skills IN TRADING SHARES,STOCKS AND MAKING MILLIONS.
One of the elements or tools to acquire financial freedom in Nigeria, Africa or World at large is through savings and investment in which shares and stocks is one of it.
It has and will help you to build your wealth in shortest period of time and long term position, if you are ready to play the game strategically.
Most richest men in the world accumulate their wealth through shares ,this is because it provides high Return On Investment [ROI] within short period of time even in the long term investment. Bill Gate the richest man in the world, Warren Buffet, Carlos Slim and many more got their wealth trading shares and stocks in Wall street of New york stock Exchange. About 100 people out of 400 billionaires in the world got their money from shares and stocks.
Meanwhile, it is now and useful to embrace the habit of making your passive income,even making millions of Naira weekly, monthly or yearly through shares and stocks, just start learning how it works.so easy.
WHAT IS A SHARE?
• Shares: is a unit of ownership which qualifies you to benefit accruing from the company invested in while
• Stock: refers to many shares .
• Shareholder is referred to as a stockholder,someone who has some unit or percentage of shares or equities in a particular company.shareholders are the one who contribute capital for the functioning of the business i.e ownership and so they share in the profit made by the company known as dividend.shareholder is also known as investors.
• Investment is a means of wealth creation,managing,multiply and sustain it with little or low stress.it is also refer to making money your messenger or houseboy,sending money errand.you can make money to work for you by certain investment and also create wealth by making people work for you as well. Your salaries or wages serves as your reward for your effort while investment enable you to get residual income with peace of mind.
INTRODUCTION TO NIGERIA STOCK EXCHANGE
Nigeria stock exchange [NSE] is a body or government arm that aids goverrment to control economy through provision of money and capital market, market for raising fund or capital on behalf of industrialist or government e.g shares, stocks,bonds and many more.
It is a market where shares,stocks and other securities are bought and sold both in primary and secondary market operation. It was established in 1960 but commenced operation in 1961. it first corporate office was situated in Lagos.
It controls about # 14trillion per day, with almost total share volume tradeable equities of about 100,000,000,000 unit. it has more than two hundred[200] listed or quoted equiteis and numerous yet to be listed ASAP.
Before company’s equities can be listed in NSE, it must have certain qualities and standard in terms of intergrity,capital base, financial standard records and others,before Security Exchange Commission [SEC] can approve its equity to be listed in NSE. SEC are the arm of NSE which monitors, regulate the policies and financial conditions of the listed or quoted companies in the market in which any company or equities that is operating non-compliance to the SEC policies and obligations will be place on suspension or banned . SEC mandate the quoted equiteis to submit their financial records [ quarter result,annual report] and scritinize if it follows the SAS, IAS e.t.c
SECTORS & SUBSECTORS OF NSE
• A= Agriculture/agro- allied , Aviation ,Airlines, Automobiles/tyre
• B= Banking, Breweries,Building materials.
• C=Chemicals/paints, Commercial services,Coy.& Office equipment, Conglomerates,Construction.
• E= Engineering technology.
• F=Food/beverages, Foot wear.
• H= Health, Hotel & Tourism.
• I=Industrial/domestic products, Insurance
• L=Leasing
• M=Manufacturing,Manage fund,Maritime,Mortgage companies.
• P=Packaging, Petroleum[mkt],Printing &Industrial estate.
• R=Real estate inv. Trust.
• T=Transport,Textiles,The foreign list.
FUNCTIONS OF NSE/SEC
• It provides a market for buying and selling of second hand securities.
• It asisst companies to raise capital by helping to change their securities into cash.
• The value of shares or stocks are determined by the stock exchange.
• The prices quoted in the stock exchange serve as economic indicators, high prices indicates good economic conditions and vice versa.
• It ensure that its members exhibit highest standard of behaviour,protect investors from any form of fraud.
• Prices quoted at the stock exchange serve as parameter for the industrialist to measure the goodwill of their companies.
• By demanding highest standard of intergrity from directors and management of the quoted companies and before the stock can be quoted.
WHO ARE THE MEMBERS OF NSE/SEC.
They are the council deemed suitable as having completed the necessary training and who have to pay considerable membership fees and annual subscription.
