Stock Pick for July Ending 2007

I have spent the last few hours painfully going through summary indices of stocks. In a matter of days, I’ll have to place an order with the broker.

The fundamentals I have gone through have left me with very little conclusion to draw, so I’m torn between beefing up some of my holdings in two different stocks: one in the banking sector (GTBank) and the other in the insurance sector (Cornerstone Insurance).

The 6 months (June 2007) result for Cornerstone Insurance is quite impressive recording a profit after tax (PAT) increase of about 362% change compared with same period last year. The market price for Cornerstone closed shop today(July 30, 2007) at N4.04, inching up from N3.94 from last Friday's. GTB on the other hand with a reported 3 month period, has increased profit after tax by 66.14% when compared with same period last year; its closing price today is N32.95, down by some kobos from last Friday’s trade of N32.99. indeed both stocks have hovered around this price range in the last 1 month, with no particular spike in their prices.

So my decision would be what time range is my investment need for these stocks. Well, I have always considered these stocks as part of the portfolio of stocks I’ll like to keep for long term, so speculations only will not drive my drive decision for this month (medium or long term, I win!). Considering price differentials between both stocks, it is obvious I'll get more volumes purchasing Cornerstone as opposed to GTB, but really that shouldn't be the reason for committing my "hard" earned kobos!

But let's just assume that I want to pitch for a short to medium term play of these stocks, and my target return rate is say 50-75% ( I believe 100% is attainable, but let's not raise our hopes too much...ok?) in another 6-9 months, which of these stocks is more likely to give me this target? In essence, we are asking, is it possible to have GTB in the range of N50-N60 in 9 months time? Is it possible to have Cornerstone in the N6-N7 bracket in 9 months time? Well, considering the PAT of both companies mentioned earlier, it may not be so bad a pitch to make. While GTB's year high for 2007 has been N37.96, comparing with the price possibilities of its peers (Intercontinental, UBA and Zenith) in the market, N50 could be a possibility, N60 maybe a stretch for our chosen time period.

Cornerstone on the other hand has a year high of N4.99 from a year low of N0.90. So asking the stock to fork out additional N2-N3 gain in 9 months (some of its peers have attained such price levels this year already: Crusader 6.70, NEM Insurance 6.32, WAPIC 9.13, Great Nigeria Insurance 6.10 etc.) may not seem an impossible target considering an over 300% PAT rise for June 2007 result compared to June 2006...hmmm are you seeing where I'm leaning to already?

The truth be told, I'm a great fan of the GTB brand and stock, and always believe, you can never get it wrong investing in its stock as long as the management continues with its fundamental based style of operation and value creation. But in the light of the above mentioned (I hear an unsubstantiated rumour that they might be coming to the market for additional capital, let's see how that goes, of course, if they do, it's a "no-brainer"), I'll keep a tab on GTB for another month but pitch my tent with Cornerstone this month.

So I recommend we take a dive...Go for Cornerstone Insurance, medium to long term...you are fine!

Enjoy...

A Market Meltdown?...I'm not expecting doomsday! U?

That the Nigerian Capital market has been bullish over the past few years has not been in doubt, even the most sardonic of global institutions and observers have attested to the paranormal performance and wealth created on our nation's capital market.

The question that has kept recurring has been for how long will this continue? Is it sustainable? Are the good times really here? Have I missed out? Can I still cash in on the good times?....multitudes of questions been expressed in our various mother tongues. It is quite understandable that with the years of economic torture Nigerians have gone through, people want to be sure that someone, somewhere and somehow is not pulling imaginary strings in the market just to heighten their appetite in preparation for an eventual doomsday!

A reality of life (and not necessarily a sad one!) is that things happen in cycles, what goes up, they say "must" surely come down and indeed this has been found to be true of business cycles - of which our capital market is not immune to. Quite a lot of people have expressed fears and concerns about the sustainability of the upward swing of the Nigerian stock market. Some argue from the point of business and economic fundamentals; again and again, it is said how much confidence can we put in the figures reported by companies. Other argument stems from the rather bizarre non-correlation between stock prices of some companies and below par performance of the quoted companies - they just seem to move in opposite direction! Not to worry, I read Economics (and love it!), and have come to understand that the Nigerian culture and environment has a rather sophisticated way of responding to the "fundamental" laws of Adam Smith and Marx' ( I haven't exactly said we don't respond to the economic laws...so read my lips!).

