The explosive rally in the Nigerian Stock-Market that has added N7.3 trillion in market capitalization just in 2020 has been led by a few Cement, Financial and telecoms stocks, as investors bet on the likely winners once the dust settles and the economy begins to grow strongly once again.
The rally is also showing the importance of stock picking to investors portfolios.
Nigerian stocks are up some 11,961 points or by 44 percent since the beginning of 2020 (see chart).
An analysis of the NSE-30 or the list of the 30 largest and most liquid stocks traded on the Nigerian Stock Exchange (NSE) shows that the index was responsible for over 60 percent of the jump in stock market values in 2020.
The few firms responsible for the major stock-market rally include Dangote Cement, MTN Nigeria, BUA Cement, Zenith Bank and Guaranty Trust Bank according to data compiled by MoneyCentral.
Dangote Cement Nigeria’s largest listed firm has added N1.755 trillion in market capitalisation in 2020 alone.
MTN Nigeria has added some N1 trillion in market capitalization in 2020, while BUA Cement has added N728 billion.
While most NSE-30 stocks are higher today than they were at the beginning of the year, there are a few laggards that have barely moved since then or are even lower.
They are largely cyclicals (Seplat, Oando) consumer goods firms (Guinness, Nigerian Breweries, International Breweries) or financials seen by the market as unattractive or having poor execution by management (Access Bank, Union Bank).
Banks like ETI and Fidelity have also largely underperformed the likes of Guaranty Trust Bank, Stanbic IBTC, UBA and FBN Holdings.
During the worst of the Coronavirus economic lockdown and panic in April, most Nigerian Stocks sold off to multiyear lows. Since then however most have rebounded as investors bet on the likely sectors to drive the economy in 2021.
The analysis clearly shows where money is flowing into a select names, leading to a powerful stock-market rally and investors will be wise to mimic the smart money.