Stock Pick Basket: February-March 2008 Performance

The market has been quite interesting in the last one month, mostly bearish than bullish. The insurance sector which has been a darling of most investors is gradually becoming a terrain where one has to be careful and circumspect in treading.

The table above shows how we performed based on the stock pick basket suggested earlier in February. No doubt individual performance will be based on what period of the month Purchase and sale was made. Most of the stocks in the basket have gone through a period of highs with a fair number falling back to their price at our February 8 post date; in fact some have actually fallen below the prices of those date. however, during the course of the month, most of the stocks reaching their highs surpassed our projected price range. I hope we were able to take advantage of the projections and more importantly as I am learning by the day, imbibing the discipline of knowing when to sell (ofcourse this advice is only for those playing short term. Medium term to long term players have nothing much to worry about).

Personally, my choice from the stock pick basket gave mixed returns. My best performer was First Aluminium, while Linkage Assurance gave me negative returns. I have recovered slightly from my intial losses in UNTL and Nigerian Wire and Cable. I am still optimistic that these stocks hold great potential in the short to medium term and look forward to bullish tendencies in the next 1 month. The greatest challenge I had during the period was my broker's inability to make my purchase when I tell them, I actually lost significant value based on my orders being executed a week or two after initial orders were placed. It was quite frustrating, though not entirely the broker's fault, but I was tempted to change them during the month.

I will be posting a more robust list for our March/April basket in the next few days.

Enjoy!

Looking for AIICO...

On friday, I instructed my broker to sell some units of my GTB, Presco, UTC, Livestock Feeds and First Aluminium. The entire proceeds from these sales would be used in purchasing AIICO. I called late friday afternoon, but couldn't get any detail on these transactions.

I have to say, it's quite hard giving the order to reduce my GTB and Presco holdings. When we talk about fundamentals being right, these companies are near the top of the pack. The future of both companies is definitely in the "black" from the short to medium term. But my current "market" behaviour is strictly driven by my goals and objectives! I am keen to play short term trades for this year as I believe the potentials are definitely huge. In another 3-5 years my strategy may be entirely different, and God willing I'll discuss this future plan with you.

So why did I sell UTC and Livestock Feeds? I'm I anticipating a fall in their prices or do I think they have gotten to their peak already? The answer is NO! I believe these stocks are still rising and may continue for some time to come. Selling these stocks for me was a big test. Before I bought these stocks I had a threshold selling target. This is a very important lesson we all have to learn when we choose the short term trading route. You need to set your taget and try and resist the temptation to hold for much longer than expected. I expected a 30-40% gain in these stocks over a month period. Livestock has done 46% while UTC has returned 77% (initially falling by -5% in 2-3 days) over the one month target. I just had to sell these stocks to be true to myself (it doesn't matter to me if tomorrow they do over 500% return).

Also, I have to say, what made the decision to sell now quite easy is the fact that my unit holdings were not so huge. So it was a perfect opportunity to test if I am only driven by money or by the overaching principle of goal setting. The next big test for me is if I can give an order to sell Equity Assurance(as at Friday, it has returned over 99% in a month!). I think I will give the order....i think!

So what about First Aluminium? Why sell some units of a stock you bought a few days before? Well, I bought some units early in January and this has returned 65%. I thought it necessary to sell some of these units. I still anticipate more price appreciation of this stock and thats why I still hold significant units of the stock.

So I have asked for AIICO...yes I did. This stock should easily do 40-50% in another month. Amongst many reasons, there is a huge demand for Insurance stock out there, and it just seems there is not enought to go round! Furthermore, AIICO did a public offer late last year, the price for this offer was an unbelievable steal(@N2.20 or something close...)! Ofcourse, I did not buy the public offer, because I'm losing patience with the certificate or no certificate drama, I'll rather pay premium on the secondary market and know I can take full ownership of my purchase in less than a week.