[a] STOCK-BROKER: these are dealer or agent who act on behalf of the members of the public in buying and selling of shares and stocks. It serves as intermediaries between the buyers and sellers e.g Dominion trust Limited: A member of stock exchange.
[b] STOCK- JOBBER: they are known as the principal who work on the floor of the house of NSE. They buy and sell securities on their own behalf. The jobbers do not buy or sell securities direct from members of the public but through brokers who act as their agents. Jobbers by custom, specialise in a particular group of securities, jobbers quote two prices , the lower for buying while the higher for for selling price.
WEEKS & DAYS OF OPERATIONS ON NSE DETAILS
NSE operation base on 52weeks or 365 days of running in a year.[working days only]
QUARTER RESULT –NSE expect the listed or quoted securities to submit their financial report of 3 months and 4 times in a year before the total compilation and presentation of the annual financial record details, in newspaper or other means to inform the investors on the capacity and competency of the company that manage their funds. This quarter result helps investors to make certain decision especially short/medium term trader in order to fix entry and exit strategy in market.
1st quarter= January to March
2nd quarter = April to June
3rd quarter= July to September
4th quarter= October to December
HOW DO NSE FIX PRICES OF STOCKS.
The share prices of stocks are often driven indiscriminately in the secondary market, to attract higher prices for publicoffer prices. The advantage is still to the investors who can easily Bid/buy at discount or low price and Ask/sell when the price move up. In case where the secondary market is down , this is normally temporary but in long term trading or portfolio it will yield higher more than the initial buying price.
OK ! WHAT ARE THE FACTORS THAT DRIVE STOCKS PRICE
UP OR DOWN.
• The forces of demand and supply which makes the prices of securities to rise or low. When demand is more than supply, the prices of the stock in high demand will definitely rise and vice versa.
• The past perormance of the company in terms of profit, bonus history,dividends.
• The future outlook or prospect of the issuing company in terms of profit making or trend.
• The prices and demand for the product of the issuing company affect the prices of its securities.
• The possibility of a merger of a company with another company tends to affect the prices of such stocks e.g proposition of merging of Ecobank and Sterling Bank of Nigeria. Ltd.
• Invention of new products and technology of production affects the prices of securities of a company.
• The rate of fluctuation in the value of money.
• Rumours about the market prices of securities affect the present prices of securities.
• The maturity date of redeemable securities tends to affect their prices.
• Public offers
• Government policies on industries affect the prices of securities on the floor of NSE.
• Fiscal and monetary policies.
• Political atmosphere in a country has great impact on stock prices,economic atmosphere as well.
WHY? REASONS FOR INVESTING IN SHARES/ STOCKS
There is a lot of benefits of investing in stock :
1. CAPITAL APPRECIATION/GAIN: NSE provides an avenue for quick capital growth within short term trade.capital gain in stock market is the percentage increase in prices of such equity. Assume you bought 20,000 unit of First Bank shares in 2007 at #33 per share in public offer and in december you sell at #72, as a result of this you will made a profit of #780,000 in less or six months time.
2. COLLATERAL SECURITY : the share certificate or Central Security Clearing System [CSCS] statement could be used as collateral security to secure loan in finance houses.
3. LIQUIDITY : the stock market provide an excellent facility for easy buying and selling of shares [T+3] that means transaction day plus threee other business day. Assume, you buy /bid shares today at the rate of #5.00 and it rises to #9.00 in a months time, which means you could sell off your shares within 4 days.
4. DIVIDEND : this is the sharing part of the profit made by the company you invested, in which it is shared per unit of share multiply by the quantity you hold or purchased.
Stock your unit Dividend per unit Total worth
Oando 10,000 3.50 #35,000
Breweries 1,000 4 #4000
5.BONUS & RIGHT ISSUE: bonus share are free shares given to existing share holders of a particular company in respect to the number of your holdings e.g Oando in year 2008 declered 1: 5 [ that is 1 share for 5],while right issue is the priviledge given to existing share holder to buy an aditional shareat reduce price e.g Oando plc right issue for the last offerin 2004 was sold for #95 while #108 on the floor and #97 for public offer.
6. Opportunity of attending annual general meeting.
7. It serves as an asset.
8. Accumulation of wealth and elimination of poverty, inculcation of savings habit.
9. TRANSFERABLE : from one person to another,generation to generations.
10.FLEXIBILITY: part of the stock can be sold and part retained anytime you want to.
