On August 2, 2019, the Nairobi Securities Exchange 20 Share Index closed at 2,586. It was the first time since March 13, 2009, that the index had fallen below the 2,600 mark and sent jitters that the bears were mauling investor wealth to lows last witnessed during the hangover of the 2007/08 post-election crisis which were later amplified by the global financial crisis. The market has since clawed back marginally, closing Monday, December 9 2019’s trade with the 20 Share Index at 2,609.
Peter Wambu’s book The Ultimate Framework for Success in Shares provides a good straddle of both the basics and the intricacies of investing in stocks. Like many others delving into the subject, the book argues that the framework lies in “knowing the right stock, the right price and the right time”. It unpacks this critical tripartite through discussing the need for clarity on one’s investment strategy as to whether they are income investors targeting dividends; growth investors generally targeting small entities with promise for rapid expansion; and value investors who chase targets the upside of undervalued companies.
That the book is heavy on fundamentals using case studies from the Nairobi Securities Exchange is a significant plus. This is especially so given that uptake of securities at the Nairobi Securities Exchange has often been driven by the hysteria of Initial Public Offers after which appetite for the market dissipates.
The book could have done more in some areas, however. First, in an equities market where concentration is high with a few counters having an outsized influence on the aggregate market, perhaps the discussion around the causality between the economy and the stock market could have been better nuanced.
This is particularly important in the present state of affairs where the trajectory of the market seems to be decoupled from that of the overall economy. Second, there is no doubt that foreign capital plays a significant role in swaying the overall direction of the Nairobi Securities Exchange. This is something the book should have offered greater insight on, especially as far as dollar versus shilling denominated returns at the market are concerned. Third, recent occurrences regarding select counters have brought to visibility the challenges faced by listed entities as far as corporate governance is concerned. Whereas the book has a segment dedicated to management quality, it would have been instructive to point out gaps using case studies for readers to better understand the scope of this challenge.
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