Follow the Money: Investment options for Q4 2021

1 month ago 25

As the final three months of 2021 unfold, there are many things to watch out for in the investment space. The rebound from the March 2020 bottom has been even more impressive than investors thought when the Coronavirus-induced crash took place.

After posting a negative year-to-date return for most of the year, Nigeria’s stock market is already heading toward some form of positivity. For long-term investors, patience is paying off.

The Crypto market continues to be volatile in 2021, but Bitcoin remains the best performing asset in the past 9 months, among mature financial assets such as stocks and commodities. Bitcoin has gained 49.1% so far this year after a strong Q3 performance. Figures from this week indicate that the flagship cryptocurrency is up at least 13% for the year over commodities, and up 17% over US microcap companies. For hodlers of Bitcoin, the picture is even better than for some other investments. The European stock market, for example, is up just 10.3% year-to-date this week.

What are the experts projecting for the last quarter of 2021?

In exclusive interviews, selected experts expressed their views to Nairametrics on assets that are showing good fundamentals for the end of the year.

Adesoji Solanke Director Frontier / SSA Banks & FinTech Equity Research, Renaissance Capital

At GTCO (BUY, TP NGN41.5), we believe that margins and cost trends will drive 2H21 RoE recovery from its 10-year lows, with the former having bottomed out and the latter benefitting from full front-loading of Asset Management Corporation of Nigeria (AMCON) charges in 1H21. Regulatory processes are progressing positively for its new non-banking subsidiaries, and management would like to see these represent 30% of group PBT in the medium-to-long term.

Stronger NIR generation at FBNH (BUY, TP NGN9.8) has been instrumental in balancing out margin pressure. It is actively building an “electronic banking unicorn” through Firstmonie (117k agents plus wallet) which we value at $1.3 billion, c. 2x the group’s market cap. Management mentioned that it is exploring strategic considerations around Firstmonie, guiding to a potential announcement in October 2021.

Separately, the potential divestment of the group’s stake in Airtel Nigeria could boost Nigeria’s CAR by up to 2-2.5ppts on our calculations, depending on how realized proceeds are allocated by the group.

Access’ (BUY, TP NGN12.8) 1H21 results bucked the trend of declining margins, helped by strong growth in its investment portfolio, the attractive yield on these and lower funding costs, boosting returns. Holdco take-off should materialise in 2H22.

GTBank, FBNH and Access are trading at FY21E P/B of 0.9x, 0.3x, and 0.4x, for RoE of 23.1%, 8.9% and 20.4%, on our estimates.

Thelma Ugonna Ohiri-Anyanwu, CFA

With high inflation, increasing naira depreciation, my long-term investment horizon and moderate risk appetite, my investment choices are centred around real estate, strong fundamentals US stock, Nigerian stocks and Eurobonds. These investment classes provide inflation hedged, high returns and also provide me dollar cash flow to meet my future dollar needs.

One can also invest in Micro-lending debt notes and Agro-finance which have pretty good returns but be sure to do your due diligence before you invest.

Also, Christmas is approaching, you can rear or get someone to rear chicks for you against the upcoming holiday, you will be amazed at the return on investment you will be making.

Silas OZOYA, President/CEO, SUBA Capital

The last quarter of the year is when everyone starts to re-evaluate their year and plan for the coming year and this includes portfolio evaluation and budgeting.

What you invested in and what you want to invest in now against the incoming year.

In my opinion, I would suggest that investors consider investing against the first quarter of the year in sectors like agriculture, banking and FMCGs as these are the sectors that would have high consumer traffic during the festive and possibly have high share patronage and appreciation in the coming quarter. This is especially for quarterly dividends yielding assets.

Nathaniel Saleh Structured Finance Analyst, BCM Global.

For the last quarter, I decided to diversify my investment by acquiring $1000 in blue-chip stocks. Fortunately, I didn’t need to do much research as I had recently joined a boutique firm listed on the Australian securities exchange.

I bought into $LINK. This offers a dynamic capital model and is a dividend-yielding asset by design. Also went on to buy into Tesla (TSLA) simply because of its market performance from October 2020 to hitting a market peak in January/February 2021.

Lastly, against my better judgement I bought more Bitcoin as whispers of it hitting a record $70k in the coming weeks may influence market performance.

Modupe (Fatai-Oso) Ativie, African Lead (Global Blockchain Women Alliance)

My investment plan would always contain Ethereum, Cardano, Polkadot and Solana. I am one of those people who believe that even though BTC has the first advantage, Ethereum will eventually be bigger because of all the possibilities it brought to the application of blockchain technology.

Bottomline

In spite of the difficulty in identifying these trends, tuning out the noise can help reveal future developments, which can potentially lead to significant gains.

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