Recommended stocks earlier this year, See how they are performing
Imagine a seasoned investor, not just following the crowd, but seeing opportunities others miss. That’s the spirit behind what we’re about to explore. This isn’t just a recap of successful stock picks; it’s a deep dive into why these calls paid off, offering valuable lessons for anyone looking to understand the mechanics of the market.
This past quarter, our investment calls across various sectors didn’t just turn green—they exploded, validating a strategy built on meticulous research, keen timing, and an almost intuitive understanding of market “power plays.” Let’s break down the “how” behind these significant gains.
Understanding the Turnaround: The FirstHoldco Story
When we looked at FirstHoldco in April, many were hesitant. The stock was trading at N23.75, and sentiment was, frankly, mixed. But this is where the art of investing truly shines. We saw past the immediate noise and identified several crucial factors that signaled a coming re-rating:
Deep Undervaluation: The company’s true worth was simply not reflected in its stock price. This is often the first sign of a hidden gem.
Boardroom Dynamics: A shake-up at the leadership level can often unlock value, as new perspectives and strategies take hold.
Recapitalization Momentum: Financial restructuring, like recapitalization, signals a company strengthening its financial foundation for future growth.
Investors: The increasing involvement of a well-known figure like Femi Otedola wasn’t just celebrity news; it suggested smart capital was flowing in, often a precursor to significant movement.
These weren’t just isolated facts; they were interconnected pieces of a puzzle. When over 10.4 billion shares changed hands in a single transaction in July, it wasn’t just a big number—it was the market confirming our thesis. This kind of “power play” often sparks fresh speculation and sets the stage for a strategic reset, especially in a post-leadership change era. The lesson here? Look beyond the headlines for the underlying fundamental shifts and the significant capital movements that signal true conviction.
The Power of Patience and Prospects: Nestlé Nigeria Plc
Our call on Nestlé Nigeria Plc in June, predicting a climb to N3,000 from N1,500, might have seemed ambitious. Today, at N1,800, it’s already up 20% since our call, and significantly year-to-date. What’s the educational takeaway?
It’s about future earnings potential and understanding how quickly a company can turn its fortunes around. Nestlé’s first-quarter earnings per share (EPS) reversed a previous loss, pointing to a potential full-year EPS that makes its valuation much more appealing. This illustrates the importance of:
Analyzing Earnings Reversals: A shift from loss to profit, especially with strong growth, is a powerful indicator of operational improvement.
Forward-Looking Valuation: While a high trailing P/E ratio might seem daunting, anticipating future earnings allows you to project a more reasonable forward P/E, revealing true value.
Even with a substantial gain, there’s still significant upside to our target, highlighting that early identification of a positive earnings trajectory can lead to sustained growth.
Unearthing Hidden Value: Custodian Investment Plc and Beta Glass
The stories of Custodian Investment Plc and Beta Glass are textbook examples of finding value where others might not be looking. Custodian, even after a 74% year-to-date rally, still shows metrics like a sub-5 P/E and a P/S under 1. This tells us:
Valuation Ratios Matter: Low Price-to-Earnings (P/E) and Price-to-Sales (P/S) ratios often indicate a company is undervalued relative to its performance.
“Buy Low, Ride the Upside”: This classic strategy requires patience and conviction, but the rewards can be substantial.
Beta Glass is another incredible lesson. When we first flagged it at N86, it traded at a P/E below 5. Today, at N333.95, it’s up over 400% year-to-date, with its P/E re-rated to 9.03. This massive gain teaches us about:
The Power of Re-rating: When a company’s true value is recognized by the market, its valuation multiples can expand significantly.
Fundamental Strength as a Foundation: Even with a rally, if earnings remain solid and investor interest grows, there’s a strong chance for continued performance.
These cases underscore that deep fundamental analysis can uncover stocks poised for significant re-rating, offering impressive returns for those who identify them early.
Riding the Recovery and Tactical Opportunities: Tesla, Fidelity Bank, MTN Nigeria, and Lafarge
These next examples highlight different facets of astute investing:
Tesla’s Rebound ($300 Signal Paid Off): This wasn’t about finding an undervalued stock, but recognizing that a temporary dip, driven by “political drama and investor jitters,” didn’t undermine the long-term thesis. For investors, this is a lesson in distinguishing between temporary noise and fundamental shifts. If the core story remains intact, a dip can be a prime buying opportunity.
Fidelity Bank’s Resilient Performance: Despite a N14 billion Supreme Court judgment that spooked some investors, our analysis identified that the bank’s fundamentals were strong enough to absorb the hit. The quick recovery to N20.85 (a 20% gain) teaches us about assessing the true impact of negative news and understanding a company’s financial resilience.
MTN Nigeria’s Tactical Buy: Our April call on MTN at N250, targeting N300, saw it soar to N400. This success was rooted in focusing on profit momentum, strategic price hikes, and operational restructuring when others were still wary of past losses and looming capital raises. It’s a testament to the power of identifying a clear path to recovery and operational efficiency.
Lafarge’s “Pouring Concrete Profits”: Calling Lafarge a buy below N90, with a N120 year-end target, was simple but effective. The bullish thesis rested on surging profits, a clean balance sheet, and a bold interim dividend. This exemplifies how clear, positive financial signals, combined with investor incentives like dividends, can drive rapid re-ratings.
The Core Lessons: What Smart Investing Really Means
This past season has been a masterclass in several key investment principles:
Deep Fundamental Analysis: Don’t just look at prices; understand the underlying business, its financial health, and its future prospects.
Reading the “Power Plays”: Recognize when significant capital is moving, when boardroom changes are happening, or when major investors are taking positions. These aren’t random events; they are strategic maneuvers.
Timing and Conviction: Knowing when to enter (and exit) a position is crucial. But equally important is having the conviction to stick with your thesis even when sentiment is mixed or negative.
Identifying Undervaluation and Re-rating Potential: The biggest gains often come from finding companies whose true worth isn’t yet recognized by the broader market.
Distinguishing Noise from Fundamentals: Don’t let short-term news or market jitters distract you from a strong long-term investment thesis.
Ultimately, these successes aren’t about luck; they’re about a systematic approach to identifying opportunities, understanding the forces at play, and having the conviction to act.
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