Best stocks every Nigerian should buy in 2022
Despite the economic difficulties in Nigeria, the nation’s stock market has been on a positive increase, giving hope to investors or potential investors in the market. According to the Nigerian Stock Exchange Index, the performance of all the stocks listed on the Nigerian stock market closed in the first half of 2022 with a gain of about 21.17%.
The recent increase resulted in a 14-year high for the first time since 2008, as indices increased significantly by 5.4 trillion NGN from the start of 2022 making it one of the best-performing stock markets in the world.
This shows that making investments in the Nigerian stock market is a way of getting yourself financially secured in the country. However, the wrong investments will lead to losses which is why you need to invest only in the best stocks. Although every company is bound to experience a bad market, buying shares in some companies will lead to more profitable results than others.
Let’s get into it.
Things to consider before buying stocks
Although you tend to make profits by buying stocks as a Nigerian, you might also make huge losses from some investments. This is why it’s important to do your research before investing your hard-earned money into any company.
Find out the value of the share, carry out other analyses and check if the long-term or short-term results fit into your financial goals. The act won’t be easy but it is what you have to do to become a successful investor. Even though it’s impossible to always get profitable results from every investment, you’ll increase your likelihood of being successful by following the steps listed below.
1. Time Horizon
The first thing you need to have in mind before buying a stock is a time horizon. This means the time you will hold the stock until you need the money back. Deciding the time horizon will help you to know if you need to buy the stock or not. However, such decisions are largely dictated by investment goals and strategies.
The time horizon can be short-term, middle-term, or long-term – depending on your financial goals. For short-term investments, you have to look for companies with good balance sheet and involves fewer risk. These types of investments are made if you plan to hold the stock for a year or less. While medium-term investments involve holding a stock for one year to 10 years. This means you should invest in quality upcoming stocks.
Finally, you should make long-term investments if you want to hold the share for more than 10 years. These investments mainly have profitable results because they have time to recover if the company experiences financial drawbacks.
This simply means the rate at which price increases or falls. Stocks with high volatility will increase quickly if the business is moving well but will fall easily during bad markets. This will affect your earnings and losses.
For instance, high volatility stocks will give you more money than low volatility stocks even when the price is rising. On the other hand, stocks with high volatility won’t give you enough time to exit the market during a downfall in price but you can cut losses by removing your money from low volatility stocks.
3. Market capitalization
Market capitalization (also known as Market Cap) is the total market value of a company’s outstanding shares of stock. This value is gotten by multiplying all the company’s outstanding shares by the current price of one stock.
Carrying out this process will help you to easily estimate the worth of the company. It also helps to know the potential outcome of your investment with them.
How to pick the best stock to buy in Nigeria
Picking the right stocks to invest in is essential for your success in the market. Although there’s no single approach to picking the best stocks, you have to be a good analyzer of the stock market. This requires being good in either of the two forms of analysis, known as fundamental and technical analysis.
Here’s how you can analyze the market using fundamental and technical analysis to pick the best stocks in Nigeria.
1. Fundamental analysis
Fundamental analysis involves determining the intrinsic value of any security or stock by examining related economic and financial factors. These factors include industry trends, external influences, events, and financial statements. The goal is to identify anything that can affect the value of the stock or company, thereby leading to a change in the price of the stock.
There are two main types of fundamental analysis;
Quantitative fundamental analysis – this analysis is based on numbers and financial statements of the company by considering factors like balance sheets and earnings releases.
Qualitative fundamental analysis – is an analysis that is based on the nature or standard of the company. This involves studying factors like past financial performance, brand value, and management decisions over a given period.
2. Technical analysis
Technical analysis is the process of determining the future price of a stock by studying the charts, trading volume, past price movements, and price trends. Unlike fundamental analysis, technical analysis focuses on the stock’s price data and movements.
Although this type of analysis requires time to learn, you can use some technical analysis indicators like Fibonacci Retracement, Moving Averages, Relative Strength Indicator (RSI), and many more.
5 best stocks every Nigerian should buy in 2022
The goal of every investment is to yield more money for you and not to waste it. This is why you should always invest in stocks that have positive potential returns. But with up to 100 stocks listed on the Nigerian Stock Exchange choosing the best stocks to invest in can be exhausting. Thus continue reading to find out the best stocks to buy on the Nigerian Stock Exchange this year.
1. Dangote Cement
With about 4.27 trillion NGN – approximately 14 billion USD market value, Dangote Cement is an excellent choice for any stock investor in Nigeria this year. The top multinational Nigerian company is involved in preparing, manufacturing, and distributing cement in Nigeria. Dangote Cement has had a dividend yield of 6.41% in recent years and the current price for a share in the company is 280 NGN.
2. MTN Nigeria
MTN is one of the biggest telecommunication companies in Nigeria and Africa. The company offers a wide range of broadband wireless access and mobile financial services in the country and continent. MTN also gives mobile telecommunication services such as short message service, airtime, data subscription, and many more.
They have a market cap of about 3.87 trillion NGN, making them one of the best companies for any Nigerian interested in buying stocks this year. You can purchase the MTN stocks for 190 NGN per share through their website.
3. Access Bank Stocks:
With a market capitalization of 322 NGN billion at 9 NGN per share, investing in an access bank stock would be a good decision even beyond 2022. The banks’ customer deposits grew from 486 Billion NGN in 2010 to about 1.1 trillion NGN in 2011. The increase continued till 2018 as it moved from 2.5 trillion NGN to 4.2 trillion NGN and skyrocketed after Access Bank merged with Diamond Bank in 2019.
4. Guinness Nigeria Plc
Established in November 1963 as a subsidiary of the British company Diageo Plc, Guinness is a popular alcoholic beverage company in Nigeria. However, the company also started producing non-alcoholic drinks, spirits, lagers, and ales. Guinness Nigeria holds about 0.74% of the Nigeria Stock Exchanges equities market with a market value of 198 billion NGN. Most stock brokers in Nigeria offer the opportunity to buy Guinness (Diageo) shares.
5. Presco Plc
Presco Plc is an agro-industrial company involved in the manufacturing of palm oil, refining of vegetable oil, cultivation of oil palm plantation, and processing of palm kernel. The company is not only one of the best in the agricultural industry but also offers profitable returns in the stock market. Presco Plc has a market cap of 158 billion NGN and you can buy a share at the price of 158.40 NGN.
We believe that this article has given you the basic information you need to make the best stock investment as a Nigerian. However, it’s important to note that stock investments involve some degree of risk and the value of any stock can change. As a stock investor, you should not only base your decision on price but also carry out thorough research and analysis.