What you need to know:
You are one of the lucky few who have some expendable money. Here is where to invest it.
Warren Buffett, the world renowned billionaire investor from the US is quoted widely saying that to make money, an investor should invest when everyone is afraid to buy and sell off when everyone is greedy. The world, is in the middle of the Covid-19 pandemic that has left markets across the global in a bloodbath and economies on the verge of recessions. But for astute investors like Buffett, this could very well be the best time to accumulate strategic assets, or launch relevant businesses. The question is; what can you invest in without burning your fingers? Here is what financial market experts advise on your best bets:
You must pick the right counter for you to make money. Christine Kihara, a financial markets analyst at Abojani Investments says that Safaricom is currently the best pick in the market. “Banking stocks are oftentimes good picks, especially the top tier banks. But the incoming quarterly results are not very positive due to the impact that Covid-19 has had, and the loan restructuring measures that have now eaten over 186 billion,” she says. “This leaves Safaricom as the finest jewel. It goes hand in hand with technology, whose consumption is at its peak. Moreover, the MPESA for Business new line that the company has opened is going to be a major revenue inlet.” This is echoed by Michael David, a financial and investment coach at MoneySense. He says that the price of banks may not be very attractive. “Look at the value of a stock and its price. You buy an asset when its value is much higher than its price,” he says. He singles out Kenya Power as a stock whose value is higher than its current price. “Although Kenya Power has been getting tons of bad publicity lately, its value is much higher than what the price reflects. It is a good pick for long term investors,” he says.
If your purpose is to get sustainable income and you have a good amount of cash with no immediate use in your bank account, you can invest in government bonds. According to David, government bonds are risk free and are a source of sustainable income. “For example, if you have Sh5 million, and you invest it in government bonds at a coupon rate of 13 per cent, you will be getting monthly income of Sh54,000 without taxes,” he says. Ms. Kihara adds that money market funds and treasury bills can be viable alternatives to bonds for investors looking to invest in the short term. “The good thing about money market fund is that it is almost the same as saving but with higher interest rates. This fund invests in near cash asset classes that you can easily liquidate in case of an emergency,” she says. Treasury bills on the hand offer returns in 91, 182, 364 days.
According to Reuben Kimani, the chief executive officer at real estate firm, Username, there are very prime distress properties that are popping up. These properties will return profit in the long run. “Everyone, from individuals to companies, has been pushed to the corner. Consequently, we have some property firms selling land and plots at unrealistically low prices in a bid to get cash and survive. There are also houses on sale with 30 per cent discounts,” says Kimani.
Agribusiness and FMCGs
When you contrast agribusiness and fast moving consumer goods to businesses such as hardware, your money will do better in agriculture and fast consumer goods. This is because with agriculture and FMCGs, the cycle of cash conversion is shorter. “Even in the presence of a pandemic and low liquidity in the population, agricultural products and FCMGs will remain in demand. However, not too many people will have cash to buy cement or steel bars from a hardware,” says Eric Munywoki, a director at Goodson Capital.
This is the best time to start embracing the economic digital revolution. Take Zoom for example. This platform has become a key player at the workplace following directives to work from home. Its popularity will not wither anytime soon as most companies are bound to include work from home formulas to cut on office costs. Follow this trend and put your money in tech. For example, if you are looking to start a business, consider ideas that align with fintech, digital health, and digital education. “Businesses that provide technological solutions like internet provision and voice such as Safaricom will continue to do well,” says Munywoki.