The PSX Stocks to Dump in 2023

Protect your investments in 2023 by avoiding these 5 worst-performing stocks in the Pakistan Stock Exchange (PSX).

Apr 21, 2023
The heading is counterintuitive, right? If they are the best-performing stocks, why shouldn’t you own them in 2023?
Because all these are penny stocks! Stocks that have no inherent value, don’t earn money but are going up because of temporary high demand.

Who is buying penny stocks?

The high demand is coming from naive investors (or Bechara investors) who confuse trading for investing. Or from sharks that want prices to go up so that it draws in small retail investors and then dumps it. that retail guy is lucky, he makes some money to lose in the next trade. But if he is unlucky he losses in the same trade.
See the list and tell us if knew about any of these stocks.
Returns in 2022
Pak Leather Craft
Reliance Cotton Spinning
Meta-Tech Health Insurance
JDW Sugar Mills **
Quetta Textile
  • Reliance Cotton Spinning is not a penny stock however, it’s very illiquid and hence very risky for a retail investor to buy.
  • *JSW is not a penny stock instead it’s a nicely run sugar mill in Pakistan belonging to Mr Jahangir Tareen. However, it’s very illiquid and it rallied so much after the announcement of a buyback.

Final thoughts about investing in penny stocks?

If you are one of those who have made money in any of these penny stocks, good for you! But trust us, it’s more luck and less shrewdness. The worst part is if any of these names was your first investment, it has ruined your investment experience! You will now demand such returns from all the stocks and feel bad when they don’t perform. Or you will always be on a hunt for penny stock and then lose.
Don’t let penny stocks ruin your investment psychology for life. Try this five-step guide instead!

Step-by-Step Guide to beginners investors in Pakistan Stock Market

We have a dedicated entire Frequently Asked Questions (FAQ) page for new stock market investors (link) but basically, you should follow these technical guidelines:

1. Invest in stocks that you understand

This is a very simple but very crucial point to understand. You must be working somewhere and that company somehow will be linked to a listed stock. For example, if you are an accountant working for a marketing company, you would know which clients are paying the highest. These are the industries you should look to invest in. Or say you are an HR person in a company and know that things are tough at your end, then you shouldn’t buy stocks from your industry.
It can look very simple but this step will build your foundations to become a better investor. Peter Lynch become one of the best investors doing exactly this.

2. Start reading research reports

Even before you invest a mere Rs1000 in any stock, read a research report on the same stock or its competitor if that particular stock isn’t covered. Why spend so much time when someone has already written a detailed report on it?
These reports will give you a detailed idea about the earnings, growth, dividends, and value of the stock. And these are the only things you should know.
Many websites offer free brokerage research, but we like to use this particular website.

3. Invest only that you can afford to lose

Why am I talking about losing first before making money? Because since 2017 most of the investors have lost more than they have made. The stock market isn’t doing well.
While it may be a good time to enter given prices are low, we don’t know for how long they will stay low or even if they would come down more or not. If you are starting with all the money you have, then even a 5% drop will be too big for you.
Start small. You can always increase the investment as you go along. Consider it like your business, go slow and understand the dynamics first.

4. Choose big names

What are the chances of Dewaan Farooque motors going default vs Engro Corporation? Dewaan can default because if it doesn’t produce anything while at the same time, Engro has successful legacy businesses.
You are far less likely to go wrong in Engro versus a penny stock.

5. Start with companies that pay dividends

Nothing beats the feeling of an unexpected inflow hitting your bank account. There are so many companies that pay dividends every three months – buy them instead of a growth company. These dividend-paying companies are also the ones that have big moats around their businesses and have a history of making money.
Making money from growth companies not only requires solid research but also the correct timing of buying and selling them. Then why take the risk? Keep the growth stock for a later stage.

Or invest through mutual funds

If these are too many things for you, consider investing in stocks through a mutual fund. We have a detailed FAQ section that will explain everything that you should know before investing (here is the link).
But if you are adamant about direct stock market investing, read technical research reports. That is the easiest way to select a stock yourself. But in no way, invest or trade without knowing the basics.
We have a dedicated video explaining each aspect of investing in the stock market in Pakistan. Which stocks should you choose? what are the steps to doing research? Should you enter when stocks are falling etc? Here is the video