One main question that investors the world over would appreciate a simple straightforward answer to is; “How do I know what to go for and when”. Unfortunately, there is no clear-cut answer to this question. Brokers usually have a list of recommend shares ranked under a time or risk continuum. This is normally quite general. The decision on the shares to invest in should take into consideration a number of factors against which you as the investor should then identify those stocks that fall into this criterion from the recommended list or even explore other unrecommended options.
Cash Outlay
Shares identification will largely depend on whether you are bringing in a lump sum amount or you plan on Drip-feeding you trading account. A lump sum approach enables you as the investor to spread out your funds over a number of counters in different industries thus diversifying your risk. It also gives you a chance to balance out your portfolio down the risk reward and investment horizon gamut.
Drip-feeding implies that you will be putting in a certain amount over certain intervals such as monthly or quarterly or uneven intervals. One of the main things that make investing in the stock Exchange stand out from other investment channels is the relatively low entry requirement. With a 100 minimum shares requirement, you can start out with as low as Kshs. 10,000 and gradually build up your portfolio. There are two strategies you can use to build your portfolio with drip-feeding approach;
1- Buy a few shares in a number of counters, and then keep adding the shares in these counters with every subsequent funds input until the shares in those counters hit your target.
2- Buy a substantial amount of shares in a single counter with each funds input.
In my opinion, option 2 has a better result. Buying a substantial amount makes you appreciate capital gains much better. If you for example buy 100 shares of three different counters and each goes up by Kshs. 10, this translates to a Kshs. 3,000 profit. If on the other hand you decide to go for 1,000 shares of a single counter and the price appreciates by Kshs. 5, you reap a Kshs. 5,000 profit. The strategy also gives you a chance to analyze the market with every outlay as you identify the potential counters at each investment point.
Investment Horizon
Stocks to invest in will also depend on the amount of time you wish to have the funds in the market. As mentioned in one of my earlier articles, please do not take funds that will be required within the year into stocks. For any funds required within the year, the 91-day and 182 day Treasury bond should be considered. Funds that can be invested for anything above a year can then be balanced between stocks and bonds. The balance will depend on the third factor, the risk Threshold.
Risk Threshold.
This is quite personal since only you can tell how strong your heart is to absorb loss shocks, as this is bound to happen, and how much of this loss you can absorb. If you are a risk taker, then you can go for an equity filled portfolio, and even experiment with risky stocks, if you are a risk averse, your portfolio should then capture less risky counters and could also be padded with some Treasury bonds.
Based on your personal analysis of these factors, you can now pick out a portfolio balance that best suits you and your requirements.
MARKET REVIEW
Investors and potential investors on the Kenyan Stock Market seem to be having a lot on their table with regards to where to put there funds and how split it to ensure a piece of everything. What with the Kenya Re IPO expected in the first quarter of Year 2007, Mumias Sugar Public offer of the governments 18% holding also expected over the first quarter, and a number of other companies having expressed their interest in listing their shares. Looks like Kenyans will be quite busy over the coming year as the market rivals the political arena in getting top attention.
Strong results trickling into the bourse are adding to the dilemma as the prices soar higher despite the rising Treasury bill rates currently at 8% on the 182 day Treasury bill and 6.7% on the 91-Day Treasury bill.
Kenya Power reflected a 29.4% appreciation in net profits on the end year results released yesterday, 28th September 2006. and attributed this largely to increased fuel costs recovery. These results came soon after Kengen’s strong results release, which saw the share price hit a Kshs. 36.75 on yesterday’s trading. Unga Group recorded a second consequent year on profits albeit much lower than over the previous year at Kshs. 36 mn. Down from the previous years Kshs. 72.5mn. The decline was attributed to an adverse effect by the avian flu scare on the animal health and nutrition business.
Uchumi also seems to be reaping the fruits of all the efforts its management have been putting into waking the wounded giant. Reports show that the supermarket’s sales now exceed Kshs. 200 mn. Per month, an impressive 87% increase over the same period last year, while earlier closed branches are gradually being re-opened. Even the sleeping Sameer is now stirring to life as it’s price, which had dropped to a low of Kshs. 13 now playing at around Kshs. 18.
With almost everything seeming to shine in the limelight of success, there is just no telling where the market is headed to and how long it will take to reach there.
Friday, September 29, 2006
DETERMINING STOCKS TO INVEST IN
Monday, September 25, 2006
UNDERSTANDING MARKET TRENDS
Investors usually ask about a possible trend in the market that could assist them identify market low points at which to put in their funds in the market, and market highs where they can then exit with maximum gains. While the market doesn’t always follow expected market trends, identifying the main factors behind significant price movements could give a certain indication of possible market trends.