I'll let you know if my broker gets through with my purchase...otherwise, I have to come up with another stock...

Wishing you a lovely week ahead...enjoy!

NB: Does anyone know how to insert a table here or create a link for people to b eable to download a table I have created listing possible stock picks for the week/month...if you have any ideas, please let me know.

New Investing Strategy and Jan 2008 Stock Performance

One of the things I chose to do this year is to try and stop using just my “head” and begin to use the ‘pen”. This made me write down increased activity on the stock market as one of my objective for this year. I don’t intend to be sentimentally attached to any stock this year (I actually wrote it down…and also I need a wallet too…). Well, not to say I have been docile before now, but I was rather conservative in my approach. I always picked good stock, carefully analysing the value (seen and unseen) of a stock before making my choices. The choices always turn out right. But this year I chose to do something different, and my interim plan is to have it this way for another 3-5 years before revisiting my strategy again.

On many occasions in the past, I was never disturbed by volatility in the market (even though in most cases, it has been upward volatility for me). I buy a stock for medium to long term reasons. Whatever happens to the price of a stock, I just won’t sell a stock because I try to come in when the price is relatively low. However, upon review of last year’s performance, I didn’t do too badly (an average of 50% over my entire portfolio), but also found out missed opportunities. With the same money, I could have gotten far more returns if only I had adjusted my strategy a bit. I needed to make my “blood” flow faster than it does currently. I needed to hound my broker a lot more to buy and sell like a “proper” trader would.

So I commenced active trading in January this year, and the results have been quite impressive. I made a choice between income stocks and growth stocks. Some of the stocks I held were in the long term growth stocks but in the short to medium term were income stocks. Some other stocks I figured out were growth stocks both in the short to long term, but there is a caveat, they could be quite risky. I will be targeting only growth stocks for this year. I acted immediately on this strategy commencing in the 2nd week of January.

First thing I did was to sell my Nigerian Breweries and Union Bank shares. I had the Union Bank for over twelve months, while the Nigerian Breweries, I guess for over a year and a half, maybe even 2 years. Don’t get me wrong, I got decent returns on these stocks, but I considered I could do much more. So what did I buy? I went for Livestock Feeds and UTC. I considered these stocks to be appropriately priced and believed they could appreciate by at least 30-40% in a month’s time. Do you want to know the results? Two weeks after, Livestock had returned 43% while UTC clocked 40% returns by the last day of January (UTC initially returned -5% after 3 days before picking again). Confessions: I am yet to offload these stocks as I planned, but will definitely do so shortly (one thing I have prayed for is to have the discipline to sell when my set objective is met and take the next “big” decision.

A week after I sold the Nigerian Breweries and Union Bank, I took another bold step. I sold some units of UBA, GTB, Unilever, and my beloved Presco shares (and all my Crusader Shares). I instructed my broker to use the entire proceeds to buy…guess? Equity Assurance! It was such a divine choice. I had no access to any fundamental analysis to make this decision, but comparing the price of the stock vis-à-vis other stocks at that time, I told myself, this will definitely be a slam dunk! In less than a week, I was over 35% in value. As at yesterday (3 weeks after), it was over 60% in value. During the same time period, I also made a purchase of First Aluminium in the 3rd week of January, and by 1st week in February, it was 36% up in value. If you think I am excited, you are damn right!

I need to point out the basis of my excitement, its not the returns per se, it is the fact that I took a decision and immediately acted upon it, and the results are showing. I believe this will be the hallmark of my life this year and beyond: to make a decision, act on it and stand by it!

If you noticed from above, the stocks I picked in the last one month were quite peculiar. Well, the common parlance is to call them Penny Stocks, I won’t challenge that nomenclature, but I’m not popular with that usage. I’ll rather say my plan is to go after appropriately priced stocks that I believe have 20-40% growth potential in a 20-30 day period. I have asked God for wisdom to do this with excellent results this year; I believe he will help me.