While I do not intend to totally discount the claims and concerns of commentators/stakeholders (most more qualified than I am) about the fragile nature of the nation's stock market, I do not agree that we are teetering on the edge of doomsday. Oh yes, indeed there's some great imbalance in the market, with just one sector accounting for over 50% of the entire market capitalisation, it does raises some points for discussion. However, I'll choose not to discuss from a stance of trepidation...I see an opportunity...not only from an individual perspective, but from a national level as well. Let it be said, that the very sector that now accounts for such a great imbalance, some scanty years ago, accounted for less than 5% of the total market capitalisation. So what has happened...quite simple, a Daniel came to the scene for that sector and charted a clear vision and direction, of which all the participants were whipped into line and focus. Our earnest desire is that as the economic reformation drama of the country continues to unfold, the next scenes and actors will help shape clear direction and focus for other sectors that have lagged behind...I see that happening!

When we measure the depth of our capital market, using the market capitalisation as a percentage measure of our GDP, it is indeed obvious how much more distance we still have to cover. The percentage ratio as at 2005 figures is put at 25%; compare this with other stock exchanges' market capitalisation as a percentage of their country's' GDP like JSE (220%), London (145%), Singapore (220%), Spain (90%), Malaysia (138%) and Bombay (90%) and the gulf is obvious (my friend calls it a depressing statistic of which the scale of the graph has to be seriously tweaked for Nigeria to appear on a comparison chart!).

But wait a minute, what do you see? I see a massive opportunity for you and I as we play in this market. Let's assume that GDP growth for the country remains stagnant, the mere growth opportunity for the stock market to catch up with the GDP of the country leaves enough mouth watering opportunities for investors like you and I. But the truth is that we are a growing economy, projected to grow our GDP at an average of 5%, considering the base point we are coming from, I strongly believe the Nigerian capital market irrespective of any sector that dominates it, is here for a very long run - sorry to disappoint the haters...no meltdown in sight!

But what if...just in case the threat of meltdown is real...then you need to understand that "opportunities" do not disappear during meltdown (I'll spare you the economics of progress during meltdowns, but just to mention, all the countries who suffered Stock Market depression at one point or the other, are still the World's leaders!)...they become better enhanced... So my friend, stop bothering about "market" failure...there's value to be created in this economy...money to be made...and a nation to be built - Selah!

My Investment Philosophy

Is investing just about making money and securing a good/bright future? What should drive me when I invest? What really should be permanently etched on my mind? I believe these are some of the key questions anyone who intends to make success of investing (of any kind) needs to ask and deliberately find answers to. Whatever answers we find (and I hope we find the right answers!) should shape the pattern of our thinking when we commit our time and sweat to answering the deep questions that emanates from that "mild" but "needed" greed that aspires everyone of us to seek a better existence.

I see investments/investing within the larger context of life itself. If you are married, close to getting married or plan to get married someday, then you will understand the simple analogy we will use to set a tone for our investing activities in the days, months and years ahead. Investing can be likened to a marital relationship. The truth be told, when you choose to start investing for the purpose of wealth creation, you are announcing to your self the birth of a relationship. A relationship that will require a lot of care, patience and love. Any mindset lesser than this sets you on a guaranteed path of failure with your investments (be it time or money). Investing is treasure hunting, and you better have your heart in it! The whole essence of marriage is to value a "life" and to be valued back in return - you don't get what you don't give!

Investing should be about creating value: spotting a value creating opportunity, nurturing that opportunity, committing to that opportunity and then spreading that opportunity. Money (and lorry loads of it!) happens to be one of those things that you get splashed with in the process of enjoying your investing life (ask all the richest men of the world...they'll tell you the same). So does that mean I invest with the hope of not making money?....pleeease...I'm not crazy or some feel good lunatic! We all want to make money - The difference is in the "how?"!

I believe in staking investments with organisations for the sole reason that increasingly, these corporations have become greater agents of change than the governments of today. When you invest in an organisation(or start one), what you have indirectly done is provide the means for these organisations to effect these changes. If after investing in any company you complain against the Capitalist "west", you've missed the point...You just became one yourself, and the earlier you start enjoying that status, the better for your investing future. When you invest, you join with a large band of stakeholders, some known to you and others, you never even realise you are joined with in the same cause. I have come to admire some of the great investors of our time, ranging from the likes of Warren Buffet, Kerkorian, Soros, Fola Adeola etc. and how the various organisations they invested in have become massive agents of change. These guys staked something deep with the organisations they've been involved with, and for every dime of their wealth celebrated today by you and I, the value created by them has influenced our societies for the better.

