The Nigerian Stock Exchange – 2013 in Review

It was an excellent year on the Nigerian Stock Exchange (NSE) as the All Share Index (ASI) returned 47.2% for the year closing at 41,329. Most of the gains were in the first half of the year (42.5%) while the Index only gained 4.7% in the second half after a run off on the last 4 trading days.

The best performing sectors were Industrials (77%) led by the cement companies and Oil & Gas (40.5%) led by Fortis Oil and Conoil. The banking sector did not do as well but it returned 28%, an excellent return in any other year.

The best performing 10 companies were:

best_perf1

Most are stocks that were severely battered in the past (Forte, Wema and Transcorp) or penny stocks (Jos Brewery, Livestock Feeds and Evans Medical). Before you rush to buy these kind of companies, especially penny stocks, note that among the 30 worst performing only Guinness can be considered large all the rest are either small or in the lower end of medium sized.

Foreign portfolio investors accounted for about 51.4% of transactions on the exchange during the year compared to 61.4% in 2012. This is still a still a significant contribution compared to 2007 when foreign portfolio investors accounted for only 15% of transactions.

In all it was an excellent year (47%) coming off the back of a very good 2012 (35%). Despite these gains the Index is still 60% off the record level of 66,371 set in March 2008.

Banks and Insurance companies did not do as well in 2013 and as a result are undervalued relative to the Industrials and Consumer Goods companies. I expect the banks to perform better in 2014. The Consumer Goods companies and Industrials are in my view over valued and could be in for a correction in 2014. I have no confidence in the fundamentals of the Insurance companies, as the sector remains weak and fragmented with too many penny stocks.

My advice as always: stay in the market and invest for the long term in quality companies at fair valuations.

asi_2013

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