Thursday, December 26, 2013 5:00 PM / Research
No doubt, defensive stocks would remain the toast of value investors irrespective of health of the economy as analysis have always revealed that such class of stocks are immune against economic uncertainty.
The core reason for this posture cannot be farfetched as most of the defensive stocks are firms that involve in consumer durables business, which keeps the firm's revenue, cash flow and bottom-line active and robust since consumption is a constant factor irrespective of purchasing power.
In consumer goods sector, we have seen value investors most times leveraging the nature and class of the business of these defensive stocks, which are mostly into durables and non-durables, particularly in the periods of market uncertainties. These set of stocks provide a measure of protections due to steady demand for products and services offered by their firms.
In this regard, a cursory review of the consumer goods sector on the Nigerian bourse confirmed this position. We have observed sustained bargain loyalty towards the stocks in the sector considerably.
Meanwhile, further Analysis revealed significant relationship between NSE Consumer Goods index and NSE All Share Index, which further points to likely impact or contribution of the sector to the general market performance in the year.
Majority of the listed firms in the sector, particularly the big capped firms engage in non-durables products which are on steady demand, just as we had observed above- This has really boosted their fundamentals, which continued to attract bargain confidence in the sector.
To buttress this further, 66% of the stocks in the consumer goods sector recorded above sector average returns of +47.6%, in which 79% of this class of stocks are firms that engage in non-durables products.
In the same view, 57.89% of top performers in the sector experienced sustained investors loyalty with continued active bargain sentiments while 42% of same class experienced fresh and renewed bargain hunting in the year
CHAMPION experienced sustained bargain trend while JOSBREW witnessed a renewed bargain sentiments to top the 19 gainers in the sector with +328.7% and +200.7% gains respectively.
On the other hand, 24% of the stocks in Consumer Goods sector recorded negative returns while 43% of the losers in the sector experienced decline in bargain confidence, led by GUINNESS as revealed price analysis.
Further analysis revealed significant relationship between NSE Consumer Goods index and NSE All Share Index, which further points to likely impact or contribution of the sector to the general market performance in the year.