MY SEARCH FOR A PENNY STOCK (my Investing ANECDOTE)
20/01/14
Some
weeks back, after selling my UBAcap and AFRIPRUD I reviewed my portfolio and I
noticed I only have one penny stock which is NEM, so I thought of adding. The
definition of penny stock varies from individual to individual but I mostly
base mine on stocks below N2. Before beginning the search my criteria was strictly
SOUND FUNDAMENTALS. So the filtering began, from cheapest stocks to cheapest
with lowest PE, I went on and on and finally I arrived at Prestige, NEM, Niger
Insurance, C and I leasing, ROYALEX, Trans EXP, NPFmfb and Law Union Insurance.
I was done quantitatively so I had to look at
my quantitative picks qualitatively. Instantly Niger insurance, Royalex and Law
and Union was scrapped, why because I am always skeptical about the insurance
sector and if I will ever buy I will only buy Aiico, NEM and Prestige as I have
always done in the past. So I was left with NEM, Prestige, C&I NPF and
TRANS Exp. I also screened out NEM because it already represents a large
portion of my portfolio which also made me screen out Prestige since it is also
an insurance stock. So finally I was left with C&I leasing NPFmfb and TRANS
EXP.
I then
focused my attention on the remaining three companies.
Candidly I was wowed by the numbers
of Trans EXP, nice EPS, very low PE, wonderful ROE but I was taken aback with
the Turnover and PAT. Q3 PAT of a company is 50mill!! I remember asking myself
if the company is a kiosk!!! That was how Trans Exp was ejected leaving me with
NPFmfb and C&I
I moved on to C&I and again I
was moved, Nice PE, attractive BV with compelling PBV but the Profit margin of
the company reveals the rot in the company, the ROE is not also encouraging so
C&I leasing was evicted leaving me with NPFmfb
I looked into NPFmfb, the numbers
seem positive in all ramification, good PE, relatively low PE ,moderate ROE
positive Profit Margin, BV and PBV also looks good. Above all buying NPFmfb
guarantees me a .10k dividend which will represent 12.5% dividend yield as I
have made up my mind I will not buy above .80k. So that’s how I found a penny
stock for myself and the next thing is to swing into action.
I swung into action and that was
when by bubble was busted, for a whole week with enormous communication with my
broker I could not get a single unit of NPF despite it staying at .75k for
three days. I had to go beyond my price limit yet I could not get. When it got
to .85k I left it alone.
This is just my anecdote, neither a
recommendation nor an aspersion towards any of the above stock.
@1himself
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