State Of The Market: 5 stocks to remove from your portfolio

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Tuesday, April 05, 2016 3.38 PM / TheAnalyst

 

“It is not only important but necessary now, more than ever, for an average investor to remain value driven and build a diversified portfolio as market slips into a portfolio-reshuffling stage for better returns. Let your trading strategies align with the logic; ‘’Buy Damaged STOCKS but not Damaged COMPANIES’’.  

The equities market sustained moderate bargain postures to end the month of March positive by 2.99%. The market had experienced an impressive rally between February 1st and March 22nd, 2016, recording 9.21% gain to hit above 26,000bpts - a 50-day high with a new support level at 25,145.28bpts. 

 

Gauging the market trends and trading pattern, we cannot but highlight the growing investor optimism towards investments in equities despite unchanged macroeconomic fundamentals on the back of continuing tight liquidity outlook. 

In addition, extensive analysis had recently revealed a significant drop in price volatility and sell pressure in the month of February (2.74% gain) and March (2.99% gain), ridding on the back of active value investing and impressive patronages towards weathered blue chips, medium and big capped stocks - this is to highlight low price and cheap valuation as part of the key drivers for sustained demand in the market.

Despite this upsides however, the general market atmosphere remains bearish as Q1'2016 ended lower by 11.65% due to the overwhelming sell-off experienced in January, which depressed the All Share Index (ASI) by 4,726.10bpts (-16.50% loss), depleting market net worth by N1.63trillion. 

 

 

As observed above, and taking a cue from the sustained moderate demand in the last two months; it is plausible to remain cautiously optimistic of a sustained March trend, and to submit that the recovery appears to be in progress as investors remain consistent with value bargain(s). This should spur improved bargain activities in Q2'16 if as expected, we witness improved liquidity outlook in near term. 

It will therefore be advisable for investors to maintain the “value investing” approach in equities but take closer look at some stocks arising from our diligence review; some of which are listed below for which we consider and categorise as “highly volatile stocks with weak fundamentals”.

·         Transcorp Plc

·         Skyebank Plc

·         FCMB Plc

·         FBNH Plc

·         Diamond Bank Plc 

Depending on your level of exposure and risk appetite, you may consider maintaining ‘hold’ positions only if you don’t mind to wait-out the market and tie-down funds for a long period.



TRANSCORP sustained a steep fall pattern since September 2014, falling from N7.08kobo to its current levels where it is struggling to halt further falling trend at N1.00kobo. 

SKYEBANK has been on a sell-off trail since January 2011, falling from N10.50kobo and currently struggling to stabilise at N0.90kobo in March 2016. 

FCMB consistently maintained a gradual sell-down pattern since March 2010 from N9.72kob0 and is now struggling to halt further sell-off at N0.68kobo in the last two months. 

FBNH has been on active sell-down trend since April 2013, falling from N22.50kobo and is now struggling to halt possible sell-off trend at N3.20. 

DIAMONDBNK has maintained a consistent sell-down pattern since January 2014, falling from N8.21kobo and is now struggling to halt sell-off pattern at N1.10kobo. 

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