Result Release
Anticipation of company interim and final releases usually has an impact on company prices. In cases where a company is expected to release strong results, the prices usually commence a gradual appreciation a while before the results are released. Once the results are released into the market, the price movement will depend on the results and any corporate action declared. The price movement may turn around if the released results are weaker than expected, or maintain the upward trend if results are stronger than expected. In some cases however, the price has factored in the expected performance by the time of the release such that the price does not gain significantly after the release regardless of any dividend or bonus declaration.
A majority of listed companies including all banks and most industrial counters close their years in December. Other companies full under March, June or September. Results usually received in the market 2 to 3 months after the interim or final period closure.
Other information Released in the market
Other information received on the bourse and not relating to the company performance may have a significant impact on the price movement. Government decisions that may have an impact on company performance such as the debt equity swap on KPLC or the budget cash boost announcement on NBK both saw the share prices gain by leaps. Last years Government decision to go for concrete roads resulted cement share price boost while the decision on the recent KPLC / Kengen tariff wrangle had a buoying effect on KPLC share price.
Information on market expansion like the one Kenya Airways has rode on over the last 4 years, product diversification, mergers, acquisitions and significant management changes may all have an impact on share price movement. There is no document that could keep an investors equipped with or anticipate such information. Investors just need to keep abreast with general business news.
There are points where the market is completely dry of information in the absence of any releases or news. At such points, prices may remain unmoved unless there is a third factor playing on the market.
Market Liquidity
Investors have a choice of channels through which they can invest their funds the main equity competitors being the bank, government bills and bonds and corporate bonds. At points where the gains on these other channels are just too low, investors opt to take their funds to the stock exchange which promises a better return. This results in increased liquidity in the market, and a heightened demand for shares. With this comes an unbridled share price appreciation as investors continue piling up funds on to the market. This appreciation may continue for as long as the liquidity environment remains, and may only be interrupted by a gains realization improvement on the bills and bonds, the onset of an IPO or a significant political adjustment.
The bourse poses a potential for gains at all times since, there is always either a company releasing their result, or other information being received in the market or just an enabling environment. Investor thus need to analyze the market at every point of entry in order to identify the most potential stocks based on the factors in play at that particular point.
MARKET REVIEW
The bull seems to have reduced its pace over the week to Friday 22nd September. Loosing counters were slightly more than the gaining ones, and the appreciations were much smaller than those captured over the previous weeks. Most of the counters that had enjoyed strong gains succumbed to profit taking and closed the week lower.
National Bank captured the largest decline having lost 17% over the week to close at Kshs. 55.50. E.A Cables hit a low of Kshs 61 over the wekk but then picked up to close the week at Kshs. 67.50, 12.34% below last week’s Kshs. 77 close. Equity shed 10% to close at Kshs. 118 while ICDC edged down 9.5% to close at Kshs. 239. Jubilee maintained its appreciation to a Kshs. 188 week close, 12% above the previous week’s close.
Result Release
Anticipation of company interim and final releases usually has an impact on company prices. In cases where a company is expected to release strong results, the prices usually commence a gradual appreciation a while before the results are released. Once the results are released into the market, the price movement will depend on the results and any corporate action declared. The price movement may turn around if the released results are weaker than expected, or maintain the upward trend if results are stronger than expected. In some cases however, the price has factored in the expected performance by the time of the release such that the price does not gain significantly after the release regardless of any dividend or bonus declaration.
A majority of listed companies including all banks and most industrial counters close their years in December. Other companies full under March, June or September. Results usually received in the market 2 to 3 months after the interim or final period closure.
Other information Released in the market
Other information received on the bourse and not relating to the company performance may have a significant impact on the price movement. Government decisions that may have an impact on company performance such as the debt equity swap on KPLC or the budget cash boost announcement on NBK both saw the share prices gain by leaps. Last years Government decision to go for concrete roads resulted cement share price boost while the decision on the recent KPLC / Kengen tariff wrangle had a buoying effect on KPLC share price.
Information on market expansion like the one Kenya Airways has rode on over the last 4 years, product diversification, mergers, acquisitions and significant management changes may all have an impact on share price movement. There is no document that could keep an investors equipped with or anticipate such information. Investors just need to keep abreast with general business news.
There are points where the market is completely dry of information in the absence of any releases or news. At such points, prices may remain unmoved unless there is a third factor playing on the market.
