The Market's Depressed, But that's Your Golden Buying Opportunity
By Acceler8now.com Stock Investing Team, November 5, 2007
The Nigerian stock market has remained depressed for some time, sliding down significantly in October alone - see graph below. That slide was the result of weight-shedding by various stocks. The All-share index closed Friday November 2 at 50,201.66, compared to year-high of 54,801.52. Many investors may be groaning and biting their fingers. Some may even be asking if this is how money will be made in stocks. Anyway, the straight answer to that is "yes", even though it's difficult to swallow when prices head down. But the really is that the market can never head steadily in one direction. It swings. And money can still be made in those swings, just as losses can also be picked up.
Understanding the above-stated point about market-swings is important for your stock investing success. One interesting feature of stock investing is the anger it generates in the average investor when prices are down. The anger stems from the disappointment that expected capital appreciation is not forthcoming, or a loss is already taken. In that mood, it is easy to become so disenchanted as to ignore the possible opportunity the market decline presents. It's even possible in those circumstance to despise the idea of stock investing, completely. Interestingly, should the market reverse and show a sustained upward price direction, same investors are likely to get interested again. However, because of the strong negative sentiment the decline had induced, it possibly takes a long way into the upward price trend (perhaps till market excitement builds up again), for that anger to thaw and re-entry occur. Unfortunately, with such response pattern to price movements, it's easy to see that success is substantially undermined.
Timing is Critical to Success
The investor that has the orientation captured above will hardly thrive in the market. The reason is in the poor timing that is inherent in that pattern of response. You need to buy when the best opportunity presents and strive to sell similarly at the best possible point. You may not get this perfectly right, but you don't want to be far off target. Being angry with the market is no solution. Prices will fall when they have to and rise when there is market impetus. Your business is to look out for where to better your lot in those price movements. When prices are depressed as they are today, you need to engage the market, ask critical questions and determine if it presents a golden opportunity to buy up stocks, especially if you have the liquidity to do so. In that context, let's take a closer look at today's market condition.
Factors Affecting Today's Market Pricing
Perhaps, the searching question to ask is whether there is a fundamental deterioration of the Nigerian economy or an immediate threat to justify an expectation of worsening corporate performance. Or whether specific companies whose stocks have shed value are reporting deteriorating performance. It's fairly easy to answer the first, to the effect that no fundamental reversal of fortune, for the economy, has occurred. At the worst, it is stable. There could still be problems, but nothing new has gone wrong. To the contrary, the expectation is about improvements and there is good reason to expect gradual positive changes. As to companies, that question can only be taken on a case-by-case basis. However, it can also be argued that most companies are reporting improving results. The current mood of the market may therefore be said to lie in other factors, such as the current 'glut' of new share issues, which investors are doing all they can to log into. What all that would translate to is that the price weakness is just for a while. In due course, prices will zoom off again.
Time to Buy
It would be wrong to say that every stock is an excellent buy at its today's price, but good opportunities can be found. Today looks like an ideal time to lock in those opportunities. That's how to reap from the market, when the up-surge comes again. How soon may be difficult to say, because the market is a tricky thing. What can be said with reasonable confidence is that the day of market correction and firm upward price direction will come again. That day is unlikely to take a lifetime to come. So, make hay!
If you are wondering what stocks you can buy now, that's partly why you have a stockbroker, so, why don't you go for a chat. Or talk to your investment adviser. If you don't have any, may be it's time to consider such relationship. This isn't the era of working without the professional services of experts. Quality professional advice will pay over time and, most often, many times over, compared to any fees you are charged.
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