Stop the bleeding of your portfolio, don't sell, reduce loss and hold

The Ghana Stock Exchange ended the week positively, following 0.22% rise in GCB's stock price. The GSE-Composite Index closed recording a year to date of 7.11%. The GSE-FSI gained 0.73 points to close trading at 1,695.04 points reaching  a CYTD of 9.64%.

There have been a lot of activities on the exchange this year with some stocks recording their highest trades ever since inception of trading. This looks promising after a tough year in 2016.

Some investors who got into the market whiles the market was at its low point are beginning to get out retrieving their gains in some good performing stocks like Fan Milk (FML) and GCB bank among others. The issue of timing is very crucial when it comes to investing. Others are still taking advantage of the relatively low prices of stocks in the market hoping for a better year under the new government.

Despite all these some investors are just totally giving up on the capital market and resorting to the money market hoping it gets back to its 2016 form.

Dumsor threatens, Inflation drops, IMF support to stay, probable drainage of Heritage fund to commence, what should one do with the bleeding portfolios of stocks.

This morning, I decided to mitigate the losses by buying more of the stocks I hold at a lower price than I earlier bought them. By so doing, a slight increase in the share price will restore me to the profit zone than waiting for the market to fully recover.

To stop the loss and start seeing gains, you need to consider buying more at the current lower price. How much more will depend on how deep the fall is from your cost price and how much you already hold.

I guess this is your best way out at this current state of the market. It is better than selling you out hoping on the money market.

What if things turn the other way round? Won't that cost me more? Yes..... It surely will. That's why it's a risky market hence you need to be tough and make that decision to stop the breeding.

What To Do Before Buying Any Stock

In all my investment coaching I tell my clients who want to venture into stocks trading or investment, to do one thing and that's what you should do before buying any stock in 2017.

And that is; READ MORE ABOUT EVERY COMPANY YOU DESIRE TO OWN.

Knowing more about the companies you buy or sell always gives you some upper hand and courage.

So get to work. And this is how;

On the Ghana Stock Exchange for instance there are about 35 listed companies. In 2017, target to read the Annual Reports, related news and learn more about what each of these 35 companies do.
You can dedicate one week to study about one company and before you know it, you will be more abreast with what's happening in the Market and then you can make informed decisions.
Most of the information you will need can be found here (www.annualreportsghana.com)
Fast readers can take two companies a week and read on.
Do not be scared of the figures and do not worry about interpreting the financial statements. The goal here is to know what these companies do to make profit, nature of their business, what industry they operate in, who is on their boards or management, who are the top 10 or top 20 shareholders, and any other relevant information you will get in their annual reports.

Doing this will not only get you informed but also build up some zeal or interest in you towards investing on the stock market.

You can apply this principle to other Investments you intend to hold, being it real estate, mutual funds, fixed income securities etc.

Simple task that always pays. Enjoy reading.

What the fully integrated West African capital markets will look like

Click to Enlarge

Where should a 60-year old man in Ghana invest?

Once again the polls have closed and the results are in favour of the Money Market.
Some number of readers think a 60 year old Ghanaian should invest in the Money Market other than the capital market. Although, it's wise for a 60 year old to invest in the money market (to put the hard-earned money to less risk), I wont, even if I'm 60 years. I've grown to understand and appreciate the growth potentials of the Ghanaian capital market, and since my children will continue after me, I'll rather hold a 70-30 portfolio in favour of the capital market.

Result in favour of the Money Market

The Money Market:
A segment of the financial market in which financial instruments with high liquidity and very short maturities are traded. The money market is used by participants as a means for borrowing and lending in the short term, from several days to just under a year. Money market securities consist of negotiable certificates of deposit (CDs), bankers acceptances, Treasury bills, commercial paper, municipal notes, federal funds and repurchase agreements. ( courtesy: investopedia).
Learn how to invest in the Money market in Ghana and find out the Various Types of investments in Ghana with respect to the Ghanaian Money market. 