Market Liquidity
Investors have a choice of channels through which they can invest their funds the main equity competitors being the bank, government bills and bonds and corporate bonds. At points where the gains on these other channels are just too low, investors opt to take their funds to the stock exchange which promises a better return. This results in increased liquidity in the market, and a heightened demand for shares. With this comes an unbridled share price appreciation as investors continue piling up funds on to the market. This appreciation may continue for as long as the liquidity environment remains, and may only be interrupted by a gains realization improvement on the bills and bonds, the onset of an IPO or a significant political adjustment.
The bourse poses a potential for gains at all times since, there is always either a company releasing their result, or other information being received in the market or just an enabling environment. Investor thus need to analyze the market at every point of entry in order to identify the most potential stocks based on the factors in play at that particular point.
MARKET REVIEW
The bull seems to have reduced its pace over the week to Friday 22nd September. Loosing counters were slightly more than the gaining ones, and the appreciations were much smaller than those captured over the previous weeks. Most of the counters that had enjoyed strong gains succumbed to profit taking and closed the week lower.
National Bank captured the largest decline having lost 17% over the week to close at Kshs. 55.50. E.A Cables hit a low of Kshs 61 over the wekk but then picked up to close the week at Kshs. 67.50, 12.34% below last week’s Kshs. 77 close. Equity shed 10% to close at Kshs. 118 while ICDC edged down 9.5% to close at Kshs. 239. Jubilee maintained its appreciation to a Kshs. 188 week close, 12% above the previous week’s close.
Thursday, September 21, 2006
MARKET “DOS”
A large number of potential investors shy away from the market citing that it is just too complicated for their comfort. Many are completely lost as the news anchor gives an update of the day’s market performance using words that sound somewhat complex for the lay man.
The Stock market is however just like any other market but with the commodity on sale as shareholding in listed companies. It has buyers and sellers like in any other market and prices are driven by the supply and demand balance just like any other market.
In order to wipe this "complicated" notion, one should;
Know the Market Lingua
The main words that make the market sound convoluted are those that give a general description of the market, and those that describe the trading status of the counters.
Market performance and movement is generally described by the Day’s turnover, the market capitalization and the Index. Market turnover captures the worth of the shares transacted by computing the number of shares traded on a particular counter at the days trading price. This is then added up to give the total market turnover. Market capitalization captures the market worth by computing the total issued shares at the days trading price per company, a summation of which gives the total market capitalization. The index is a measure of market movement. The market has identified 20 active counters whose percentage price movement is calculated on a daily basis.
Trading status is described by an ex or cum status of company following a corporate action. Shares purchased at cum status implies that the investor qualifies for corporate action while an ex status implies that the investor does no qualify.
Corporate actions include dividends distribution, where the company shares profits with shareholders, Bonus, where the company distributes bonus shares at a certain rate to shareholders, rights, where the company sells additional shares to shareholders at a certain rate and at a discounted price, and Splits, where a companies shares are split at a certain rate like the one recently done on E.A Cables.
Understand the price list
The pricelist is the document that translates the market performance on a daily basis and is the document that the bourse uses to report the day’s happenings. The price List is divided into the different market sectors and captures the following information;
-Each company’s 12 month high and low, that is, the highest and lowest price that the shares have traded over the last 12 months. This is adjusted any time the price hits a new high or low.
-The company’s trading status following the Announcement of a corporate action
-The highest and lowest price that the shares traded at on the day’s trading
-The average trading price for the day which is a weighted average of the different prices captured on the counter.
-The previous day’s average price
-The number of shares that changed hands over the trading period
-The fixed income section
-The day’s general performance including the Index, Market cap and Market Turnover
-Recent announcements, corporate actions and effective dates
The pricelist analyses he market on a daily basis and is thus a very important tool for any market participant.
Learn how to interpret company announcements
Each company releases the half and end-year performance at least two or three months after the end of the reporting period. All banks and some industrial and commercial counters report as frequently as quarterly. The reports usually outline the company’s performance over the period in review, a summary of reasons attributed to this performance, any corporate action declared by directors, management outlook on the coming period.
You thus need to know companies reporting periods and approximate time that companies release their results as this is one major driver of the demand /supply balance on the market. You also need to be able to interpret the released results, and analyze this against the previous comparable period. This way, you get to understand the company better and even compare its performance with other companies in the industry.
Visit the trading floor
If you are within the proximity of the Stock Market, make a point of visiting and spending a few minutes watching the trading taking place. Being there as the action takes place helps you get a feel of what really happens on the market. If you had already paid a visit in the just ended open outcry environment, then make a point of visiting in the new automated environment and watch the prices match.
