How I Analyse Insurance Stocks Using Companies Financial Statement Like Profit or Loss, Balance Sheet (Financial Positions) And Cashflow - Top Financial Ratios to Find Best Insurance Companies Stocks In Nigeria

I had a conversation with a friend, this guy loves penny stock so much that he doesn't trade stocks that sell above N10 per share. Besides, most of the penny stocks he bought early this year have earned him double-digit return.

I always tell him that I love his confidence when it comes to picking penny stock but you know his major concern? His least performing stocks are insurance companies, while the banking stocks are doing well on a year-to-date return basis YTD), the insurance stocks are underperforming compared to the overall sector index.

The insurance sector is up by 9.5% year-to-date which isn't impressive when compared to the other indices. As of this writing, the NSE insurance sector, after a 5-day fall, is forming a pin bar at the 20 moving average line, a signal that shows the end of a downtrend.

The truth is this, Insurance is the most difficult financial products to sell in Nigeria and if you really want to invest in the sector, you need to find companies that are really making consistent profits, highly efficient and are generating healthy cash flow.

How then can one pick good insurance stocks to buy?

My simple guide to picking great insurance stocks to focus on the best-performing company in the sector, the usual way of analysing the strongest sector isn't applicable as the sector had always been behind its peers for a long time, a reason not to even give it a shot. Take a look at the 5-year performance, 5-9% is low compared to the banking, industrial, healthcare and even the overall market index, so why would you still take the risk of buying stocks in the insurance sector? The only reason is the opportunity to cash out from penny stocks. When you buy into a big cap stock like Zenith bank, a 50k increase might not necessarily make much money compared to the result of a 50K gain on a penny stock. Why? the low price per share of penny stocks make larger volume purchases easy, hence offers better opportunities to cash out faster. Insurance sector offers more penny stocks than others.

More details here - http://nigerianstockstobuy.com/how-i-analyse-insurance-stocks-companies-financials/

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