What is going on with the Insurance stocks?

[chymex]

Does anybody have any professional explanation on what is happening with the stocks in the Insurance sector? They all appear to be on a free fall.

I was advised by my broker to buy into MBENEFIT, LASACO, UNIC and WAPIC, which I did, but it appears that since I bought into them they seemed determined to test my shock management abilities.

Is it advisable to pull out of them at this time even when they have all lost N1 minimum (almost 25% each) since I bought into them and seem determined to sink even further? Are there fundamentals supporting these stocks? Almost everyday they keep reporting in RED.

Where are the gurus of this forum? Please bring your expertise to bear to advise this discouraged brother and save my hard earned coins .

[paragon]

@ chymex,

it is obvious that people that bought when these stocks were selling low are cashing in on their gains. The market is driven by two things- FEAR and GREED. this is what we are seeing.

If you ask me, now is the best time to buy some of these stocks, because when they begin a rally, it's going to be another story altogether.

[oseitutu]

Originally Posted by paragon

If you ask me, now is the best time to buy some of these stocks, because when they begin a rally, it's going to be another story altogether.

Can I ask you Paragon, what signalled the sudden reversal of price direction? Is it the new listings in that sector? When you say this is the best time to buy, how do you know they will not lose 90%? How do you know they will ever recover within say 2 years to today's price. There has to be a reason to buy now, not just that the price is falling, or that they have lost 25%. Are insurance stocks now underpiced? That is the question.
Chymex, just hold what you have. If you have already lost up to 25%, do some due diligence and decide. You may dispose of the ones that are worst and hold onto the others....if you need the money now. Otherwise, just wait for their year end and book end. Good results will spell price appreciation. Do not panic or worry 'cos worrying is another problem.
On the other hand, if you are confident that the price will continue to drop and will drop significantly for one reason or the other, then sell now and when the price has dropped 60%, buy up. That way you may have doubled your holdings. However that is gambling and remember, you can not win them all.

[cfa]

I will probably offload some of them and buy International Energy Insurance Limited, if you still want to be in that sector. It was listed today for 1.35, current price 1.41 and volume was very robust 82,961,000.

N2 in the near term is my speculation.

[paragon]

@ Oseitutu,

one of the reasons why the stocks in that sector inparticular in losing steam is because of upcoming offer, Dangote flour, Access bank and the rest. investors have made quite some gains from stocks in the insurance sector. they are however cashing in to partake in the upcoming offers.

Insurance firm are undervalued based on future prospects and let me say that the future is just by the corner. why else do you think that people will still be buying as others are selling.Nigerias' market is characterised by inexperienced investors and this is one of the causes of high volatility.

I am a high risk taker, so i do not expect everyone to be like me. The best i can do is to express my beliefs and that is what i've done.

[obritto]

ave just made order 4 lasaco is it a good move? pls advise i can still cancel

[cfa]

It's all profit taking. The insurance sector is all about speculative trading right now. Their is no real analysis going on.

Those that were lucky to get in when they were trading for N1/N2 are now reducing their positions. I still see some selling pressures going forward as some speculators become spooked by the recent downturn.

You can see that the trading volume for most of the insurance stocks are thining out. Volume in the sector has fallen sharply from around 20-30% of trades to less than 10% recently. I will wait to see an uptick in volume before I proceed if you don't already own the stock.

It looks like the institutional guys have stopped buying and you have the likes of you and I selling.

[olusolakemmy]

what is happening basically is profit taking.
might be due to upcoming offer or not,but fear is the word, i might not be able to relate profit taking to greed, cause the name of the game is profit.

i also bought lasaco at N3.3, i will rather buy more if the company shld fall to say N2 OR N1.5, SO As to average my purchase price to abt N2.5, that way i can sell at N4.5

sentiment and speculation play a major role in the stock market, imagine just because wema bank rebranded themself, prices begin to rise,i knew it will happen, but i dont have funds to buy, its not as if wema release a report that show mega profit n they did not promise bonus,i tell you, the price will rally to abt N18 before it stop.

soi will advice you to wait, if u sell, you might regret n it can also favour u

[obritto]

thx kemmy. u great help. I take ur answer to mean i should go ahead n buy lasaco

[c kenneths]

I also believe its profit taking, and this is a nice time to buy, especially the nice ones with a lot of fundamental strenght.

But some of my mischievious friends are insisting it all has to do with the rumoured recertification/recapitalization in the insurance sector?

Does anyone have an angle to this rumour?

[olusolakemmy]

cfa, if you sell and intend to international energy, you might not be able to buy until it hit 3.5 to 4, reason been that has been the trend on the sector for all the new listed companies.

c.kenneth, i also thought in that line that people might be scared that some of this firm might not succeed after recertification.

but i think some like mutual fund, cornestone, lasaco and others shld scale the bridge

[c kenneths]

Olusolakemmy, they should, only that this market is driven by fear and greed, a little bad news and there is a stampede, small investors may get trampled in the greed of bigger investors.

But some of these insurance stocks are reporting a robust increase in both turnover and profitability, eg. Cornerstone reported a 25.72% rise in turnover and a 193.67 rise in PAT.

Also NEM, Linkage, STDinsure, and Sovereign trust are some of the companies reporting rising earnings, but they are all shedding prices, maybe due to profit taking.

For those that have bought and are seeing the prices sliding further, you can do one of two things, if you are averse to risks, then do nothing, just wait for the prices to turn around, it usually does.

But for people like me, with a high risk appetite, this is a sure buying opportunity, a swoop is advised and a sale in the short term since the situation of these companies is not bad. Naira cost averaging is adviced here, buy more of the stocks as prices decrease, your average price will be fair, and if it ever gets to your previous buy price, you are already in profit.

Prices will turn but when? two weeks, a month, a year? let's wait and see.