Stocks to invest in on Ghana Stock Exchange - May Results

Results from the Stocks polls on my blog for last month revealed that, 34.48% of some readers on this blog think Fan Milk ltd is the best stock to buy on Ghana Stock Exchange among the options presented to them ( Ghana Commercial Bank -GCB,  Fan Milk Ltd -FML, HFC Bank ltd -HFC & Ghana Oil Company -GOIL). HFC Bank ranked second among these stocks according to the polls.
To find out more about FML and what other investors think, read my post on "The Fan Milk (FML) Debate: Is FML over-valued on GSE? #FMLdebate 

Results from Stocks Polls
Click to Enlarge

Join the next poll for the next weeks. The question this time is,

African Capital Markets - The Potentials & The Lost Opportunities.

Guest Post by:
BOAKYE OGYEM EMMANUEL. ( 0261528542 / ogyemb@yahoo.com)
A few days ago, I decided to research Africa’s capital markets, and to my astonishment I realized that most of these markets were very resilient to exchange rate fluctuations and the debilitating effect of inflation. These findings fascinated my imagination and re-oriented my negative stereotypical perception about Africa’s capital markets. However my greatest disbelieve dawn on me when I realized that the GHANA STOCK EXCHANGE (GSE COMPOSITE INDEX) far out-performed the S&P 500 of the UNITED STATE OF AMERICA in terms of dollar adjusted returns within the years of 1992-2013, this means that passive investors in Ghana within the aforementioned years were better off than their counterparts in the united States. The research choose 1992 as the base year solely due to two reasons, firstly it was the year Ghana declared democratic rule and entered into the 4threpublic, making its capital market attractive to foreign investors. Secondly, it marks the start of the longest bull market in the history of the United States, which spanned for almost 7yrs, between the years of 1992-1999. The Ghana stock exchange in the mist of significant macro-economic pressures such as ,an annual compounded cedi depreciation rate of 18.54%, unwarranted high levels of inflation in the 90’s and a sluggish economic growth amid lackluster energy sector , surmounted to become more profitable than the S&P 500. Now let’s move on to the number crunching that reinforce these assertions, in 1992 the GSE all shares Index traded with a value of 62.17, by the end of the year 2013 the value of the GSE COMPOSITE INDEX was 2,145.20 after adjusting the Composite index to the ALL SHARES INDEX which was previously used by market participants until 2010,we arrived at a value of 16313.66 for year 2013. This value reflects an annualized return of 28.90% for all investors who had invested during the aforementioned investment horizon. One may ask how do these numbers translate into millions of cedis for the average Ghanaian who had invested in the GSE within the 1990’s? the answer will be an enormous amount of wealth, if an investor had invested a sum of GH₵1000 on the exchange within the year 1992 he/she would have pocketed a whooping sum of GH₵266,418.3791 (the equivalent of 2.6 billion old Ghana cedi’s) by the end of 2013 , not convinced? then add a zero to the initial amount invested , that is if an individual had invested an amount of GH₵10,000 in 1992 for his kid or dream house , that individual would have now pocked almost GH₵2.66million new Ghana cedi (the equivalent of 26 billion old Ghana ), yes!!! The individual would have been a millionaire due to the power of compounding, and the resilience of a stock exchange that has triumph against the overwhelming odds of high inflation and significant exchange rate fluctuations. One amazing discovery is that many Ghanaians during this same period gave far more money needed to invest and achieve these sterling results to dubious connection men, in other to seek greener pastures outside the country. However, the returns from the exchange indicates that those who stayed behind and placed their bet on the stock exchange are now better off and perhaps “millionaires” relative to their foes who went outside for greener pastures. As a value oriented investor I deemed it necessary to determine if there existed significant value in stocks trading outside my home land , due to this I decided to compare the results of the GSE to the US dollar and the S&P 500 index. Thorough data gathered from renowned investment sites (CNN MONEY, BLOOMBERG DATA etc.) indicates that the S&P 500 started with a value of 262.79 in 1992 as at 31st December 2013, the index was trading at a value of 1813.036; this represents an annualized value of 9.1759% on a compounded basis. That means that if an investor had invested $1000 in the S&P 500 for the 22yrs period he/she would have pocketed an amount of $6,897.79 for year-end 2013. In order to reasonably compare these exchanges a dollar adjusted return for the GSE Composite index was computed to be an annualized 10.35% for the same investment horizon. However the S&P’S annualized gain was 9.1759%. Data used for the dollar adjusted return was acquired from Dr. Mahamadu Bawumia’s speech titled “RESTORING THE VALUE OF THE CEDI”. According to the article the cedi value against the US dollar during 1992 was at GH₵0.05208 (the equivalent of ₵520 old Ghanaian cedi), as at 2013 the value of the cedi was GH₵2.20 (the equivalent of ₵22,000 old Ghana cedi). This represents an annualized compounded depreciation rate of 18.55% which lags against the GSE index’s sterling performance. Finally, from the research it’s apparent that the GSE (GHANA STOCK EXCHANGE) has shown its superiority amid a turbulent exchange rate fluctuations, economic sluggishness and unabated inflationary pressures , to emerge as the best investment entity for the long term. Furthermore, it’s strategically positioned than ever before to produce sterling performance going forward, this can partly be attributed to increase positive inflow of FDI, strong economic growth fundamentals, stable political climate and copious oil /natural gas reserves. With all these positive factors looming in the long run, I think we should all start investing into the future to realize our unlimited gains in the stock market.
Source: (CNN MONEY, ANNUAL REPORT GHANA, REUTERS, ARTICLE FROM DR.BAWUMIA, WIKIPEDIA , INVESTINGAFRICA.COM)