I hope I'm not sounding off point here, because like I said in my last post, this is a journey - a long journey (no quick fix promises). Let's agree on our principles before we start...it will save us a lot of headache in the future and will bring us the returns we desire.

(it's getting close to that part of the month where I need to put some cash in the market, I will be ruminating on some basic financials of listed companies over the weekend to decide what order to give my stockbroker next week. So you can look forward to the recommendations I'll be giving in my next few posts!)

- Gbolade Shoyemi

Welcome to Investing

Now to the business of the day!

I'm so glad I finally connected my heart and hands to start posting on this blog. I've wanted to do this for a very long time; many times I've constructed in my head situations that would have been of immense benefit to all who will click on this blog, and as frequent as those times, brutally deconstructed the execution from same head.

This blog is largely going to be about investing: stock investments. No theory! Simple plain practical playing the Nigerian capital market; this will be our starting point, later into the future we will take a pitching point into the rest of Africa.

My approach on this blog will be simple. I wont complicate what is not...and what others try to make cumbersome , I promise to use plain laity language. I wont claim expertise where I don't have, and you will also find out I wont portray ignorance. I promise you no quick abracadabra, but indeed mind blowing consistency in wealth creating opportunities. It's going to be decent work, hard work, but as results unfold, you'll find out its also fun work!

I intend to listen to you, hear your opinions, and gossips(financial gossips!) if you have any. In return I won't hold back from you. In most cases, I will be putting out my neck on some bets and pickings, I'll make available some tools I use for playing in this market, some crude...and some, just plain genius - none of which I'll claim right to. I will let you know whenever I buy a stock, why I'm buying the stock, and I will advice you do the same. If I sell, I'll also let you know, basically, you will be privy to the way the game is played in my mind. we will experience some interesting time together as you will discover, the market "always" play to your advantage. we will see what others don't see and reap from what we've sown( I love miracles, but don't believe in magic!). We will make investment decisions together and we'll track over time measuring our expectations against actual performance.

I realise I have a gift...I know what is good on the stock market, I've given opinions and practical investment advice to friends and colleagues before now. Consistently, we beat the market. Some based on hard core data and analysis of fundamentals of companies...and some, just based on simple plain logic and common sense. And in some occasion, guts...a great God and a good heart gives performing guts! You will find out as we progress, we wont lack any of this!

Before we delve into the business of playing in the stock market and staking a future in it, on my next post, I'll share with us my investment philosophy...from that point we will understand the basis for the numerous investment decisions we will be taking.

I'm looking forward to this, and loving every thought of it!

I welcome you to my journey...ooops...I meant "our" journey.

Na me be dis....Gbolade Shoyemi

Smiling Fortunes!!!

My resolve has never been tested as much as it happened this night. It's unbelievable what happened to me. The very tool expected to give me expression of the thing I hold very dear, became an alibi to introduce some desperation to my feelings...you wonder what this ranting is all about?

I have spent the last 2 hours putting together a masterpiece introduction to this blog which I have been postponing for the last 2 years. It was wonderfully crafted (or so I believe), I was done with the editing, crossed all my "ts" and dotted the "is". and then smiled to myself...wow such a piece..all of a sudden NEPA(oops, sorry PHCN!) struck. I tried to quickly cut and paste the write up onto Microsoft word(apparently there was no need for that, the blogging tool actually saves your write-up as draft seconds after your nails get off the keypad...nope, I wasn't listening, some moments of madness ensued, these PHCN guys have taught me in the past, no risk is worth taking...in the clumsiness of a few seconds, my muscles tripped, the mouse became a gun, it wiped off my entire write-up...i calmed just a bit, but not enough...I reached for the "undo" key..don't know what happened..was it my eyes? was it the hunger I felt...really can't tell...when I fully realised what it was...the undo combination all returned a blank white screen....My people, I no fit cry!!!

I found myself torn between picking myself and working away from this wonder of our time and cursing it for my mild misfortune...then I noticed, the blink...that wonderful blink that entices a nerd to the screen just like the smile of father's first little girl entices him to come home early...calling for my attention and waiting for me to push the pads again...go on I can hear...Express your self again...I'm sorry it says...but if you turn away today, you'll meet me here again - even if it takes another 2 years! Then I retorted..."no be your fault, if to say I know, na paper I for write am put..all this shakara for no happen!"

The words don't flow again, not like when I started...but how for do?..This Blog, na tonight I go start am....