HOW TO PARTICIPATE IN STOCK TRADING.
You can participate in stock investment through primary market and secondary market operation:
[A.] THROUGH PRIMARY MARKET: it is the market that offer new stock or securities to the public via :
• Initial public offer [IPO]
• Private placement [PP]
• Public offer [PO]
• Right issue [RI]
• IPO : means the first approach of a company is making to the public for the purchase of its shares.
• PO: means that the equities or company has been listed on NSE but needs additional fund as a result of inviting members of public to add or buy its shares either on discount or at par e.g Zenith bank plc. Share is 9million plus and offer another 3million worth,making their total volume of shares more than 12million.
• PP: is an investment window that is privately done through invitation to a specific individual, organisation by limited liability company trying to make entry to capital marketor NSE list.
• Offer for subscription : is an invitation for you to buy freshly created shares of a company. In that case no one had ever owned the shares before you.
• Offer for sale : is an invitation to buy already existing shares owned by another investor. In essence,the investors previosly owning the share is fully or partially divesting and willing to sell to the public.
STEPS TO MAKE MONEY IN PRIMARY MARKET.
Get the primary market forms be it IPO, PO,RI or PP or even bonds, all these forms can be obtained through agents like banks,issuing houses and stock broking firms.you can mandate your broker to get you one.
Fill the form appropriately. You can also be guided by your broker or the receiver agent where you collected the form. Note there are no charges when undertaking public offer transaction.
Submit your form with an amount you had bid to the receiving agent and make sure you collect a receipt which is an evidence of purchase. Payment can be done by cash or by cheque depending on the receiving agent.
In few weeks or months the amount or unit of shares alloted to you will be mail to your box and if it part of your biding , the remaining fund will be refund to you.[you can if any,register with your CSCS account number, because it will fasten the process].
In few weeks or months time , the certificate bearing your name and other details will be sent to your mail bag or at registered venue.
Make sure while registering your data in the form,be accurate and put valid datas.
[B] THROUGH SECONDARY MARKET : it is the market where securities are bought or sold through CSCS account by mandating or ordering of stock broker. It is the existing securities that are listed on Nigeria stock exchange.
Secondary market comes in when the money has been received by issuing house and transfered to the fund seekers that is the quoted company [listed on NSE]. Your unit bought is now downloaded or transfered on the floor from where you can trade for capital appreciation or get your portfolio built-up on the Central Security Clearing System[CSCS].
STEPS TO MAKE MONEY IN SECONDARY MARKET.
• Locate good and efficient stock broker firm, that is a good and efficient. Stock broker as a lot of effect on your trading in secondary market, who will perform your mandate/order to buy/sell as sooner as possible and get the result within 4 working days.
• Get your CSCS account : it is stock account and free to open .it can be open through your stock broker who act on your behalf.
You can obtain the CSCS form through: stock broker,nearest NSE/CSCS office or Online/net www.nse-cscstradealert.com
Central Security Clearing System[CSCS] : it is a trade alert scheme. It is initiated by NSE in which all your buying and selling transactions will be notifies through SMS.it is the only functions as a safety valve and clearing house of the NSE .it issues statements of account and carries out share-holding documentation for investors. It also helps to prevent fraudulent activities on the stock exchange by maintaining a central accounting and computerised control system for monitoring stockholders account and adequately keeping track of all transactions.
• Accessibility of CSCS account can be done on internet by account holder base on his wishes by applying but it incur annual charges hence it is not compulsory for all investors.
• DATA REQUIREMENTS FOR CSCS ARE : valid I.D e.g international passport/drivers license, 2 passport photograph, Household bills.
After these,SMS notification will be sent to your phone number indicating your CSCS account number, names e.t.c. the transactions being performed on your CSCS number will be notified to you either your Bid/buy or Sell/ask.
• Upgrade your capital to invest i.e buying and selling.
• How do i know which type of stock to buy/sell even that will yield in short term period? You can pick stock base on your ability to read market, forecast e.t.c
• How to read and know good to buy, appropriate time to dispose for profit? You simply buy when you observe the price is low and sell when it is high within short or medium term period.
• How do i buy or sell ? you can buy through order /mandate given to your stockbroker and sell as well.