2-day Capital Market Conference in Ghana.

Under the theme "The Capital Market: A key to Economic Growth and Development", the Securities and Exchange Commission (SEC) in collaboration  with the Ghana Stock Exchange (GSE) and Ghana Securities Industry Association (GSIA) are convening a two-day conference at the National College of Physicians and Surgeons in Accra on 9th and 10th May. 

I hope this conference achieves it's aim and bring about relevant discussions of issues relating to the Capital Market to drive policies for the industry.  

I hope it doesn't become just one event for our policy makers, regulators, financial industry players, parliamentarians, academia and capital market participants to sit and talk about irrelevant topics and issues that won't help the industry in anyway. I 'll be glad to partake in the confab this week, by my schedule is just too tight. . Mr Seth Tekper, Minister of Finance and Economic Planning would be there to give the keynote address whiles P.V. Obeng, Chairman of National Planning Development Committee would chair the Opening Ceremony.

All interested parties should do well to join this conference for the development of the capital market and our economy as a whole

Stock Market Update: GSE bounces back as stocks rally

No losses were recorded on the Ghana Stock Exchange as the market bounced back from Thursday's loss. The GSE-Composite Index went up 9.84 points, as stocks edged upwards, to close the week at 1,778.07, resulting in a year-to-date return of 48.21%.

Ghana Stock Exchange begins week with five gainers as trade volume hits record high for the year

This week has begun on the Ghana Stock Exchange with smiles on the faces of some investors as equities from different sectors of the economy gained some cedis. There were five gainers namely AngloGold Ashanti, AGA (Mining), Enterprise Group Ltd, EGL (Insurance), Ecobank Transnational Inc. ETI, (Banking), Ghana Oil, GOIL (Oil) and

Benso Oil Palm Plantation (BOPP) in the 1st Quarter of 2012 on Ghana Stock Exchange

6 months performance on GSE - BOPP [Oct - Mar]

Benso Oil Palm Plantation with GSE stock ticker symbol; [BOPP] is an oil palm producing and processing company and was listed on the GSE on August 30, 2004 when it was converted into the public limited liability. The nature of businesses the company is authorized to carry on include: Growing of oil palm and other agricultural products, Processing of oil palm fruits to produce palm oil and palm kernels and Dealing & trading in palm oil, palm kernels and other agricultural products.

BOPP on the Ghana Stock Exchange has recently been the choice for investors as the company continues to show greatness in different forms.

