The Nigerian Exchange Limited (NGX) ended 2023 on a positive note, due to restored investor confidence in listed companies.
Gatekeepers News reports that this has led to optimism for a potentially bullish market in 2024, with the equities index approaching 80,000 points.
Although it’s important to remain cautious in the near term due to market dynamics, select penny stocks could offer attractive entry points for investors looking for capital appreciation. However, it’s crucial to conduct careful research and risk management before considering such stocks.
Investment analysts strongly advise focusing on penny stocks that possess robust fundamentals and a track record of consistent dividend payments.
Analysts suggest certain penny stocks can offer good returns in the medium term due to their potential for share price appreciation.
Examples include Sterling Bank, FCMB, Wapic Insurance, Jaiz Bank, AIICO, FTN Cocoa, Chams, Japaul Gold, Universal Insurance, Royal Exchange, and Verita Kapital.
Thorough due diligence and considering factors such as a company’s financial health, growth prospects, and management team are important before investing.
The Managing Director of Crane Securities Limited, Mike Eze , observed that during bullish market phases, investors tend to rotate out of overvalued stocks nearing their peaks and seek opportunities in sectors with relatively lower prices.
“When the market is bullish, the tendency is for investors to move from stocks where their prices are very high-almost reaching their peak to other sectors where the prices of stocks are still relatively low and take a position,” he told Nairametrics.
He noted that this behaviour echoes the market boom witnessed about two decades ago, where investors actively explored diverse sectors and astute players identified value in penny stocks. Numerous such stocks experienced significant price surges, even without strong fundamentals.
“What we are witnessing is almost equivalent to when there was a market boom about two decades ago. The tenets then were that investors are just roaming around the different sectors of the market -from one stock to another.
The astute investors then anchored on penny stocks. And many of these penny stocks moved from 50 kobo to N20.00 without any fundamentals,” he said.
However, it is important to note that investing in penny stocks solely based on past performance or general market sentiment can be risky. Eze cautions against making generalizations and emphasizes the need for careful analysis.
He advised investors to prioritize due diligence and focus on identifying penny stocks with strong underlying fundamentals and growth potential.
He noted that while regulated markets offer a degree of capital protection, it’s crucial to remember that no investment is guaranteed.
“The good thing about investing in stocks is that it is a win-win affair, there is safety of capital because it is a regulated environment.
“Investors should look at penny stocks like AIICO Insurance, AXA-Mansard, Jaiz Bank, and Chams as stocks that will do well in 2024.
“The current market development suggests that penny stocks are where to go in 2024 for investors to smile at the banks because it offer good returns on investments. They will be better at the end of the year for a bountiful return,” he said.
To increase their chances of success, Eze advises investors to conduct thorough research and maintain a long-term perspective. By carefully selecting stocks with promising potential and managing risk diligently, investors can potentially achieve significant returns in the year 2024. It’s important to stress that taking a meticulous approach can be highly beneficial.
Victor Chiazor, Analyst and Head of Research at FSL Securities Limited, has projected a potential normalization in response to recent government policy statements in 2024.
Consequently, he anticipates that the equities market will be influenced by both company performance and the implementation of new pro-market policies.
“In light of this, investors are advised to exercise caution as the second quarter approaches.
“The prevailing trend is expected to see a shift towards investments in penny stocks, with notable considerations including Sterling Bank, FCMB, and Wapic Insurance.
“Additionally, we recommend keeping an eye on larger entities such as Fidelity, Access, Wapco, and MTN for potential investment opportunities,” he said.
Kasimu Garba Kurfi, the CEO of APT Securities and Funds Limited, highlighted the potential significance of penny stocks and small-cap investments in 2024 in terms of capital gain and share appreciation.
He cautioned, however, that the initial surge in the Banking Sector may not sustain itself due to primary concerns arising from most banks seeking to raise capital to meet new requirements set by the Central Bank of Nigeria (CBN).
This impending need for capitalization is anticipated to impact the sector’s performance throughout the year 2024.
In terms of recommended penny stocks, Kurfi suggested considering options such as AIICO, FTN Cocoa, Chams, Japaul Gold, Universal Insurance, Royal Exchange, and Verita Kapital, among others. Investors are advised to thoroughly evaluate these opportunities for potential investment.
However, David Adonri, Executive Vice Chairman of Hicap Securities Limited, stressed that due to the prevailing sustained bull run across the market, finding penny stocks with solid fundamentals has become a challenging task.
He emphasized that investors prioritizing safety, liquidity, and profitability of their investments can achieve their diverse investment objectives through stocks, regardless of their capitalization status—be it highly capitalized or low-cap.