• How do i cash my return or capital gains? After given mandate to your broker to sell and the broker act to it within 4 working days, draft or cross cheque will be raise bearing your name used to registered , you can present the cross cheque at any current account with Nigeria banks to cash it.
GENERAL OBSERVATION ISSUES & NOTES.
• You make money in stock market not by buying in public offer only but by opening a CSCS account with your stock broker. After which you tell him what to buy and you start watching the price movement yourself. When the price is up, you mandate your stockbroker to sell, so in stock trading you tell your broker what to buy and when to sell.
• To turn over your money in stock trading is so easy e.g #10,000 into #50,000 within months,master the picking principles,move your money from one stock to another within weeks or quarters.
• Small cap/penny stocks have the ability and potential of rising faster than blue or expensive stocks.it can give about 100% to 1000% in few months.
• The best way to start making huge capital gains is to start trading on short term basis through weekly or monthly professional prediction and your own forecast as well. It has the quality to turn capital outlay about 4times or more in a year. Long term porfolio is good for pension or retirement planners,kids by their parents,personality purpose,chairmanship or directorship post.
• Most, if not all the expensive stocks now were sometimes penny in years back e.g First bank in 1992 is #2.00 per unit but in 2007/2008 worth #72 per share. Expensive or blue chip stock are those stocks that have consistent good performance over the years in terms of profits, goodwill, dividend payout, bonus e.t.c.
• CSCS is real, even if your stocck broker fails or you feel to change him for some reasons or could not meet up to the recapitalization processes,your CSCS account number deals directly with NSE and the value in it, is not money or real capital but convertible unit or fragment of shares that can be easily converted into cash.
• You cannot paid in or withdraw without the permission or going through stock broker. CSCS account does not yield interest but the value or unit of stocks in the portfolio may increase in unit through bonus issue,dividend payout and increasing of the prices per unit.
• You can check your portfolio or account on internet yourself for monitoring. It can be activated through your stock broker on demand but it incure annual charges.
• In secondary market, stock broker don’t have to border about your stock, you have to be the one to border about your portfolio if any, it must be on your own consent with certain percentage to manage your portfolio. You will tell what to buy and when to sell, because your stock broker is not to bear risk for you in the stock market.
• The secondary market is a market that gains its popularity from massive stock trading activities on daily basis, with all classes of investors exchanging stocks for cash and cash for stocks in
securities format and both situation influencing the market capitalisation of the exchange, either on the upside or down swing.
POSITIONING OF STOCK TRADING DURING BULLISH /BEARISH PERIOD.
BULLISH PERIOD: it is the period whereby one Buy/bid particular equity with the hope,believe and decision indicates that the price will rise. As a result of rising above biding price or targeted price, one may sell at higher price to make profit.it could take 1,3,6,12 or more months to appreciate to targeted prices.
BEARISH PERIOD : it is short position. The time at which the investors anticipate, feels,forecast or observe that the equity or security’s price will fall thereby enabling the investors to sell the security for cash and make profits. This is the best time to get good stocks at cheap price because when investors take profit on such stock will depress it capitalization hence cheaper at this period.
STOCKS CLASSIFICATION.
• SMALL CAP OR PENNY STOCK : it is stock of #10.00 and below. They are small in value but gives high returns like 200%, 500%,1000%. They are known as underpriced stocks. Robert T. Kiyosaki, a great american investor said he predominantly trade with low priced stock.
• GROWTH STOCK : they are the stock with prices ranges from #10.00 and below.
• BLUE CHIPS : are ranges from within #20.00 and above .
• DEFENSIVE OR RESIDUAL INCOME STOCK : they pay their holders high dividend.
HOW TO PICK GOOD SMALL CAP/ PENNY STOCKS.
1. The stock must has a good and consistent profitability.
2. Consider the volume or number of shares, share with low volumes enable the quick move up of the stock price.
3. It must has good growth in turnover, gross earnings or premium.
4. There must be changes in the profit after tax.
5. It must maintain debt free and good management.
6. The past five year financial report should be check and free of financial problems.
End of the year stock prices.