The Key Statistics for BOPP as researched by Bloomberg reveals that, the current P/E ratio [trailing twelve months (ttm)] is 6.0546 and Earning per share (EPS) (ttm) is 0.2808.  BOPP’s current market capitalization is GHS 59.16 million with about 34.80 million shares outstanding. Price per Book (most recent quarter) is valued at 1.9908.

BOPP started the year, 2012 on the Ghana Stock Exchange with a share price of GHS 1.10 (03.01.12) and has since been rising to attain a year high of GHS 1.78 (20.02.12); the highest since 18^th October, 2011. An investment made in BOPP exactly a year ago would make an outstanding 121.23% profit to date.

Year to Date change on GSE - BOPP [Jan -Mar. ]

Analysts predict further rise in price of this stock in the year but the greatest fear for most investors is the Election Year fever on the market which has shown its power over stocks in the past years.

We hope to closely follow this stock and see how investors react to it despite the election year’s controlling force in the market. 

Building the Economy: Middle Class of Ghana Unconcerned

Are we really sleeping? Then it is time to wake up.

The Middle Class in Ghana, simply don't care. They find means to solve public problems in personal ways and just remain unconcerned, very quiet!! It's a culture problem, people say. Others say Ghanaians just think about their families and not the Public. Scholars blame it on education, stating that, "you can't teach an old dog new tricks". But is this helping the nation? Would it ever? How can we develop with this? Why won't us remain poor? Failed government or State, Failed Top Class, Now failing Middle class & educated elites, and the Voiceless/uneducated poor (which are the most populated).

We have the platforms, we don't use them. We have the knowledge, we don't apply it to help our nation, the worst of all, we sell them cheap to other nations. We have the energy, we misuse it. Oh Mother Ghana!!! How long would the Middle Class decide to be silent. It's pathetic they understand the problems better than anyone but decide to stay away.

Typical Middle Class (educated elites) Behaviors:

Power outage:- Put on the generator (For the family alone) and shut up.

Water Problem:- Get enough Poly-tanks to store water for the family. Don't care about the community or person next door (who's probably voiceless).

Education:- Send children to schools abroad. (No Teachers' strike).

Health:- Go to private hospitals. Don't care if doctors are on strike.

Ehhhhh!!!! My people. Are we safe? When the Voiceless or low class decide to talk or fight back, can we stand them? Ghana, we can't afford to fail God and the next Generation. Let's act NOW in all sectors of the economy. Let's be responsible and not think about our families alone. Let's build the economy of Ghana.

Oh Ghana!!!!. God Help us. Long Live Ghana

Is CAL Bank undervalued on the Ghana Stock Exchange?

The debate continues everywhere among investors as they keep wondering whether CAL Bank shares on the Ghana Stock Exchange are undervalued. My earlier post on the 2011 year review of CAL bank on GSE has shown clear analysis of CAL as at last year. It showed the potential of CAL's share price rising this year as the bank plans to recapitalize to meet the required capital as proposed by the Bank of Ghana. Meanwhile, some investors and market analysts argue that, the share price is undervalued to the extent of stating that there could be a rally on the exchange for these stocks very soon.
Let us look at some figures of the Bank; (courtesy: Bloomberg)

Valuation and Earnings as at 20.02.12.

The Banking stock shows a relative P/E to the GSE Composite Index of 0.2628 and a P/E ratio (ttm) of 3.6220 as reported by market analysts.

With a current market capitalization of about GHC 64.48 million, the Bank would recapitalize this year to meet the requirement.


Dividends figures & Other Market figures

Chart: Share Price Movement from December 2011 to Date on GSE.

Relationship Managers & Receptionists are not Stock Brokers. Talk to the right person.

 I have been observing this for some time now and I think it is getting on my nerves and moreover, investors are losing money because of this issue. I have been a victim and it was due to my ignorance. Don't make the same mistake. Some thing must be done. The Securities and Exchange Commission must act now to protect investors.

