Hello All,

This thread has been created to provide an avenue for the exchange of ideas amongst those primarily interested in fundamentals-driven equity investing. Discussions may extend to other relevant topics as well.
While fundamentals-driven investing is broadly divided into value and growth investing, I share the opinion that all good investing is value investing, that is, buying an asset for less than it is/will be truly worth (I subscribe to this broad definition). There are other approaches e.g., quantitative analysis, qualitative analysis, event-driven investing and more, but the main idea is that investing is informed by an assessment of value.

While there is a thread for Nigerian Stock Exchange stock pick alerts, it seems heavily skewed towards technical analysis. The aim here is not solely on the NSE. While it might take most of the attention, and that is reasonable, discussions should hopefully go beyond companies listed on the NSE.

On this thread we can share investment and learning/educative ideas, discuss and provide constructive criticism, connect with like-minded investors/individuals, share other relevant information etc.

Hopefully the thread takes on a life of its own, but I intend to post from time to time. There might however be some limitation to what I can share so I greatly encourage and will appreciate other contributions.

NB: Whatever opinion I post is personal and should not be construed as being of any other form. It is also not to be taken as investment advice or counsel. Just my view. Thank you.

Great. Wpuld love to learn

I'm here to answer present.

I'm a potential value investor, as I dedicate a certain amount every month I throw into the equities market per month, more like funds I can afford to lose, or excess cash I got from a profitable deal


However practicing this overtime has made me see my capital grow, and I am shifting focus to.....

Maybe I should just pick fundamentally sound stocks and be buying them at intervals and piling them up, with the cashflow building up over time via dividends

That's why I'm excited about this thread.

once again, I'm here to mark present

Ugosample:
I'm here to answer present.

I'm a potential value investor, as I dedicate a certain amount every month I throw into the equities market per month, more like funds I can afford to lose, or excess cash I got from a profitable deal


However practicing this overtime has made me see my capital grow, and I am shifting focus to.....

Maybe I should just pick fundamentally sound stocks and be buying them at intervals and piling them up, with the cashflow building up over time via dividends

That's why I'm excited about this thread.

once again, I'm here to mark present

Great to have you here. What you are doing is commendable but I agree you may want to stick to fundamentally good stocks, especially if you are in for the long term. However, it is not sufficient that a business is fundamentally sound, the price should also be such that it gives you a "margin of safety" should things not go as you may have imagined they will.

As earlier indicated, your approach is commendable but another way of doing it - if you are able to conservatively value these good companies - is to be patient until an opportunity arises where the price is low enough for you to invest with sufficient margin of safety. You could invest your money in short-term fixed income securities or other highly liquid, low risk investments for the time being. If you can't conservatively value the stocks, then cost averaging might be fine.

In any case, periods of pessimism sometime provide buying opportunities but one still needs to carefully examine and determine what and which to buy.

"I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful." - Warren Buffet.
“Buy when there’s blood in the streets.” - credited to Baron Rothschild.

And on margin of safety: "A margin of safety is achieved when securities are purchased at prices sufficiently below underlying value to allow for human error, bad luck, or extreme volatility in a complex, unpredictable and rapidly changing world." - Seth Klarman.

bobbyL:


Great to have you here. What you are doing is commendable but I agree you may want to stick to fundamentally good stocks, especially if you are in for the long term. However, it is not sufficient that a business is fundamentally sound, the price should also be such that it gives you a "margin of safety" should things not go as you may have imagined they will.

As earlier indicated, your approach is commendable but another way of doing it - if you are able to conservatively value these good companies - is to be patient until an opportunity arises where the price is low enough for you to invest with sufficient margin of safety. You could invest your money in short-term fixed income securities or other highly liquid, low risk investments for the time being. If you can't conservatively value the stocks, then cost averaging might be fine.

In any case, periods of pessimism sometime provide buying opportunities but one still needs to carefully examine and determine what and which to buy.

"I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful." - Warren Buffet.
“Buy when there’s blood in the streets.” - credited to Baron Rothschild.

And on margin of safety: "A margin of safety is achieved when securities are purchased at prices sufficiently below underlying value to allow for human error, bad luck, or extreme volatility in a complex, unpredictable and rapidly changing world." - Seth Klarman.

Thanks

It seems we will be having interesting conversations here for a very long time

bobbyL:


Great to have you here. What you are doing is commendable but I agree you may want to stick to fundamentally good stocks, especially if you are in for the long term. However, it is not sufficient that a business is fundamentally sound, the price should also be such that it gives you a "margin of safety" should things not go as you may have imagined they will.

As earlier indicated, your approach is commendable but another way of doing it - if you are able to conservatively value these good companies - is to be patient until an opportunity arises where the price is low enough for you to invest with sufficient margin of safety. You could invest your money in short-term fixed income securities or other highly liquid, low risk investments for the time being. If you can't conservatively value the stocks, then cost averaging might be fine.

In any case, periods of pessimism sometime provide buying opportunities but one still needs to carefully examine and determine what and which to buy.

