The Nigerian Stock Exchange released its 2017 first half review of its major indices on Tuesday. Of particular interest to us was the NSE Pension Index, which comprises of stocks typically purchased by Pension Funds. In its latest review, the Nigerian Stock Exchange yanked off Beta Glass Co. Plc, International Breweries Plc, Skye Bank Plc and replaced them with United Capital Plc, Ecobank Transnational Inc, Dangote Flour Plc. The implication is that the three stocks newly added will likely attract significant interest from Pension Funds.
Of the three, we take particular interest to United Capital Plc. The company has just come off a remarkable 2016 where it was among the top 5 performers for the year. The company also reported impressive profitability growth and has been a consistent dividend paying stock with impressive yields. We see the share price gaining another 15-20% before it gets marked down again for dividends. Dangote Flour Mills is also a surprise for us. Since the retake of the company by Alhaji Aliko Dangote’s DIL, the stock has outperformed all stocks in the index. It gained a whopping 286% in 2016 alone.
What is in it for retail investors
For retail investors, the Pension Index provides them with an index they can decide to mirror in their portfolio. Since Pension Fund Managers are rated on their ability to outperform this index and the wider All Share Index, the stocks in this index are carefully handpicked and have more chances of providing positive returns.
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