial loss of capital) in the market at the moment. If you compare gains with losses, the latter seems to pale into insignificance.
- It’s good, too, to observe stocks in the dormancy class that saw no action over a whole year. We hope those wouldn’t be where you’d like to put your money.
- You must be wondering that most of the top-priced stocks did not come into the top range of the returns table. It’s important, though, to note that different categories of stock play different roles in your portfolio. For instance, top-dog resilient stocks that may provide a defensive strength to your portfolio may not be as yielding as some aggressive, more risky components. Similarly, while relishing the performance of some of the top returns stocks, you need to judge the risk profile of each of them. Would you have easily invested in them, without the benefit of hindsight? A good investment strategy may not necessarily be about the highest market returns, much as you want to optimse your earnings. There is a balancing act between risk and return and where you aim to position should be a function of various personal factors.
-
You may want to see how stocks in each market sector rank relative to each other, sorting into sector leaders and laggards. That’s what you get in this table of sector performance ranking. Companies that command leadership performance in each sector are easy to see, which should help your investment decisions.
Note, however, that the figures derive from year-opening and closing market prices. In between, prices would have moved up or down, from which gains or losses arose. What’s captured represents where an investor held the stock all year through.
|
|