"I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful." - Warren Buffet.
“Buy when there’s blood in the streets.” - credited to Baron Rothschild.

And on margin of safety: "A margin of safety is achieved when securities are purchased at prices sufficiently below underlying value to allow for human error, bad luck, or extreme volatility in a complex, unpredictable and rapidly changing world." - Seth Klarman.

So tell me, what techniques do you use to determine the fair value of the fundamentally sound stocks, and you could also give me ten stocks YOU THINK are fundamentally sound stocks

your opinion

Thank you

Anybody here ?

Valuation is a highly subjective exercise. And I can't tell you that one way is perfect. I will post some links that speak to it.

At the end of the day, what one is doing when investing, is putting in money today to make/receive money/cashflows/earnings in the future. And if one looks at a stock as not just a ticker but primarily as ownership in a business, then future earnings
/cashflows of the business should sufficiently exceed your investment today. If these future cashflows can be accurately and confidently determined, then one can discount them at a required rate of return to know how much one is wiling to pay today. However, for stocks (unlike many bonds, assuming there is no default), these are usually variable.

For an investor willing to invest for the long term if need be, it might be more important to take time to understand any business you will be investing in than to focus on valuation. If you understand the business well enough, then you can have a reasonable sense of its prospects. This understanding will help make better investment decisions.

Good book on qualitative analysis - "Common Stocks and Uncommon Profits and Other Writings" by Phillip Fisher.

Googling "how to value a stock" should give you more than enough resources on valuation.

I like the article in the link below. Talking about value stocks (in a strict sense).

https://www.forbes.com/sites/johnnavin/2018/06/29/identifying-value-stocks-is-methodology-and-art/

Ugosample:


So tell me, what techniques do you use to determine the fair value of the fundamentally sound stocks, and you could also give me ten stocks YOU THINK are fundamentally sound stocks

your opinion

Thank you

We can discuss individual companies you are interested in. It will be great if you can share what you think about the companies as well.

bobbyL:


We can discuss individual companies you are interested in. It will be great if you can share what you think about the companies as well.

Nice

I'm looking mostly at the banks, because their stocks are very liquid, and they pay dividends on a regular

Dangote cement is also on my radar

Then two or three insurance companies

Ugosample:


Nice

I'm looking mostly at the banks, because their stocks are very liquid, and they pay dividends on a regular

Dangote cement is also on my radar

Then two or three insurance companies

They may be liquid but that has its negatives too.

Payment of dividends does not always mean much. Why pay out dividends if the retained earnings can be used to generate much greater returns in the future than would be available to the shareholder through other investments.

For banks, for me, risk management is highly important. Impairments can arise out of nowhere. For the smaller, weaker banks, it might be better to buy them only when the prices are so low, they are begging to be bought. And even then you want to be sure the bank will remain in existence.

Please read that Forbes article in the earlier post. I think it might be a a good approach for assessing banks.

Been a while. Had to focus on a few things.

Since then, the NSE has maintained it's decline over the calendar year. Investors, especially foreign, have largely chosen to remain on the NSE sidelines due to factors that likely include higher returns in advanced markets (US Fed hikes) and political uncertainty here in Nigeria.

"I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful."

But please, stick to your circle of competence and do not forget margin of safety.

In any case, if one lacks conviction of or cannot reasonably assess the suitability of an investment opportunity, it is better to put your funds in low risk short to medium term fixed income funds/investments until a suitable opportunity arises, than to be pushed into making unforced errors.

bobbyL:
Been a while. Had to focus on a few things.

Since then, the NSE has maintained it's decline over the calendar year. Investors, especially foreign, have largely chosen to remain on the NSE sidelines due to factors that likely include higher returns in advanced markets (US Fed hikes) and political uncertainty here in Nigeria.

"I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful."

But please, stick to your circle of competence and do not forget margin of safety.

In any case, if one lacks conviction of or cannot reasonably assess the suitability of an investment opportunity, it is better to put your funds in low risk short to medium term fixed income funds/investments until a suitable opportunity arises, than to be pushed into making unforced errors.

it's good to see you once again


I have my eyes on a few stocks, and I will be loading them regardless of the decline in prices


I'm sure when the time is right, I would reap bountiful

Interesting thread. Following to learn.

Investment opportunity still exist at AfriSurvey. See the link below for details.

https://www.nairaland.com/4758836/opportunity-invest-promising-tech-start-up

Ugosample:



it's good to see you once again


I have my eyes on a few stocks, and I will be loading them regardless of the decline in prices


I'm sure when the time is right, I would reap bountiful

Good to hear from you too.

Despite my inhibitions regarding advising on what stock to or not to buy, you can bring up particular companies from time to time and talk about why you think it might be a good investment; If I'm able to, I'll share my thoughts. However, as the market waits on nobody, if you have conviction and have done your work well enough, you can go ahead and make your investment and then talk about it after.

Ugosample:



it's good to see you once again


I have my eyes on a few stocks, and I will be loading them regardless of the decline in prices


I'm sure when the time is right, I would reap bountiful

I hope most of your funds aren't in a bank account yielding little or nothing.