To many people in the Ghanaian financial market, everyone that works in a brokerage firm or with a Licensed Dealing Member (LDM) is having a good knowledge about the market or is a stock broker (Authorized Dealing Member). This misinformed public perception is reinforced by some ordinary workers at some brokerage houses who give their misleading recommendations about stocks on the market to ignorant investors. They speak so fluently and courageous as if they are authorized to give investment advice whiles their job is just to help investors or clients fill forms, explain the various investment opportunities to the client or direct them to the licensed /authorized advisor.  

On several occasions, a Relationship manager of a reputable Brokerage house tried to advise me on my investments with the aim of convincing me to invest in the firm's investment product which was a mutual fund whiles I insisted on talking to a broker. She thought I was just an ordinary investor who knows little or nothing about what I’m doing. She told me the stock market is not a place I should invest in. I asked why? And all she was able to say is that she doesn't invest there so she won't advise anyone to.  This was so surprising to me because I make so much money from the stock market. Moreover, she and her colleagues don’t have any authority to confuse investors in the name of investment advisory. It’s pathetic that investors are misled by this kind of ignorant people who act as experts. This must stop now.

I experienced the same thing in another brokerage firm when a receptionist tried to mislead me just because there was no broker around at that time. I ended up lecturing her about the current affairs on the market and the last thing she asked was my business card.

The Securities and Exchange Commission did not license these firms as broker-dealers or investment advisors because of the bogus advices their receptionists and relationship managers give. Every stakeholder must note this and I would advise all investors to seek for good advice from authorized, qualified and recognized investment advisory firms or people. The fact that someone works in such firms doesn’t make the person qualified to give investment advices. Be cautious and insist on talking to the best before you make any investment decision. Meanwhile don’t forget to do your homework before you invest. Study very well what you are investing in and talk to the experts not ‘ignorant’ receptionist.

Listing & Trading Rules are set for ETFs on GSE.

Exchange Traded Funds (ETFs) are considered by some financial gurus as an investment product of choice for the inexperienced trader all the way to the professional money managers. In emerging financial markets like that of Ghana, ETFs are yet to see the light of the day. The Ghana Stock Exchange (GSE) announced the introduction of  ETFs in to the market sometime ago and finally, the Securities and Exchange Commission (SEC) has approved the Rules for the Exchange Traded Funds. 
The general listing rules prescribing the requirements for obtaining and maintaining the listing of securities on the Ghana Stock Exchange does not apply to ETFs hence different rules were set for listing and trading. With reference to the Rules for ETFs released this month, trades in ETFs shall be settled through the Clearing and Settlement System of the GSE and Securities Depository System of GSE Securities Depository Ltd just like stocks on the GSE.
This same document revealed that an application for the issue of ETFs must include, Net Asset Value (NAV) of the ETF as at the date of application and the Percentage change of the NAV of the underlying basket of securities / index / underlying asset for the previous 6 months on a weekly basis, among others. The criteria for listing revealed that, the ETFs must be open-ended and fully secured at all times: either by the underlying securities/commodities or financial instruments it represents, a proxy security
acceptable to GSE which should be listed, freely tradable and have adequate liquidity or cash. Looking at the current affairs of the capital market, liquidity issues are very important to the GSE & SEC.
Further scrutiny of the rules showed that, ETF issuers must undertake to compute the Net Asset Value of the ETF on a daily basis and make the NAV public to all market participants at the same time through the GSE. Obviously, no insider trading would be encouraged. The condition for listing stipulated among a list of requirements that, GSE may, in its overriding discretion, grant a listing to an Issuer who does not fulfill the requirements set out or refuse a listing to an Issuer who does not comply with the listing requirements on the basis that, in the GSE’s opinion, the grant or refusal of the listing is in the interest of the investing public.

In terms of pricing the ETFs, the rules stated that, the issue price shall be on a basis approved by the Exchange and shall not include management charges and other fees. Moreover all management charges and other fees are required to be separately specified in the offer Document.