Monday, September 18, 2006
MARKET “DO NOTS”
Every operational environment develops some unwritten rules that work along side the formally written rules to assist in smoothing out performance.
Over time, market players have also developed some informal ‘dos’ and ‘donts’ to help facilitate the growth of their portfolios.
While these rules may not have similar results in different circumstances, a number of practices should be avoided in whatever circumstance.
Avoid Speculation
Speculation basically means investing on rumors and is a relatively controversial area given that a number of investors have put in funds on certain counters and made some good gains. Investing on rumors is quite unstable and exposes such an investor to high amounts of risk.
Aim instead at investing against well researched company fundamentals, the company’s growth prospects, future outlook among other basic factors that help determine the strength and possible future performance of the company. This way, there are concrete reasons against which you determine the counters to put your money into and much as there is a level of risk in any such investment venture, the level is much lower as compared to speculative investing.
You should only indulge in speculation at the point where you have built a well balanced and large portfolio such that you can curve out a certain percentage for speculation, and leave enough to comfortably land on should speculation lead to losses.
Avoid Short Term Investing
Avoid bringing to the market funds that all be needed as soon as three or six months after investment such that any slight decline on the price puts you in a panic. Short term investing only forces you to speculate since at that point you are looking for a company whose shares will be moving up over that time. As earlier noted, it is practically impossibly to determining with absolute certainty which shares prices will be moving up over a certain period of time and to what levels. A price ,ay be on an upward trend over a week then turn around and commence a decline, and there is nothing as bad as being caught in an exit race of a plummeting counter.
Aim instead to invest funds that are currently surplus and will not be required for at least a year. That way, you will appreciate but be in no pressure for immediate growth, you make sober and informed decisions based on fundamentals and greatly reduce your risk exposure. For any shorter term investment, then go instead for treasury bills.
Avoid leaving your Portfolio to your broker’s discretion
Money is a hard earned commodity and in most cases a lot of sweat, time and a large number of other resources are put into it’s realization. Should you decide to put your money in a bank account, then you are fully aware of the charges and interest rate earned. The same goes for investment in bills and bonds. These are fixed income securities that expose you to very little risk and as such you can afford to sit back and wait for your annual or semi-annual interest.
On the other hand, to invest your funds in stocks, considering the risk exposure and price volatility, and leave it to someone’s discretion is a strong “do not”. Only you know the sweat that has gone into its acquisition, and only you know the magnitude of appreciation with every shilling increase on our portfolio worth. Ask for as much advice as you wish, seek for recommendation on a daily basis, call your broker every so often but do not leave the final decision to someone else.
The situation in the country right now is that we have too few service providers and too many people requiring the services, and the number is increasing with every IPO as awareness increases. Brokerage houses are thus overwhelmed which makes it quite difficult for them to follow up your discretionary account as you would wish for it to be done.
MARKET REVIEW
The bourse maintained a strong price appreciation over the week ended 15th September 2006 Only 10 of the active counters captured declines, the largest being on Equity which slid down to close at Kshs. 77 23% below the week’s opening Kshs. 100. All other declines were quite low relative to the appreciating counters.
ICDC captured the highest appreciation, up 46.7% to close at an all time high of Kshs. 264. National Bank edged up 33.7% to close at Kshs. 66.5 while Standard Group closed 29%higher at Kshs. 55.50. Sasini Tea was the highest climber on the Agricultural sector, up 31% to Ksh.50.50. Commercials saw CMC close 25.6% higher at Kshs. 125 while Kenya Airways gained 9% to close at Kshs. 124.
Over time, market players have also developed some informal ‘dos’ and ‘donts’ to help facilitate the growth of their portfolios.
While these rules may not have similar results in different circumstances, a number of practices should be avoided in whatever circumstance.
Avoid Speculation
Speculation basically means investing on rumors and is a relatively controversial area given that a number of investors have put in funds on certain counters and made some good gains. Investing on rumors is quite unstable and exposes such an investor to high amounts of risk.
Aim instead at investing against well researched company fundamentals, the company’s growth prospects, future outlook among other basic factors that help determine the strength and possible future performance of the company. This way, there are concrete reasons against which you determine the counters to put your money into and much as there is a level of risk in any such investment venture, the level is much lower as compared to speculative investing.
You should only indulge in speculation at the point where you have built a well balanced and large portfolio such that you can curve out a certain percentage for speculation, and leave enough to comfortably land on should speculation lead to losses.