STOCK 2000 2001 2002 2003 2004 2005 2006 2007
Wema 1.88 3.76 5.75 4.35 3.74 3.74 3.25 15
Livestock 3.8 3.45 3.45 2.83 2.83 2.83 0.95 3.81
Dunlop 3.91 3.36 2.7 2.3 2.16 2.79 4.16 3.3
Incar 1.02 1.47 1.9 1.71 1.3 1.02 6.88 8.7
Eternal oil 0.92 1.3 0.7 2.01 1.99 3 3 16.8
C &l leasing 1.47 1.25 1.08 2.2 1.49 1.14 1.22 8.5
Rean 4 4 3.42 3.2 5.01 3 2.77 3.15
Crusader 2.12 2.7 0.97 1 0.7 1.5 2.55 6.75
Cornerstone 2.01 1.62 1.33 1.63 1.25 1.51 0.9 4.83
Vitafoam 4.42 4.4 6 3.8 3.5 4.73 4.14 10.31
Vono pro 2.01 1.87 1.85 1.46 1.9 1.75 1.6 4.4
STOCK 2000 2001 2002 2003 2004 2005 2006 2007
Boc 7.7 4.35 3.14 2.99 3.08 3 3.3 9.5
Phamad 2.75 2.63 2.45 2.62 5.42 4.14 2.97 5
Neimeth 5.44 5.44 4.45 2.44 2.94 3.23 3.26 5.46
MAY&B 4.4 2.5 1.87 4.09 5.2 5.35 8 13.45
Evans 1.4 1.5 1.56 2.5 3.01 0.5 5 6.77
Utc 0.67 0.99 0.74 0.72 1.15 0.92 1.29 3.93
Aglev. 1.18 0.91 0.62 0.65 1.23 1.16 1.86 5.35
Access 1.35 1.3 1.82 3 3.42 2.99 6.96 24
Dnmeyer 5.6 10.1 4.1 7.75 5.25 4.33 2.99 8.33
Berger 2.92 2.6 2.4 3 4.85 4.03 3.85 10.65
Aiico 3.12 2.99 1.31 2.45 1.67 0.52 1.74 3.43
Prestige 3.03 2.15 2.83 2.68 1.67 2.39 2.99 8.5
Wapic 2 2.01 1.6 1.05 2.65 3.32 3.83 7.9
HOW TO AVOID LOSS TRADING SMALL CAP OR PENNY STOCKS.
Anything in life is risk, even life or world we live, is full of risks which result to the existence of INSURANCE COMPANIES. Any business has its own risk but there are various measures to curtail or reduce such risk and possibilities of utilizing it into an opportunities.
In stock, to avoid risk you need research,strategies and information to keep the edge above others. Remember, the higher the risk the higher the returns.
STEPS TO AVOID LOSS.
1. The stock must have a trading stock feature that is behaviour, you check the low price period and the high price period and the ability of the news to affect it. Do not buy stock that when you checked it last year, it is the same price with what it was this year. Means that the price doesn’t move upward or downward,but stagnant.
STOCK PRICE@07 PRICE@JAN. 08 PRICE@APRIL08
Champion 3.31 3.31
Goldenguinea 0.68 0.68
Ceramic 0.25 0.25 0.25
Nigercem 5 5 5
African paint 3.49 3.49 3.49
Wema 15 15 15
The prices can be affected or move high or low due to activities in terms of bonus,dividend,public offer,merger,management culture.
2. The reason for the low price of the stock or what causes the low price of such stock should be observe either due to bad management or lack of fund.
3. Market capitalisation, it is the total market value or worth of a particular equity and it attracts both local and foreign investors.it is get by the current price multiply by total number of shares= market capital.
4. Check and use the result of a company per quarter, because it has a great effect on the movement prices of a share.if the 1st or 2nd quarter you can make entry in 3rd .
5. News analysis. Change in management of a company,release of operating results news,dividend payout,bonus issue,right issue,technical corrections.
6. Have an ENTRY and EXIT strategy; there must be an targeted entry and exit principles towards the stock market in holding particular stock in order to avoid drop down of prices and to take profit if trading on short term basis.
7.Interact , inquiry from professional,stock analyst,co-trader,newspaper ,magazines and other to compare your own consent and forecast in respect to your stocks picking.
8. Don’t always trade low or small cap stocks rather oftenly trade growth or blue chips that is less expensive with good fundamentals.
