Thread by @ooyeboade

Here is the most recent ARM's stock recommendation. Don't be too scared to take risk. YOLO!

Personal Note:
1. Don't buy stocks if you can't keep the money away for at least 1 year. If you invest your rent money that is due on 1st January in stocks, it MAY end in premium tears.

2. No amount is too small, just start from somewhere N50K, N100Ketc

3. It is important that you understand the concept behind the investment house's rating. Most times, they rate a stock for a BUY because of a significant UPSIDE POTENTIAL (UPP) that they have estimated could be

realized in one year. So if you buy based on the recommendation, you must be willing to wait for 1 year. Also, their recommendation may change as it is not cast in stone. So they could have recommended a stock for BUY 2 months ago and now recommend for a HOLD or SELL today. Know

this and know peace.

4. Set a target for the returns you will like to get. I would assume everyone wants returns that's above the inflation rate. September's inflation rate printed at 13.7% and I do not have any doubt that December will be up to 15%.

5. Check the upside column, that tells you the difference between the current share price and the target price of the investment house. That's the FVE on the stock recommendation image shared in the first tweet of this thread. The FVE is highly subjective and different investment

houses will have different values. That figure is also not cast in concrete. Know this and know peace.😁

For example, UBA's share price as at close of trading yesterday was N7.7 and ARM's target price for this stock is N10 resulting in UPP of 29.9%. This means that if you

buy the stocks at this price, and you are able to wait for at least one year, you may make ~30% in capital gains.

6. The UPP column is not enough. You need to check the P/E ratio. P/E ratio could be used to tell if the stock is overvalued or undervalued. Since it is

quite difficult to tell what the optimum P/E ratio should be, it will be instructive for you to compare P/E ratios of stocks in the same industry. For example, if you look at the UBA's and GTB's P/E ratios (2.1 and 6.0 respectively), it appears that UBA is relatively cheaper than

GTB even though one may argue that both stocks are currently cheap.

7. The P/B ratio is also very important metric. There is no single ratio that tells the whole story so you have to combine all relevant ratios together. P/B ratio is the Price to book ratio. This

compares the company's net asset value (book value) with the market capitalization. Most companies market capitalization usually exceed the book value so it it is very common to see a P/B ratio that's greater than 1. Most times P/B ratio less than 1 shows strong fundamentals

because it means that the stock is trading at a discount to the book value unless investors feel that the company's assets are overvalued. So, look at UBA and GTB again. UBA's P/B ratio is 0.4 while that of GTB is 1.9. Using this metric too indicates that UBA's stock price

is relatively cheaper than GTB's even though both appears cheap.

8. I relish dividend's credit alert (no matter how kobo-kobo) and I am sure you love it too. So you should look at the Dividend yield column. See UBA and GTB again! UBA's dividend yield is higher than

GTB's. May be it's just a coincidence😜.

9. If you choose a stock from the ARM's list, you should check recommendations from Meristem, FSDH, Afrinvest too. I like Meristem because their FVE is always lower than others. They are more conservative than others.

10. Try to diversify. if you are investing just N100k, instead of buying only UBA, you can buy UBA and Zenith.

11. Please note that all these analyses do not guaranty any returns on your investment, BUT if you diligently apply this info, you would have greatly reduced your

downside risk.

If you want to learn more about P/E, P/B ratios, you should follow @themoneyafrica. They have explainers on all these.

I always recommend "The Intelligent Investor" book by Benjamin Graham for anyone that's interested in stock investment.

Cheers.