Avoid Short Term Investing
Avoid bringing to the market funds that all be needed as soon as three or six months after investment such that any slight decline on the price puts you in a panic. Short term investing only forces you to speculate since at that point you are looking for a company whose shares will be moving up over that time. As earlier noted, it is practically impossibly to determining with absolute certainty which shares prices will be moving up over a certain period of time and to what levels. A price ,ay be on an upward trend over a week then turn around and commence a decline, and there is nothing as bad as being caught in an exit race of a plummeting counter.
Aim instead to invest funds that are currently surplus and will not be required for at least a year. That way, you will appreciate but be in no pressure for immediate growth, you make sober and informed decisions based on fundamentals and greatly reduce your risk exposure. For any shorter term investment, then go instead for treasury bills.
Avoid leaving your Portfolio to your broker’s discretion
Money is a hard earned commodity and in most cases a lot of sweat, time and a large number of other resources are put into it’s realization. Should you decide to put your money in a bank account, then you are fully aware of the charges and interest rate earned. The same goes for investment in bills and bonds. These are fixed income securities that expose you to very little risk and as such you can afford to sit back and wait for your annual or semi-annual interest.
On the other hand, to invest your funds in stocks, considering the risk exposure and price volatility, and leave it to someone’s discretion is a strong “do not”. Only you know the sweat that has gone into its acquisition, and only you know the magnitude of appreciation with every shilling increase on our portfolio worth. Ask for as much advice as you wish, seek for recommendation on a daily basis, call your broker every so often but do not leave the final decision to someone else.
The situation in the country right now is that we have too few service providers and too many people requiring the services, and the number is increasing with every IPO as awareness increases. Brokerage houses are thus overwhelmed which makes it quite difficult for them to follow up your discretionary account as you would wish for it to be done.
MARKET REVIEW
The bourse maintained a strong price appreciation over the week ended 15th September 2006 Only 10 of the active counters captured declines, the largest being on Equity which slid down to close at Kshs. 77 23% below the week’s opening Kshs. 100. All other declines were quite low relative to the appreciating counters.
ICDC captured the highest appreciation, up 46.7% to close at an all time high of Kshs. 264. National Bank edged up 33.7% to close at Kshs. 66.5 while Standard Group closed 29%higher at Kshs. 55.50. Sasini Tea was the highest climber on the Agricultural sector, up 31% to Ksh.50.50. Commercials saw CMC close 25.6% higher at Kshs. 125 while Kenya Airways gained 9% to close at Kshs. 124.
Thursday, September 14, 2006
STRATEGIC POSITIONING FOR MAXIMUM GAINS
Just like in any other venture, especially one that involves money, it is only wise to have a strategy that enhances your chances to see your funds grow. Whenever you invest funds, you are delaying immediate consumption of the funds with the hope that at the point where you will choose to redeem the invested funds, they will be worth much higher than it was at investment point.
In order to position yourself for such hoped for gains, you need to adopt a number of strategies;
Get to understand the market
When getting into the market, make a point of visiting an investment advisor. Get to ask all you would wish to get to know about the market. Get to understand how prices move and what moves them, market trends, understanding the pricelist, get to know the market players and their different roles and appreciating the lingua. You will be putting your hard earned money into the stock and the worst thing would be to get into something you do not understand.
Information seeking is not unique to a new market entrant. Market participants should continue seeking relevant information through out their investment journey in order to ensure that they are making informed investment decisions at every point of their journey.
Wisely identify shares to invest in
Based on the information acquired you can now identify the shares to invest in. this will largely depend on a number of factors including;
§ The amount of funds being invested – are you investing a one off lump – sum or drip feeding your account with small but frequent deposits
§ The investment Horizon – How long are you looking to have the funds in the market
§ The risk threshold – What level of risks are you ready to take
Brokers, investment advisors and agents usually have a list of recommended shares at each point and, depending on your standing on the identified factors, you can then pick out what to go for.
Set Investment Targets
Determine a certain percentage that you would wish to earn on invested funds against which you will follow the growth of your funds. This should not be a fixed target but instead should only guide you on your investment growth. Should you then hit the target and the price is still uphill, then the wise thing to do would be to continue reaping from the appreciation. Remember however that it is completely impossible to tell with absolute certainty the point at which a price turnaround will be captured, and managing to sell at the highest point of a turn around is pure luck.
Do not hold out waiting for the price to continue appreciating only to have the price turnaround and start a quick slide as it usually happens once other shareholders get the panic sale syndrome.
Follow up on your investment
Once you put funds in any of the listed companies on the Stock Exchange you become a part owner of the company and as such, any information on the company being received on the market should concern you. Find out the company’s result announcement date, analyze the company’s performance against the previous period and other companies in the industry and follow up on the price movement.
