10 Recession-Proof Stocks to Buy On NSE
It is true that investing successfully in any market in the world requires that you understand the big picture of the economy and stock market dynamics to grow wealth. The wealthiest people who made fortunes from equity investment in today’s world are those that recognize the long term nature of the stock market and also know the appropriate keys to play the game profitably.
The big picture gives an idea of how all the facets of the economy work together to influence the market and share prices of quoted companies.
A gloomy economy will have a weak and unpredictable stock market which is the leading indicator that reveals a country’s economic deterioration or prosperity.
An economy consists of the socio-political and business environments that influence business activities which in turn, drive a nation’s development and growth. The economy is sub-divided into markets, sectors, industries and companies.
It also goes through boom and gloom cycles, with the boom stage comprising the early, middle and late expansion periods; while the gloom stage comes in form of the early and late periods of contraction.
For us to be successful equity investors and traders at all times, we must successfully identify the stage our economy is at any particular time and which sector, industry and company can do well in all these stages by remaining in business and posting good earnings that can support its share price and dividend payout in future.
The just concluded Q3 earnings season reveals the weak earnings power of many listed companies on the exchange, that was expected, having been obvious for four straight quarters beginning from Q4 of 2015 till the recent numbers in the market.
On this note, as smart investors that are not swayed easily by sentiments, we must alsway look at the nature of a company’s products and services. These will help us determine whether the demand for them are inelastic in nature such that increase in prices will not have much effect being that they are a necessity.
A vital question one should therefore ask is whether the company has a clear and simply business model that you understand. The next question becomes the quality of management team and existence of a succession plan; followed by the presence of not of a strong risk strategies or buffer to absorb external forces.
Other factors that help identifying quality companies include: whether they have a profit driver, consistent earnings growth, a profit margin that is above 15%, low debt, improved cash flow and a good dividend payout ratio.
This suggests that growing your income in a bad or good economy is a function of your understanding of how the stock market operates when planning for financial independence through equity investment. This is possible if you are buying the right stocks in time and season.
It is obvious that the two straight quarters of economic contraction is taking its toll on listed companies as revealed by corporate earnings made available to the investing community. The general stock market tends to perform poorly during recessions, but stocks that are dependent on the economy perform worse than others. Stocks outperforming the economy now on the exchange are the services sectors, net exporting companies and dividend paying stock with high yield.
It is important to understand that if you are feeling uneasy about the market at this time you are not the only one, even market operators and fund managers are in the same boat. But that is not enough for you to sit on the fence with your money.
Instead, watch the market and be proactive with your money to continue cashing in on opportunities that makes themselves available for smart investors to create more money, no matter the prevailing economic situation.
Ten defensive and recession-proof stocks identified in this piece have been selected based on their strong earnings power on quarterly/yearly basis, among others previously identified. Investors looking to protect their portfolio at this time of recessive should fix their gaze on the stocks below:
This company is into oil marketing, distribution and energy. With strong financials that have supported its price for the last five years in a row, it remains well positioned in the downstream oil marketing sector with low crude oil price in the international market been a plus. Total’s stock has a potential to rally on the strength of its strong earnings and payout policy. Investors looking the way of this sector now should think medium and long, as the increased pump price of fuel has started reflecting on the bottom line of oil marketing companies.
With the quarterly earnings moving from first quarter EPS of 668 kobo to second quarter EPS of 2631 kobo, and third quarter EPS of 3026 kobo, full year is forecast at 3485 kobo. Final dividend probability of N5 or more is high, for a company that has paid interim dividend of N10 in the current financial year on the strength of its strong earnings power. The stock trades at 10.91x earnings with a dividend yield of 12.37%.
Mobil also is into oil marketing, distribution and real estate business. The latest 68% hike in pump price of fuel has started reflecting on its bottom line, in addition to its property business, despite the economic recession. The increasing earnings power of the company has supported its share price and dividend payment over the years.
The company remains well positioned in the downstream oil marketing sector with the low oil price in the international market serving as a boost to its earnings power. The recent divestment of its core investor ExxonMobil International offered an indigenous company- NIPCO the opportunity to hold 67% stake in Mobil.
So far, the market seems not excited about the ownership change in Mobil, which the parties expect to consummate next year. A major reason is not far-fetched, going by the experience of many oil companies managed by Nigerian over the years that have become mere shadows of themselves, just after the exit of their core investor international oil company (IOC).
This stock has potential to rally on the strength of its strong earnings power and payout, its quarterly earnings have been in the north direction, just as the. third quarter EPS of N15.93 and full year forecast of N18.00, dividend possibility of N8 is high. The stock is currently trading at 11.93 times earnings with a dividend yield of 3.78%.
This bank is unique in its aggressive marketing, relationship building with a strong ICT that is driving its business to rank among the biggest in the continent and Nigeria’s top three banks in Nigeria.