Do you want to come on this journey with me? Some choices I make this year could scare you but something tells me we will have so much fun while doing this.

Enjoy…

NB: if you are interested in seeing the list of my Buy and Sold activity in January, leave a comment behind and include your email address. I am yet to figure out to load a table on this blog, and the picture quality when converted to Jpeg just didn't cut it.

Should He sell his Transcorp shares?

The lesson from today's post must not be missed by anyone who reads this!

A very good friend of mine had a discussion with me today and his concern centered on what to do with the shares of Transcorp Plc he bought over a year ago. He is currently reappraising his performance on the stock market (I suppose he is been playing for the past2-3 years now) and and plans to jiggle a bit with his medium to long term plans. He is proud to say he has had some stupendous measure of success, however his only sore point is...yes...Transcorp!

So how did he end up with Transcorp? Well, this friend of mine credits most(if not all) of his stock picks to my advice, however, on Transcorp he did not heed my advice. He was a constant torn to my ears through his phone calls asking what to buy and sell. Credit to him though, he was one of the reasons I decided to commence this blog. I remembered the period I got a call from him requesting what my opinion was on Transcorp, he had some money(a little below N2m) and was considering putting it in Transcorp. What was my consideration then? Well, I have to confess, I was not damn right prescriptive to him then, but I was equally quick to put a caveat on Transcorp shares. Needless to say, I had a discouraging tone towards Transcorp for anyone with a short to medium term perspective.

Don't get me wrong, I am quick to admit that the idea and concept Transcorp represents is noble. The sectors targeted for investment were indeed strategic (and still are) and do hold great potentials. What about the people behind the Transcorp idea, well, I don't know any of them personally, but truly they are people of worth and credible experience worth banking on. So what was wrong? Why didn't I jump on the bandwagon? Why did I choose to use body language rather than my harsh voice to put a "no-no" on the stock back then?

In one of my flaneur moments, shared with my friends during both the private placements and eventual IPO of Transcorp, I was quite categorical on the inappropriateness of taking a dive with Transcorp for anyone with "meagre" capital. I remember picking up the prospectus of Transcorp back then, and was puzzled to discover no historical performance to base any meaningful economic evaluation on. I asked for specific "Economic Value Creation" activities the company has had good track record with, and behold there was none. My mantra then became, if you invest in Transcorp, you invest in an idea - a good idea, but "unproven"! What Transcorp needed then was not a "public offer", it needed "Venture Capital". It was not a 50-50 chance for great returns in the short run, it was a near 90-10 chance of loss of economic value. Furthermore, compounding my puzzled mind then, was also the lack of a clear strategic plan by the proponents of the idea, it was clearly missing in the prospectus. That was another red flag!

So I'm I completely writing off Transcorp? Not at all, I'm only asserting what is now obvious - don't expect any magnificent returns in the short to medium term (actually, the price is quite low now, so it might actually not be a bad idea to buy, but my caveat still stands!). If Transcorp puts its house in order and comes out with a clear plan to ride the crest of economic potentials Nigeria offers, it is a sensible long term bet! It will take a lot of patience(with a 1000 heart skips and beats to go with it) to reap benefits from the stock.

So what will I advise my friend? Stay in for the long haul or get out? It's hard (He invested at a price of N6 and the stock now goes for about N3), he is going to halve the value of his money from near N2m to less than a million. Tough...but the decision has to be taken...I wish I could just tell him, leave it there and hopefully 10 years from now, you can use the returns to pay your children's school fees, but he has a short to medium term plan for his funds and needs to rescue what he has left. Indeed, he should sell....do you think differently?

So if he sells, where can he put this money in the short term that will possibly make-up for the loss he has made on Transcorp? Truth be told? I'm at a loss...but with a gun to my head as I think with my fingers..I'll do an Insurance company or take a position in Presco Plc, at least they have past performances I can review!

Cheers!

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...