Story highlights

• The Nigerian Exchange Limited (NGX) experienced a positive first half of 2024, marked by a surge in investor confidence and overcoming economic challenges, resulting in a 33.81% year-to-date return. 
• Financial experts recommend focusing on fundamentals-driven selection, portfolio diversification, and active management, highlighting sectors like banking, oil and gas, agriculture, and telecommunications for investment. 
• Notable stock recommendations include Zenith Bank, UBA, Access Bank, TotalEnergies, Okomu Oil, Presco, MTN, and Seplat, with an emphasis on both dividend yields and capital gains opportunities. 

Equities trading on the Nigerian Exchange Limited (NGX) finished the first half of 2024 (January-June) with notable positivity, driven by a significant surge in investor confidence in listed corporations.  

This exceptional performance marks a milestone in NGX’s history, overcoming economic challenges such as high inflation, a depreciating exchange rate, and ongoing security concerns. 

The prevailing optimism led to discernible shifts in purchasing behaviour, resulting in the All-Share Index closing the first half of the year at 100,057.49 index points.  

Additionally, the year-to-date (YTD) return of the NGX All-Share Index showcases its resilience, standing at an impressive 33.81% despite bearish trends observed in the second quarter of the year. 

Demonstrating resilience amidst challenges, the market navigated headwinds such as the Central Bank’s interest rate hike and rising inflation, revealing its underlying strength. 

Investment Outlook 

While the outlook for the second half of 2024 appears promising, caution remains crucial. Investors should prioritize the following strategies: 

• Fundamentals-Driven Selection: Focus on companies with robust financial performance, strong leadership, and clear growth prospects. 
• Portfolio Diversification: Spread investments across various sectors and asset classes to mitigate risk and maximize potential returns. 
• Active Portfolio Management: Continuously monitor holdings and adjust positions as market conditions evolve. 

Investment analysts’ recommendations:  Investment analysts who spoke to Nairametrics said the Banking sector, Oil and gas sector, Agricultural sector, and telecommunications sector are sectors to invest in this second half of the year.  

• According to them, these sectors are expected to do well given that they will make more revenue and profits, thus leading to good return on investment and better dividends for investors.  
• They noted that given that most share prices of the companies quoted on the Exchange are still trading low it is more attractive, hence this is the time for investors to accumulate the stocks to reap bigger dividends and capital gains.  

Below are the recommendations on stocks to invest in H2’2024, according to the investment analysts.  

What financial experts are saying  

In an exclusive interview with Nairmetrics, Director at Halo Nigeria Capital Management Limited, Mr. Paul Uzum, demystified the key factors to consider when investing in the Nigerian capital market.  

He identified four pillars guiding investment decisions: return on investment (capital gain), dividend payout, bonus issue, and stability of capital.  

Uzim highlighted that the recapitalization in the banking sector, which involves issuing new shares, will lead to an increase in outstanding shares by 50%-100%.  

These new shares will qualify for the 2024 dividend, resulting in a decline in EPS and a significant drop in dividend per share. 

Uzim emphasized that dividend payout is crucial for pricing stocks in Nigeria due to the high inflation rate.  

He noted that Zenith Bank remains the only banking stock assured to provide investors with at least a 10% dividend yield at the current price, even after issuing new shares.  

He also recommended UBA and Access Bank but advised against purchasing GTCO at the current price of N45, citing a low dividend yield of 7.3%. Instead, he suggested waiting to buy GTCO at N37 post-capital raise. 

“Due to the high inflation rate in Nigeria, dividend payout is the most crucial factor in pricing stocks. Zenith Bank is the only banking stock that is guaranteed to provide investors with at least a 10% dividend yield at the current price, even after issuing new shares. 

After Zenith, I recommend UBA and Access. I do not advise investors to buy GTCO at the current price of N45 because the current dividend yield is 7.3%, which is quite low for the industry. However, if you are patient, you may be able to buy GTCO at N37 after the capital raise,” he said. 