Keep in constant touch with your broker or investment adviser. This way, you will be able to follow up on market support on your stocks and chances of possible price turnarounds and thus cash in on good entry and exit points.
MARKET REVIEW
The bourse is still grappling with teething problems after the implementation of the Automated Trading System as it witnessed delayed trading commencement and erratic price movements. Investors should now be cautious when putting in orders especially those being place at market rate and should seek proper guidance from their brokers when placing orders.
On the general price movement, Sasini has continued its appreciation having closed at Kshs 45, Kshs. 4 above the previous day’s price. Kenya airways regained its Kshs. 120 trading level as it averaged Kshs. 121. ICDC edged deeper into the Kshs.200 level to close at Kshs. 219 while Equity bank regained its appreciation to close a Kshs. 139. Bamburi maintained its gradual appreciation as it closed Kshs. 8 shy of Kshs 200, while E.A Cables slipped backwards Kshs. 94.50.
PERFORMANCE ANALYSIS
Mumias Sugar released their financial results for the year ended 30th over this week. The results reflected an 18.2% appreciation in net profit performance to a Kshs. 1.53 bn. up from the previous years Kshs. 1.3 bn. while net sales were up 15.6% to Kshs. 11.7 bn.
Directors proposed a final dividend of Kshs. 1.00 per share. This, when added to the earlier distributed interim dividend of Kshs. 0.75 brings the total dividend for the year to Kshs. 1.75, which is covered 1.7 times by the Kshs. 2.99 earnings per share.
The current trading price of Kshs. 58 puts the dividend yield at 3.02%. The company has a relatively high Pe ration of Kshs. 19.4 but well below the market average of 25.642 and the industry average of 25.22.
In order to position yourself for such hoped for gains, you need to adopt a number of strategies;
Get to understand the market
When getting into the market, make a point of visiting an investment advisor. Get to ask all you would wish to get to know about the market. Get to understand how prices move and what moves them, market trends, understanding the pricelist, get to know the market players and their different roles and appreciating the lingua. You will be putting your hard earned money into the stock and the worst thing would be to get into something you do not understand.
Information seeking is not unique to a new market entrant. Market participants should continue seeking relevant information through out their investment journey in order to ensure that they are making informed investment decisions at every point of their journey.
Wisely identify shares to invest in
Based on the information acquired you can now identify the shares to invest in. this will largely depend on a number of factors including;
§ The amount of funds being invested – are you investing a one off lump – sum or drip feeding your account with small but frequent deposits
§ The investment Horizon – How long are you looking to have the funds in the market
§ The risk threshold – What level of risks are you ready to take
Brokers, investment advisors and agents usually have a list of recommended shares at each point and, depending on your standing on the identified factors, you can then pick out what to go for.
Set Investment Targets
Determine a certain percentage that you would wish to earn on invested funds against which you will follow the growth of your funds. This should not be a fixed target but instead should only guide you on your investment growth. Should you then hit the target and the price is still uphill, then the wise thing to do would be to continue reaping from the appreciation. Remember however that it is completely impossible to tell with absolute certainty the point at which a price turnaround will be captured, and managing to sell at the highest point of a turn around is pure luck.
Do not hold out waiting for the price to continue appreciating only to have the price turnaround and start a quick slide as it usually happens once other shareholders get the panic sale syndrome.
Follow up on your investment
Once you put funds in any of the listed companies on the Stock Exchange you become a part owner of the company and as such, any information on the company being received on the market should concern you. Find out the company’s result announcement date, analyze the company’s performance against the previous period and other companies in the industry and follow up on the price movement.
Keep in constant touch with your broker or investment adviser. This way, you will be able to follow up on market support on your stocks and chances of possible price turnarounds and thus cash in on good entry and exit points.
MARKET REVIEW
The bourse is still grappling with teething problems after the implementation of the Automated Trading System as it witnessed delayed trading commencement and erratic price movements. Investors should now be cautious when putting in orders especially those being place at market rate and should seek proper guidance from their brokers when placing orders.
On the general price movement, Sasini has continued its appreciation having closed at Kshs 45, Kshs. 4 above the previous day’s price. Kenya airways regained its Kshs. 120 trading level as it averaged Kshs. 121. ICDC edged deeper into the Kshs.200 level to close at Kshs. 219 while Equity bank regained its appreciation to close a Kshs. 139. Bamburi maintained its gradual appreciation as it closed Kshs. 8 shy of Kshs 200, while E.A Cables slipped backwards Kshs. 94.50.
