How to Grow Your Money with The Paramount Fund (Equity)

FUND MANAGER SERIES: THE PARAMOUNT FUND (EQUITY) · NOTE 1/5

Bigger Isn't Always Better. But Size Matters. 

What professional investors look at before they buy a stock and why the share price is almost never the first thing they check. 

Favour Tewogbade  ·  Chapel Hill Denham Management 

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Picture two businesses. The first is the provision store in your neighbourhood, the kind that knows your name, lets you buy on credit, and has been there fifteen years. The second is a company like Justrite or Ebeano: hundreds of staff, branches in multiple states, millions of customers every month. Both are real businesses. Both have loyal customers. But if the economy tightens and people pull back on spending, which one do you think weathers it better? 

Most people instinctively pick the larger one. And they are right. That same instinct is exactly where professional investors start when they look at the stock market (NGX). 

Nigeria's stock market has a total value of approximately $116.98 billion. That is an impressive number it makes the NGX one of the largest equity markets in sub-Saharan Africa. But if you stop at the headline, you will miss the reality underneath it. 

WORD TO KNOW - NGX: Nigerian Exchange Group — Nigeria's main stock exchange where shares of listed companies are bought and sold. Also called the Nigerian Exchange or the stock market. 

 

What 'Size' Actually Means on the Stock Market 

When investors talk about the size of a listed company, they are not talking about the number of employees or the size of the head office. They are talking about Market Capitalisation, usually shortened to market cap. Take the share price and multiply it by the total number of shares in existence. The result tells you what the market believes the entire company is worth today. 

WORD TO KNOW - Market Capitalisation (Market Cap): The total value of a company as priced by the stock market. If a company has 500 million shares and each share costs ₦200, the market cap is ₦100 billion. Think of it as the market's answer to the question: what is this entire business worth right now? It is a measure of scale, not quality. 

The important thing to understand is that market cap is not the same as profit, revenue, or how well the company is actually run. It is a measure of scale. A starting point, not a verdict. 

 

A Surprising Fact About the Nigerian Stock Market 

Most people assume the NGX is a fairly level playing field. Around 130 companies listed, all contributing their share to the market. The reality is very different. 

 

Think about what that means. One in ten companies, not even a full handful, controls the vast majority of the market. The bottom hundred companies, by contrast, share less than 5% between them. 

Think of it like Oshodi market. Hundreds of traders, but a handful control the prime spots at the entrance, run the biggest stalls, and do the majority of the daily turnover. The rest are further back, smaller, and see far less traffic. The NGX is structured the same way. Knowing which stalls are at the front is half the battle. 

 

Why Larger Companies Tend to Hold Up Better 

Nigeria's economy moves in cycles that most Nigerians know intimately. Fuel subsidy removal. Naira devaluation. Interest rates climbing. Inflation eating into purchasing power. These events do not discriminate between large companies and small ones, but they do not hit them equally either.  

• Better access to funding: when banks tighten lending, large companies still have options. They can issue bonds, raise equity, or negotiate facilities that smaller businesses simply cannot access.  

• Resilience when things get hard: A large company with deep reserves and a diversified customer base can absorb a difficult quarter without collapsing. A smaller company may not survive it. For investors, that staying power protects your capital. 

• More experienced management: Companies that have grown to scale generally have leadership teams that have navigated at least one crisis, one regulatory shift, one competitive threat.  

• Shares that actually trade: This is the one most retail investors miss. Larger companies tend to have more of their shares available to buy and sell in the open market. We go deeper on this concept called free float in the next note.  

 

But Bigger Does Not Automatically Mean Better 

Here is where we need to be straight with you. Size is the starting point of our analysis at the Paramount Fund (Equity), not the conclusion. A large company is not automatically a good investment. A small company is not automatically a bad one. 

What size does is narrow the field. Think of it like house hunting in Lagos. Before you start visiting properties, you decide which areas are worth your attention: Ogudu, Gbagada, Maryland, Ikeja GRA, Island (Victoria Island, Lekki, Ikoyi), maybe Surulere. You are not saying those neighbourhoods guarantee a good deal. You are saying they meet a minimum threshold worth your attention. Size does exactly that for stocks. It sets the neighbourhood. 

FROM THE FUND MANAGER: "Size doesn't determine whether we invest. It helps determine where we start looking. It is the filter before the filter." 

The Share Price Trap Most Investors Fall Into 

Before your next trade, consider this: a ₦500 share is not more expensive than a ₦20 share in any meaningful sense. The price per share on its own tells you almost nothing. What matters is the size and quality of the whole business behind it. 

WORD TO KNOW- The NGX 30: The thirty largest and most liquid companies on the Nigerian Exchange. Used as a benchmark a way to measure whether an investment is doing better or worse than Nigeria's top companies overall. 

Imagine two properties in Lagos. One is listed at ₦25 million in Ikorodu. The other is ₦250 million on the Island. Can you say which one is the better deal just from the price? Of course not. You need to know the size, location, condition, and rental income. Only then does price mean anything. Stocks work exactly the same way. The price you see on screen is just the starting point. What matters is the value underneath it. 

The Paramount Principle: We begin every investment decision with size. Not because large companies are automatically great investments, but because their scale gives us a foundation from which to assess everything else. 

 

What to Take From This Note 

➡️ Market cap is the total value the market assigns to a company. It is a measure of scale, not quality. 

➡️ Ten companies account for roughly 70% of the NGX's total value. The exchange is far more concentrated than most people realise. 

➡️ Large companies have real structural advantages: better funding access, stronger resilience, and shares that actually trade. 

➡️ Size is the starting point of professional analysis, not the conclusion. It narrows the field. It does not make the decision. 

➡️ A ₦500 share is not more expensive than a ₦20 share. Share price alone is one of the most misleading numbers in investing. 

💬  YOUR TURN! QUICK QUIZ 

In your opinion, why does size matter most when choosing a stock? 

☐  Larger companies always make more profit 

☐  Size signals quality, resilience, and shares that actually trade 

☐  Small companies are more exciting and grow faster 

☐  Size is just a vanity metric, it doesn't affect returns 

Drop your answer in the comments below 👇🏾

 

Coming in Note 2: once you know a company is large enough to consider, the next question is how much of it you can actually buy and sell. The answer may surprise you. 

 

→  Subscribe to the Paramount Fund (Equity) on the InvestNaija app 

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