Investors are encouraged to closely monitor the forthcoming FBNH rights issue, as Femi Otedola and Oba Otudeko vie for control of the bank.  

This rights issue will determine the bank’s future leadership, and there are opportunities for profit from trading the rights. 

Uzim believes the stock will see significant movement post-rights issue due to Otedola’s involvement. 

“Investors should keep a close watch for the upcoming FBNH rights issue. As Femi Otedola and Oba Otudeko scramble for control of the bank, this rights issue will determine who gains total control.  

There is potential to profit from trading the rights, and I believe the stock will move significantly after the rights issue due to the presence of Femi Otedola,” he said. 

Beyond the banking sector, Uzim recommended Total, Okomu Oil, and Presco for their strong performance and benefits from the economic policy reforms of Tinubu’s government.  

He also advised investors to anticipate MTN reporting significant losses when the H1 2024 numbers are published at the end of July.  

Investors can take advantage of this by buying MTN stock at around N180 as the market reacts negatively to the results. A similar strategy is recommended for Nestle, expected to make substantial losses, with a buying opportunity below N800. 

Managing Director / CEO. Arthur Stevens Asset Mgt Limited and former CIS President Mr.Tunde Amolegbe  speculated that the focus for the second half of the year will be on banking recapitalization, with more banks expected to launch public offerings of shares to existing and prospective shareholders.  

He mentioned that Zenith Bank, GTBank, Access Bank, and FCMB are likely preparing for this move. 

Beyond banking, Amolegbe highlighted sectors or companies with significant foreign exchange revenues, such as agriculture and oil and gas, as likely outperformers.  

He also noted the potential for growth in the telecom sector, driven by possible price realignments. 

“Aside from banking obviously sectors or companies with significant fx revenues such as agriculture and oil and gas are likely to outperform  

I also feel like the telecom sector still has significant room for growth given the potential for price realignments,” he said. 

In particular, Amolegbe expressed personal interest in TotalEnergies, Presco, MTN, and Seplat due to their strong growth prospects. 

David Adonri of Highcap advised investors to focus on the banking industry, petroleum, and agriculture sectors.  

He stated that all listed banks are good stocks to buy following the recapitalization exercise. 

 In the petroleum sector, he picked Total Energies Plc, and in the agricultural sector, he recommended Okomu Oil Plc and Presco Plc. 

Group Managing Director of Crane Securities Limited, Mr. Mike Eze stressing the importance of understanding individual investment goals, cautioned against solely chasing high-priced equities.  

• He emphasized: “If your objective is capital gain, focus on stocks with growth potential and undervalued fundamentals, not simply high prices.”   
• “If an equity is high in price, there is no need to invest in it because it will not yield expected capital gain.  
• If your major reason for investing in the capital market is the return on investment, you don’t need to invest in stocks that have high prices, you have to look for equities that have a propensity for capital gains.  
• You need to look for those equities that their prices are low and have good fundamentals and move in”.  

 Eze further differentiated strategies for capital gains and income-oriented investors.  

• He noted: “Dividend payouts and bonus issues often require a patient investment horizon, whereas capital gains can potentially be realized sooner.”  
• If you are investing for dividend and bonus issues, you have to wait for a long period because those benefits don’t come in immediately,” he said.     

Eze listed stocks like Zenith Bank, Fidelity Bank, Access Bank, MTNN Plc, Total Energies Plc, Seplat Energies Plc, Okumo, and Presco as good stocks to buy at the beginning of the second half of the year 2024.  

According to him, the reason is that the stocks are still very attractive and still have the propensity to go higher in price which will enable investors to have a good capital gain.  

What you should know 

Investing inherently carries risks, and it is essential to carefully consider these risks before making any decisions.  

Consulting with a financial advisor is a valuable step towards making informed investment choices, achieving financial goals, and ensuring a secure financial future. 

By identifying promising sectors, conducting thorough research, and employing prudent risk management strategies, investors can navigate the opportunities that lie ahead.  

Remember, knowledge is a powerful asset in the market. Use it to make well-informed decisions and unlock your investment potential in the coming year.