Analysts Advise on How to Navigate Stock Market

As the stock market continues to feel the impact of the general economic headwinds, some investment analysts have given some tips on how to navigate the market in the coming year.

Speakers at a one-day Invest 2017 Traders and Investors summit organised by InvestData Consulting Limited in Lagos recently urged investors against buying to hold, or becoming greedy. They advised investors to define their investment objective from the onset.

For instance, Mr. Meshach Ukpoma, an investment analyst with TRW Stockbrokers Limited said investors should aim to buy stocks at their lowest prices, and sell when there is a rebound afterwards.

He also took them through some technical aspects of determining when to enter and exit a stock for maximum returns and minimal losses, depending on the trend, including how to even down during stormy weather.

Similarly, taking participants through what investors should look for when investing in equities at this season of economic recession, Chief Research Officer, InvestData, Mr. Ambrose Omordion, spoke of the need to understanding how to interpret financial information.

“Financials are very important when analysing a stock, this component and the five factors that comprise it are weighted more heavily than the other,” he said.

He listed them as: Debt-to-equity ratio (or simply debt/ equity); price to book value ratio (price/book value or PBV); return on equity; price to sales ratio (price/sales); and free cash flow analysis.

“This is because they include the value metrics that investors like Warren Buffet use to find stocks that are both well priced and have potential for long term price appreciation,” Omordion explained.

According to him, these financial metrics are essential in an overview of the financial health of a company and market perception, while identifying stocks with significant underlying value and those less risky.

“In any market situation, price movement and dividend payout is a function of earnings. This means that without earnings, no company can think of paying dividend,” he said.

Based on the identified parameters among others, Omordion said there are at least 10 stocks that can be considered “recession-proof, that can help investors preserve the value of their assets.

As part of efforts to guide participants on investing between now and the first quarter of 2017, he noted that while investors in the 25 stocks are lucky to get any dividend at all, there are 50 others from which no payout should be expected at full year, except a miracle happens “in the course of their operations in the dying days of this year.”