Ugosample:



it's good to see you once again


I have my eyes on a few stocks, and I will be loading them regardless of the decline in prices


I'm sure when the time is right, I would reap bountiful

Do you also take advantage of the yields in the money market?

bobbyL:


Do you also take advantage of the yields in the money market?

I do


in fact, it is proceeds from money market I use to play in the NSE

Plus extra money

Plus the interest rates in Ghana are doing very well too, and the currency is stronger than naira, so I do some cross dealing

Beautiful thread, so educative, following back to back

Ugosample:



it's good to see you once again


I have my eyes on a few stocks, and I will be loading them regardless of the decline in prices


I'm sure when the time is right, I would reap bountiful

I seem to like your approach towards stock picks
What strategies do you use in picking your stocks

Good thread.

One of the most acclaimed books on value investing is "The Intelligent Investor" written by Benjamin Graham - widely regarded as the father of value investing. Here is a link to the e-book for those who are interested:

https://www.e-reading.club/bookreader.php/133361/The_Intelligent_Investor.pdf

I found chapter 20, which covers the concept of margin of safety, very educational. In any case, you will need to overlay "Nigerian factor" to some of the concepts in the book since our market is not as developed in terms of efficiency, liquidity etc.

When investing, always remember that it's not what you buy that is most important, it's what you pay. Good luck investing!

Ugosample:


I do


in fact, it is proceeds from money market I use to play in the NSE

Plus extra money

Plus the interest rates in Ghana are doing very well too, and the currency is stronger than naira, so I do some cross dealing

Nice one. Makes good sense. Another thing I learnt at least from a book called The Warren Buffet Way is to consider going longer into bonds if the returns are close to or rival what a satisfactory equity investment would give.

That currency bit is a bit tricky though. It might be worth more at the moment but it is what obtains when you need your money back that matters most. If the Naira appreciates relative to the Cedi, then you lose some of your money, if the Naira depreciates, you gain. But hey, if you adjudge that the returns in Ghana compensate adequately for the risk, or if the risk of a depreciation on the Naira seems higher than that of an appreciation in Ghana, it is reasonable. However, high interest rates may indicate that a currency should be weakening versus another currency with lower interest rates.

katamo:
Good thread.

One of the most acclaimed books on value investing is "The Intelligent Investor" written by Benjamin Graham - widely regarded as the father of value investing. Here is a link to the e-book for those who are interested:

https://www.e-reading.club/bookreader.php/133361/The_Intelligent_Investor.pdf

I found chapter 20, which covers the concept of margin of safety, very educational. In any case, you will need to overlay "Nigerian factor" to some of the concepts in the book since our market is not as developed in terms of efficiency, liquidity etc.

When investing, always remember that it's not what you buy that is most important, it's what you pay. Good luck investing!

Yeah. I think it is the first book I really read on investing. Good foundation on how to approach assessing the value of a company. Chapter 8 - The investor and market fluctuations is another fine chapter. Mr Market...

Although.... The books should be obtained legally.

bobbyL:


Nice one. Makes good sense. Another thing I learnt at least from a book called The Warren Buffet Way is to consider going longer into bonds if the returns are close to or rival what a satisfactory equity investment would give.

That currency bit is a bit tricky though. It might be worth more at the moment but it is what obtains when you need your money back that matters most. If the Naira appreciates relative to the Cedi, then you lose some of your money, if the Naira depreciates, you gain. But hey, if you adjudge that the returns in Ghana compensate adequately for the risk, or if the risk of a depreciation on the Naira seems higher than that of an appreciation in Ghana, it is reasonable. However, high interest rates may indicate that a currency should be weakening versus another currency with lower interest rates.

Yea

the Ghana currency is a bit more tricky because they don't run the konf of casino that Nigerian central bank runs (using dollars to defend cedis)

With a strengthening USD, it is telling on the cedi

but naira seems to be flat because of the casino (CBN)

Ugosample:



Yea

the Ghana currency is a bit more tricky because they don't run the konf of casino that Nigerian central bank runs (using dollars to defend cedis)

With a strengthening USD, it is telling on the cedi

but naira seems to be flat because of the casino (CBN)

Casino..

The floating matter... That's a discussion for another day. Macroeconomic indicators can be tough to predict, especially in the short term but making good investments helps weather the period turbulence.

Ugosample:



Yea

the Ghana currency is a bit more tricky because they don't run the konf of casino that Nigerian central bank runs (using dollars to defend cedis)

With a strengthening USD, it is telling on the cedi

but naira seems to be flat because of the casino (CBN)

The CBN has been increasingly active in the Investors' and Exporters' window. With elections a few days away, exchange rate is the last thing the government would want the electorate worried about.

https://www.forbes.com/global/2001/0820/036.html

A bit dated but interesting article nonetheless. Hopefully, we will have such arise from this country.

HAPPY NEW YEAR!!!

I stumbled unto this thread and its good to see like minded people particularly with value investing at heart...

Many regards...

Nice