9. Utilize the advantage of entry period in terms of price period e.g highest price,middle price, or lowest price.
10. The best time to buy a stock even expensive one is bearish period when profit taker impact the market. When it is still in it’s resting period but make use of EPS and P/E ratio.
11. The management must be effective,efficient and innovatives.
12. Taking note of the news on re-engineering,re-packaging,take-over,buy over or positive upward building of the organisation.
13. Sector to sector reviews. In year 2008,april Banking and Insurance sector are most trade as a result.
NEWS THAT IMPACT STOCK PRICES.
The prices of stock most often move upward if there is certain information and news about the secondary market:
1. RESULTS : the release of result of the financial status of the company tends to highly increase the price because the forces of demand and supply will be varies. Many investors will want to buy certain equity while those that had it may not want dispose the stock. Meanwhile, if there is higher demand than supply, the prices will move up. For example, demand or application exceed the supply in First Bank 2007 public offer,while offer is #100billion while after the offer,total applicant worth #400billion as a result the price move from #33 before offer to about #72 in few months time after the offer it due to forces of demand and supply.
Types of result are Quarter/interim result,End of the year result[release or expected]
2. MANAGEMENT: the information on the management affects the change in price of stocks. The effectiveness and efficiency or innovative of the management will determine how far the price of their stock to rise upward or downward. For example, take over of the Benue cement by Dangote management, which drastically change the stock price about 700% capital gain within 2months.
3. PUBLIC OFFER: any company that is coming out for public offer will definitely have it’s stock price move up.
4. DIVIDEND AND BONUS : the payout of dividend to investors and given of free share to shareholders holding particular unit,thereby enabling the high patronage of the stock by investors and holders will not want to dispose as a result the stock will be scarce hence the stock will definitely rise.
5. GOVERNMENT POLICY: the government actions or policies to control the economy may favour or unfavourable some sector of securities e.g banned of importation of some products like sugar,livestock and more tend to improve local manufacturer of this products. Tax holiday or free,excise free for exportations and other government monetary and fiscal policy as great effect on equities.
6. TREASURY BILLS & OTHER INVESTMENT WINDOWS: if the Return On Investment[ROI] in other investment is greater or considerable to stock market will impact the level of market capitalization and investors as well e.g bonds, public offer, real estate,private placement and many more.
7. ACQUISITION,MERGER/TAKEOVER: it is the coming together of companies in horizontal or vertical level of production in order maintain and improve mode of operation towards profits,productions and other fundamentals.
RISK REDUCTIONS CODE.
Have a target entry period [low,high or middle] and exit period.
Have a written down plan.
Research about the market.
Have a targeted exit price.
Plan towards possibility of risks.
Wait for another cycle or quarter.
RISK AVOIDANCE CODE.
Buy only in the 3rd quarter, if the 1st,2nd,3rd quarter result is good.
Buy stocks that you know that you can hold for more than one financial year.
Buy stocks that you know you can hold even when you know that the market can close down.
RISK SPREAD CODE.
Try to invest in different sectors,but you must make sure it is liquid. Never put all your eggs in one basket.
Never buy stocks under pressure. Do not invest in what you don’t understand.
WHERE TO GET MATERIALS FOR ANALYSIS.
Newspaper and magazines.
Success digest extra : it is twice in a month publication.
Stockwatch : it is weekly publication.And other publications.
Online :
www.proshareng.com www.nigerianstockexchange.com
www.firstinlandsecurities.com www.sterlingcapitalng.com
Radio :
Premier FM Wednesday,by 9.30am
Star FM 101.5/DSTV radio, Monday-Friday by 8.45-9.00am.
Guidance and issues
Sanmi Akindipe: sanmiakindipe@yahoo.com 08033597235.
AbayomiObabolujo:stockwatchmag@yahoo.com08037268265
Lanre Oyetade : lanreoyetade@yahoo.com 08055072371.
Hope Eno : hopeeno@sadcnigeria.org 08023982600 SMS
PRACTICAL TOOLS TO USE IN PICKING VIABLE STOCKS.
• News
• Total number of shares
• Quarter performance
• Expected or released financial year end result
• Earning per share and Price earning ratio EPS & P/E
• Annual report [long term investment]
• Five year financial statement
• Bullish and Bearish period
• Market capitalisation
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