On the strength of its earnings power and performance in its sub-sector, it has remained on top with strong profitability ratios. The high dividend payout of the bank in the last four years have been supported by the equally strong earnings, despite the seeming over regulation of the sector? by the Central Bank of Nigera (CBN).
It has consistently grown its earnings on quarterly and yearly basis to support its share price and net assets that had provided investors with high margin of safety. This stock is trading at 4.67x earnings, with a dividend yield of 10.65%.
The nature of it service, role in economic development and the dividend policy has made Zenith Bank stock defensive, especially in this period. The bank is good and attractive for income investors that want regular flow into their account from their investment. It also operates branches outside the country with strong technology and competent personnel. The possibility of dividend in 2017 is higher.
For trading, the stock is attractive with good potentials after the weak earnings season and market fundamentals had depressed it share price. The bank’s performances have been impressive with or without the current FX revaluation that boosted its results in recent times.
Guaranty Trust Bank
This bank provides financial services to Nigeria, having branches outside the shores of the country, with investment in Global Depository Receipt (IDR) and Eurobond which has boosted its FX revaluation as stated in its latest report.
The bank’s profitability level for the first time hit N120 billion to top the industry in gross earnings and profit. Its corporate and retail banking preference and strong service culture have enabled it record consistent year on year growth in customer base and these have impacted on its bottom line to support its dividend payout policy. Its strong professionalism in operations and good technology have helped in delivering satisfactory services to its customers at all times. The bank ranks best in return on equity. It has been consistent in dividend payment in the last five years. The stock trades at 5.86x earnings and a yield of 6.68%. For capital protection and regular dividend, look the ways of this stock, because it has strong up potential from the current position it is selling. Its pattern of dividend payment and holding structure has equally supported its share price even at this recession.
This palm oil-producing company in recent years have stabilized with steady earnings performance to reflect the operating environment as government incentive to the agricultural sector which is part of the reaonsis enjoying as the zeal to diversify the economy by government has shifted attention to food production for local consumption and export. The improving earnings of the company have started to reflect in its share price, regardless of the increase in share outstanding due to the last bonus issue. The company processing it finial products into different stages for several uses. This company is a net exporter of refined palm oil which is expected to boost its bottom line as revealed in the latest numbers released. It has remained the leader in its industry in terms of market value with strong earnings power. On the strength of its current financial year quarterly earnings growth in the mixed of economic recession and having a strong prospect for better earnings regardless of the economic position. This company is fair valued as it is currently trading at 9.36x earnings but with a low dividend yield of 0.24 per cent. The stock has been trending in recent months to a strong resistant level which might be a breakout or reversal. It is expected that the company will pay a better dividend at the end of the day.
This agribusiness company that is into palm oil production and processing has for a long time posted strong numbers that have supported its dividend payout and share price on the exchange. The oscillating trend of the company’s share price in 2014 and 2015 before this year’s up trend was due to general market performance.
Presco’s over 100% quarterly earnings growth is worth considering at this point, especially given the expected improvement in the sector amidst government’s efforts to diversify the economy. Government is seriously working to boost the contribution of agriculture to GDP in a bid to diversify the economic by encouraging farming, if the country must feed herself, thereby saving the huge foreign exchange spent yearly to import food that can otherwise be produced locally. Thereafter, the plan is to export and enhance foreign reserve,
Already, Presco is benefiting from government’s single digit interest rate for agribusiness thereby enhancing their smooth operation. Also the company earns in foreign currency due to export of palm oil. It has remained the leader in its industry in terms of earnings growth and consistency in rewarding shareholders.
On the strength of its recent third quarter earnings position of N6.80. This company is currently trading at 6.45x earnings with a dividend yield of 2.28%. The stock has formed a cup and handle chart pattern that support breakout and continuation of trend.
This company is into the refining of raw sugar into edible form, which is then and has strong prospects of growth as it continues to invest in capacity expansion to meet domestic consumption and export with the aim of boosting profit.
The backward integration efforts of the company with the setting up of sugar cane farms in more than five states, is geared towards making raw materials available for production at low cost. This has started yielding results as reflected in the company’s quarterly earnings reports. The implementation of government roadmap to boost sugar production in the country will increase activities in the sector. Growth in the company’s earnings has supported dividend payment to shareholders since it was listed on the floor of the Nigerian Stock Exchange.
The company’s stock is reasonably valued at its current 7.44x earnings with dividend yield of 8%, with its upside potential from the price. The company’s expanded marketing and distribution outlets within and outside the shore of the country will attract foreign currency boost profit that will support price.
This is a leading cement producing company in Nigeria that is fully integrated with projects and expansion of its operations into 18 other African countries. The company is the most capitalized stock on the exchange and the most priced in its sector. It has expanded production capacity above 20 million metric tons per annum to boost sustainable development with alternative energy from coal to remain in production and boost profitability level. It has continued to export cement, while meeting the demand of government and private sector consumers. It continues to prove a worthy ally in the commitment to infrastructure development and efforts to bridge the existing gap on the road to economic diversification.