The rules for ETFs are very clear and easy to understand. For more analysis of the essence of these rules, join me on Twitter: peagama (click to follow) or facebook: Patrick .... and let's discuss.
For more details on the Rules for ETFs in Ghana, Click to download full document. (Courtesy: GSE, & SEC).

Analyzing the Wealth of Steve Jobs from US$1500 to US$8.3 billion

From a humble beginning, Steve Jobs started Apple with Steve Wozniak and Mike Markkula. Jobs invested his Volkswagen bus valued at $1,500 and Wozniak invested his calculator, valued at US$250.

From the investment of US$1,500, Steve Jobs became every body’s hero and a billion in America. But before then, he ‘stayed hungry and stayed foolish’. When Apple began to expand, the company looked for an experienced executive to help manage its expansion. So many people came on Board as well as investors. Steve Job lured Sculley John in to Apple away from Pepsi- Cola by asking him whether he would like to sell sugar water for the rest of his life or join him to change the world.  Whiles most of Jobs’ employee thought he was too temperamental, he stood by his principles and gets the job done at all times.

An internal power struggle at Apple and redundancies at the time made Sculley relieved Jobs of his duties. The Co-founder was fired.  To Steve, "The heaviness of being successful was replaced by the lightness of being a beginner again, less sure about everything. It freed me to enter one of the most creative periods of my life."

Jobs owned 7.5 million shares when they went public and with an IPO price of $22 per share that makes his $1,500 investment in 1976 worth $217 million in 1980.

Steve Jobs left Apple to start NeXT Computer in 1985 with $7 million and when things were going bad, the Billionaire Ross Perot invested a lot of money in the company.

Steve later bought The Graphic Group (Pixar) for $10 million of which $5 million was given as capital. After some time, Jobs announced that Disney had agreed to buy Pixar which was worth about 7.4 billion. This transaction made him the largest individual shareholder with about 7% stock holdings in the company. The sale of Pixar to Disney brought the largest impact to his net worth valued at above $7 billion today.  Along with the sale of Pixar, Jobs gained a seat on the Disney board and increased his net worth to more than $5.1 billion from a worth of 4.3 billion representing 138 million shares in Disney.

Apple Inc. bought NeXT Computers for US$429 million in 1996 and that was how Steve Jobs came back to his company. At the 2000 Macworld Expo, Jobs became the permanent CEO of Apple Inc. but in August 2011, Jobs resigned as CEO, but remained at the company as chairman of the company's board and director on Disney board.

Money is not the key motivator for Steve Jobs but he died a Billionaire (has a net worth of $8.3 billion as of March 2011), a great contributor to the American Capital market and an inspiration to young entrepreneurs or business owners.

Courtesy: Market Watch, Wikipedia, Investopedia, Forbes and Apple Inc.

Value Investing and its rewards on the Ghana Stock Exchange.

There are different kinds of stocks or shares of companies on the Ghana Stock Exchange and every investor has a purpose for investing with reference to individual risk preference and time horizon. An investor’s purpose for investing could be for growth or for income or value. Value investing is investing in stocks believed to be worth far more than their current prices rather than those that pay high dividends or seem likely to appreciate irrespective of underlying value. 

On the stock market, there are some stocks that are mispriced. Mispricing is calculated as the difference between the estimated intrinsic value and the market price of a stock. Intrinsic value of an asset, in this case stock, is the value of the asset given a hypothetically complete understanding of the asset’s investment characteristics.  Therefore when a stock is undervalued on the exchange, there is an investment opportunity and smart investors take advantage of that.

The Question then is, how do you know whether a stock is undervalued or not? This is where you need an expert to advice you. Knowing this involves a lot of factors and calculations. One must first valuate the stock using some figures on the financial statement of the company. Some industry experts say that, UT bank is currently undervalued on the stock market. They make their argument with respect to the potentials of the company and how low it is currently priced on the Stock market (0.33p, courtesy: GSE). One thing you should know is that, so many investors do these calculations and that informs their investments strategy. An advice to you is that, for an active strategy to be consistent and successful, the investor’s expectations must differ from consensus expectations and be, on average, correct as well.