PERFORMANCE ANALYSIS
Mumias Sugar released their financial results for the year ended 30th over this week. The results reflected an 18.2% appreciation in net profit performance to a Kshs. 1.53 bn. up from the previous years Kshs. 1.3 bn. while net sales were up 15.6% to Kshs. 11.7 bn.
Directors proposed a final dividend of Kshs. 1.00 per share. This, when added to the earlier distributed interim dividend of Kshs. 0.75 brings the total dividend for the year to Kshs. 1.75, which is covered 1.7 times by the Kshs. 2.99 earnings per share.
The current trading price of Kshs. 58 puts the dividend yield at 3.02%. The company has a relatively high Pe ration of Kshs. 19.4 but well below the market average of 25.642 and the industry average of 25.22.
Tuesday, September 12, 2006
VOICE OF CAUTION
I have been in the Kenyan shares investment industry for a number of years within which I witnessed some investors gain immensely, others loose and some maintain a stagnant value. Stock markets the world over offer investors a chance to grow their funds, but also expose investors to some level of risk.
The recent roll-out of IPOs on the Exchange and the current bull run have left investors, new to the market, blindly believing that IPOs are a sure rip, and the market is perpetually on a bullish trend. Kengen and Scangroup IPOs were both a whooping success with both of them being grossly oversubscribed, and Kengen’s price more than tripling on its entry into the market. Equity Bank’s introduction into the market saw the price more than double on its initial trading day.
While the Stock market may look like an easy place to make money, this is not necessarily always the case. There is a need for level-headedness and a lot of caution on the Stock Exchange dealings and investors, especially those new to the market need to put the following pointers at hand when going into this investment sea.
Reward and Risk
An investor who purchased a modest 1,000 Kenya Airways shares at the beginning of years 2005 parted with approximately Kshs. 20,000. 1 year down the line, this investor is worth approximately Kshs. 115,000, translate to a 575% capital gain over a single year. An E.A. Cables share-holder would have a much better story to tell, especially if the shares were purchased as recently as last year when the share traded at a low of Kshs. 65. The company has captured an unbridled shares price appreciation since the 10 to 1 shares split announcement. Currently trading at Kshs. 103, translating to Kshs. 1,030 before the split, this shares-holder would thus be boasting of a crazy 1485% profit.
The story is not the same however for any Uchumi Supermarket share holder. The suspension of this formally quite active stock on the NSE resulted in the sinking of millions of investors funds. The market has an investor compensation fund that mitigates against market related risks such as the folding up of a brokerage company. Uchumi’s suspension however falls under Industry risk which is completely bore by the investor.
Investors thus need to appreciate the two side of the investment coin and bear this in mind as they commence this investment journey.
Market Correction
The market always experiences a market correction after a bullish run as investors lock in on capital gains or prices reaches uncomfortable levels.
Market prices are swayed by the supply/demand balance, and a Bull Run results from an overweight on the demand side. A point reaches however where shareholders, especially those who may have bought the shares at a much lower price, want to cash in on the gains, thus increasing supply in the market. The price may also shoot to levels where investors feel is too high to purchase and pull out, thus reducing demand for the share. This usually causes a turnaround on the share price trend to a decline.
Price Turnaround Points
All investors get into the market with the hope of buying share at their lowest point and selling at the highest point of a possible bull cycle. It is however completely impossible to tell at what point a price trend will turn around from decline to appreciation and vice versa. These points are the hardest to hit and no analyst can tell with complete certainty at what point a price will bottom out for perfect purchase, or hit the roof for a perfect sale. Managing to hit these points is pure luck, and waiting to hit these points can be disappointing.
MARKET REVIEW
The bourse captured a general price appreciation across the board as it marked the first day of trading under the Automated Trading System (ATS). 80% of the listed companies captured activity out of which 61% registered appreciation and 39% edged lower.
Agriculturals saw Rea Vipingo and Sasini close slightly higher at Kshs. 24 and 40.75 respectively. All active counters on the commercial and services captured improved prices. CMC Holdings broke the Kshs. 100 barrier to average Kshs. 103 while TPS broke its declining trend to close Kshs. 8 higher at Kshs. 100. Scangroup moved 540,500 shares at an average of Kshs. 26, while Kenya Airways and Nation Media both closed a shilling higher at 115 and 208 respectively.
Financials were all up except KCB and Standard Chartered both of which maintained their Friday’s average price of Kshs. 180 and 158 in that order. Equity Bank and CFC Bank were the sectors highest climbers as Equity shot up Kshs. 11 higher to close at Kshs. 122 while CFC was up Kshs. 8 to average Kshs. 88.
