List of Nigerian Stocks that outpaced inflation rate in May 2023

Nigeria’s economy has been grappling with high inflation rates, reaching 22.22% recently. However, a group of resilient stocks has managed to outshine this challenging environment, demonstrating remarkable returns that surpass the nation’s inflation rate.

These companies, spanning various sectors, have proven their ability to thrive and deliver impressive performance even in adverse conditions.

Despite the challenging economic conditions, several factors have contributed to the impressive performance of these stocks. Let’s delve into some of the key observations.

What we observed

Industry Trends:

Petroleum and Petroleum Products Distributors: Conoil PLC and Totalenergies Marketing Nigeria PLC capitalized on the steady demand for petroleum products, benefiting from favorable pricing and market dynamics.

Banking: Sterling Bank PLC, United Bank for Africa PLC, and Zenith Bank PLC have reaped the rewards of a resilient banking sector, supported by increased financial inclusion, technological advancements, and improved risk management practices.

Food and Beverage: Cadbury Nigeria PLC and Nigerian Breweries PLC have leveraged the consistent consumer demand for food and beverages, demonstrating the sector’s resilience and adaptability.
Growth Opportunities:

Livestock/Animal Specialties: Livestock Feeds PLC’s robust performance reflects the increased focus on the agriculture sector, as the nation seeks to enhance food security and promote self-sufficiency.
Livestock Feeds PLC’s ability to tap into the growing demand for animal feed and related products has contributed to its impressive returns.

Insurance: Axamansard Insurance PLC has showcased its resilience in the face of economic challenges, benefiting from the growing demand for insurance services and its ability to effectively manage risks.

Market Leadership:

Building Materials: Berger Paints PLC’s strong performance can be attributed to its market leadership, brand recognition, and its ability to cater to the demand for construction and renovation materials.
Economic Factors:

Inflation Hedge: These stocks have provided investors with a potential hedge against inflation. As inflation erodes the purchasing power of the currency, investors have sought avenues to preserve and grow their wealth, turning to stocks with robust returns.

Why this matter

In an economy facing galloping inflation, inflation-beating stocks play a crucial role in preserving investor wealth and providing stability to the overall economy.

When inflation rises rapidly, the value of the local currency depreciates, eroding the purchasing power of individuals and businesses. In this challenging environment, stocks that outpace inflation become essential for several reasons.

Firstly, inflation-beating stocks act as a hedge against the rising cost of goods and services. As companies experience increased costs due to inflation, those with pricing power and the ability to pass on higher costs to consumers can maintain their profitability and even enhance it.

These stocks tend to be resilient in times of inflationary pressure, as their earnings and cash flows have the potential to outpace the rising costs.

Secondly, inflation-beating stocks drive investor confidence and capital inflows. When investors see opportunities to protect and grow their wealth despite galloping inflation, they are more likely to invest in the stock market.
Furthermore, inflation-beating stocks serve as a signal of the economy’s ability to adapt and withstand inflationary pressures. Companies that consistently deliver strong returns despite challenging inflationary conditions demonstrate their resilience, adaptability, and effective management.

Optics

Including inflation-beating stocks in a portfolio is of utmost importance due to the erosive nature of inflation on the purchasing power of money.

Inflation refers to the general increase in prices over time, meaning that the same amount of money will buy fewer goods and services in the future. By investing in stocks that outpace inflation, investors aim to protect and potentially enhance the value of their wealth.

These stocks have the potential to deliver returns that surpass the inflation rate, allowing investors to maintain or increase their purchasing power over the long term.

Including such stocks in a diversified portfolio can act as a hedge against inflation, helping to preserve and grow wealth despite the eroding effects of rising prices.

By focusing on companies that exhibit strong performance, adaptability to economic conditions, and market leadership, investors can position themselves to benefit from the growth opportunities and resilience offered by these inflation-beating stocks.

Caution

It is important to note that while these stocks have outperformed the inflation rate, investment decisions should be made after careful analysis and consideration of individual risk profiles and investment goals. The stock market carries inherent risks, and past performance may not necessarily guarantee future results.

Despite the challenges posed by inflation, these stocks have demonstrated resilience and the ability to generate significant returns.

Investors should keep a close eye on industry trends, growth opportunities, and macroeconomic factors to make informed investment decisions.

As the Nigerian economy continues to navigate inflationary pressures, the performance of these stocks serves as a testament to the potential for growth and value creation within the Nigerian stock market.