Batanai Matsika IT is fascinating that much of what humans do in life is searching for something. Life in itself requires one to find a good education, a job or income generating activity and most importantly a life-partner.
Those who are lucky enough also find happiness. “Ask and it will be given to you; seek and you will find; knock and the door will be opened to you”.
Much of our activities tend to revolve around this Bible verse and this could be the reason behind the success of Pokémon Go, a 2016 augmented reality (AR) mobile game developed and published by Niantic.
Pokémon Go is perhaps the biggest AR game to date. It is estimated that in 2019 alone, Pokémon Go earned US$1,4 billion while Pokémon Go live events earned US$249 million in tourism revenue.
Pokémon Go is a game that uses your phone’s GPS to detect where and when you are in the game and make Pokémon (virtual creatures) “appear” around you (on your phone screen), so you can go and catch them. As you move around, different and more types of Pokémon will appear depending on where you are and what time it is.
The idea is to encourage you to travel around the real world to catch Pokémon in the game. You may have heard stories of people hunting down Pokémon on their office desks, in hospital rooms, and even in bathrooms.
One teenage girl even found a dead body while looking for Pokémon.
In the same way gamers search for Pokémon, the focus for investors on a stock market is getting alpha returns.
Alpha, one of the most quoted indicators of investment performance, is defined as the excess return on an investment relative to the return on a benchmark index.
For example, if you invest in a stock on the ZSE, and it returns 20 percent while the ZSE ASI earned 5 percent, the alpha is 15.
An alpha of -15 would indicate that the investment underperformed by 20 percent. An alpha of zero suggests that an investment has earned a return commensurate with the risk. Alpha of greater than zero means an investment outperformed.
So, when hedge fund managers talk about high alpha, they are saying that their managers are good enough to outperform the market. But that raises another important question; “How can one beat the market and achieve alpha returns?”
Our approach as Morgan & Co Research involves a combination of fundamental analysis techniques and market intelligence. For stock recommendations, we make use of a system that is based on two key parameters; (i) the quality of management teams and (ii) future earnings as measured by our Forecasted Earnings Per Share (EPS).
The EPS estimates are constantly being updated from time to time to reflect the changing dynamics affecting the company’s earnings potential. Stocks are then ranked based on these two set of parameters to identify winners (BUYs) and losers (SELLs).
In addition to company fundamentals, our ears are always on the ground for any critical market intelligence that can impact share prices movements. Market sentiment analysis is also critical. In the long run, valuations tend to drive stock prices, but in the short-term it is market sentiment that moves prices.
News Analysis is also another technique or method that is used to trade shares and other instruments on the financial markets. It is essentially an attempt to profit from price movements emanating from immediate market reactions to major news and economic data announcements.
Generally, economic as well political news reports often spur strong short-term movements in the markets, which may create trading opportunities. For example, company results releases, M&A activity, announcements about interest rates, unemployment or the central bank’s policy shifts can affect exchange rates and share prices.
Similarly, news relating to corporate profits or a change in management can affect the share price. Based on our analysis, stocks on the ZSE where possible M&A activity could present significant trading opportunities include Dairibord Holdings, First Mutual Holdings Limited, SeedCo, ZB Financial Holdings and Zimre Holdings Limited.
Overall, when playing Pokémon Go, to catch them all (and earn the medals attached to catching Pokémon), you are going to have to explore far and wide and be engaged during the day and night. That is the only way to become the very best, like no one ever was. The same can be said of the stock market.
We are reliably informed that there will be yet another round of liquidity injection on the stock market that could trigger a rally.
If you are seeking alpha returns, download the Morgan & Co Research App today and have access to market intelligence on the go!
● Matsika is head of research at Morgan & Co and founder of piggybankadvisor.com. He can be reached on +263 78 358 4745 or batanai@morganzim.com / batanai@piggybankadvisor.com