Industrials had mixed performance with a larger number of losers. The cement industry captured the day as Bamburi cement moved 5,000 shares Kshs. 12 higher at Kshs. 190 while E.A. Portland closed 9 higher at Kshs. 139.
The recent roll-out of IPOs on the Exchange and the current bull run have left investors, new to the market, blindly believing that IPOs are a sure rip, and the market is perpetually on a bullish trend. Kengen and Scangroup IPOs were both a whooping success with both of them being grossly oversubscribed, and Kengen’s price more than tripling on its entry into the market. Equity Bank’s introduction into the market saw the price more than double on its initial trading day.
While the Stock market may look like an easy place to make money, this is not necessarily always the case. There is a need for level-headedness and a lot of caution on the Stock Exchange dealings and investors, especially those new to the market need to put the following pointers at hand when going into this investment sea.
Reward and Risk
An investor who purchased a modest 1,000 Kenya Airways shares at the beginning of years 2005 parted with approximately Kshs. 20,000. 1 year down the line, this investor is worth approximately Kshs. 115,000, translate to a 575% capital gain over a single year. An E.A. Cables share-holder would have a much better story to tell, especially if the shares were purchased as recently as last year when the share traded at a low of Kshs. 65. The company has captured an unbridled shares price appreciation since the 10 to 1 shares split announcement. Currently trading at Kshs. 103, translating to Kshs. 1,030 before the split, this shares-holder would thus be boasting of a crazy 1485% profit.
The story is not the same however for any Uchumi Supermarket share holder. The suspension of this formally quite active stock on the NSE resulted in the sinking of millions of investors funds. The market has an investor compensation fund that mitigates against market related risks such as the folding up of a brokerage company. Uchumi’s suspension however falls under Industry risk which is completely bore by the investor.
Investors thus need to appreciate the two side of the investment coin and bear this in mind as they commence this investment journey.
Market Correction
The market always experiences a market correction after a bullish run as investors lock in on capital gains or prices reaches uncomfortable levels.
Market prices are swayed by the supply/demand balance, and a Bull Run results from an overweight on the demand side. A point reaches however where shareholders, especially those who may have bought the shares at a much lower price, want to cash in on the gains, thus increasing supply in the market. The price may also shoot to levels where investors feel is too high to purchase and pull out, thus reducing demand for the share. This usually causes a turnaround on the share price trend to a decline.
Price Turnaround Points
All investors get into the market with the hope of buying share at their lowest point and selling at the highest point of a possible bull cycle. It is however completely impossible to tell at what point a price trend will turn around from decline to appreciation and vice versa. These points are the hardest to hit and no analyst can tell with complete certainty at what point a price will bottom out for perfect purchase, or hit the roof for a perfect sale. Managing to hit these points is pure luck, and waiting to hit these points can be disappointing.
MARKET REVIEW
The bourse captured a general price appreciation across the board as it marked the first day of trading under the Automated Trading System (ATS). 80% of the listed companies captured activity out of which 61% registered appreciation and 39% edged lower.
Agriculturals saw Rea Vipingo and Sasini close slightly higher at Kshs. 24 and 40.75 respectively. All active counters on the commercial and services captured improved prices. CMC Holdings broke the Kshs. 100 barrier to average Kshs. 103 while TPS broke its declining trend to close Kshs. 8 higher at Kshs. 100. Scangroup moved 540,500 shares at an average of Kshs. 26, while Kenya Airways and Nation Media both closed a shilling higher at 115 and 208 respectively.
Financials were all up except KCB and Standard Chartered both of which maintained their Friday’s average price of Kshs. 180 and 158 in that order. Equity Bank and CFC Bank were the sectors highest climbers as Equity shot up Kshs. 11 higher to close at Kshs. 122 while CFC was up Kshs. 8 to average Kshs. 88.
Industrials had mixed performance with a larger number of losers. The cement industry captured the day as Bamburi cement moved 5,000 shares Kshs. 12 higher at Kshs. 190 while E.A. Portland closed 9 higher at Kshs. 139.
Sunday, September 10, 2006
Demystifying the stock market intro
I have been toying with the idea of using the blog channel as a forum to share information with fellow Kenyans and other interested parties both within the country and in the diaspora.
While I do not consider myself a guru on the investment arena, I do feel that my market participation in various capacities has exposed me to some value adding market insight.
Information will be largely skewed towards the Kenyan business arena, with a heavy emphasis on the Nairobi Stock Exchange.
While I do not consider myself a guru on the investment arena, I do feel that my market participation in various capacities has exposed me to some value adding market insight.
Information will be largely skewed towards the Kenyan business arena, with a heavy emphasis on the Nairobi Stock Exchange.
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