The company’s huge investment in capacity building will yield outstanding returns for the medium and long term investor. On the strength of its third quarter EPS of N8.13 and the projected full year EPS of N12.00, the possibility of dividend is high, the stock trades at 21.53x of earnings with a dividend yield of 4.57%. The company is trading at a reasonable valuation with improving profit margin. The construction industry and building materials’ companies are expected to benefit from the government infrastructure development drive to support economic diversification at this time of the nation history and development.
This investment company has demonstrated capacity and strength to create value for its investors since it was listed on the exchange. The company’s services include investment banking, asset management, securities trading and financial advisory to government and private companies.
It ranked among the top three high dividend yield stocks with 14%. The company’s performance in the current financial year has been impressive with and without the sales of its investment in metropolitan insurance, as it continued to structure and package financial instruments for the nation’s energy sector, in addition to consulting services which has boosted bottom line over the years.
The impact of its increased capital base by way of right is reflecting on the numbers posted after the offer.
As a financial and investment service provider, the possibility of dividend payout for 2016 is very high, considering the impressive third quarter EPS of 78 kobo. These strong numbers are attractive at this time of recession.
The company’s price to earnings of 3.21x is attractive as it indicates that waiting period in this stock is short if current earnings and price remain constant. Its earnings movement so far is impressive as quarterly earnings have surpassed 2015 full year earnings position.
This bank, in recent times, has emerged in the sixth position in terms of profitability level in its sector. This was attributed to its increasing African subsidiary network that is contributing more than 20% to the bank’s profit. The bank is not consistent in dividend payment as a result of undulating earnings’ performance. Its performance in recent time shows dwindling earnings power which can be attributed to pressure from the CBN policy adjustment which ranges from increasing public and private sector Cash Reserve Ratio, hike in Monetary Policy Rate to others. On the strength of the bank’s third quarter EPS of 102 kobo, the likelihood of dividend in the range of 30 to 35 kobo is high and anything closer to the figure paid last year will be as a result of its shareholding structure. It is currently trading at 4.22x earnings with a yield of 11.63x. As the bank is currently sourcing for additional funds to boost its operation through rights issue, its earnings and future performance are expected to improve. Income and growth investors should keep their gaze on the stock.
Attention! Attention !! Attention!!!!!!!!!!!!!!!!!
Theme: INVEST 2017 Traders and Investors Summit
1, Outlook of the Economy for 2017 & How to navigate the stock market in a recessive economy By Alhaji Garba Kurfi, Managing Director of APT Securities & Funds Limited.
2, Trading Bad news with Support and Resistant Trend lines Using Technical Analysis By Mr. Abdul-Rasheed Oshoma Momoh, Head, Capital Market in TRW Stockbrokers Limited.
3, The Safest recession-proof Investing Techniques for 2017, By Mr Adonri David, Managing Director of HighCap Securities Limited
4, 10 Top Recession-proof Dividend stocks for 2017 By Mr. Ambrose Omodion, Chief Research Officer, InvestData Consulting Limited.
In equity investment, seasonality and price momentum flow together and this is a game-changer for smart traders and discerning investors who know the forces behind the full-year earnings season in the first quarter of 2017.
Seasonal trend statistics have been repeated as often as 85 to 100% of the time. The trends and all the statistics will be shared at this one-day workshop tagged: INVEST 2017 TRADERS & INVESTORS SUMMIT.
Also, at this gathering, you will learn the following:
a, How to identify specific profit drivers in a sector and the market.
b, The numbers to combine when seeking value in any stock/company
c, How to discover undervalued stocks with excellent upward potentials
d, The safest way to invest or trade in tough economic conditions like ours, knowing correctly the support and resistant levels to manage your risk.
e, Revealing the top 10 recession-proof stocks expected to deliver dividend growth in 2017
F, 25 Stocks with Dividend cut in 2017
g, 50 Stocks without dividend in 2017.
h, Learn how government policies influence the economy and stock market.
i, How flow of funds boost market fundamental and determine direction.
The workshop holds on December 3, 2016 at Ostra Hall & Hotel, Behind M.K.O Abiola Gardens, Opposite NNPC Gas Plant, CBD, Alausa, Ikeja. Time is 9:00am. The fee is N20,000 per participant. Payment made on or before November 27, 2016 attracts 15% discount. Companies sending more than two representatives would enjoy 20% discount. Those who have participated in our previous seminars and workshops will enjoy 15% discount. Payment should be made into Investdata Consulting Limited; Zenith Bank Acct. No: 1013033032 or Stanbic IBTC, Acct. No: 0005224062.
For more details about the programme, please call 08023381388, 08032055467 or 08179547605.