10 Best African Stocks to Invest In

Published on July 14, 2021 at 3:43 pm by Ma’k Almario in Hedge Funds, News

In this article, we will take a look at the 10 best African stocks to invest in. You can skip our detailed analysis of these companies, and go directly to the 5 Best African Stocks to Invest In.

Africa, the world’s second-largest continent, has become one of the most appealing developing countries in recent years, thanks to its rising GDP and increased economic activity. The African economy is worth over $2.6 trillion, with $6.6 trillion in annual consumer and sector spending. Nigeria ranked first with a GDP of $442.98 billion, followed by Egypt with $361.88 billion and South Africa with $282.59 billion. The country is home to well-known businesses such as MTN Group Limited (OTC: MTN), Naspers Limited (OTC: NPSNY), and Sasol Limited (NYSE: SSL).

Africa’s abundant resources made the continent a hotbed of commerce and economic activity. According to an article by consulting firm McKinsey, Africa has enormous growth potential, with industrial output expected to reach $930 billion by 2025.

Africa and The Mining Industry

The stock market in Africa is dominated by mining businesses that allowed the continent to compete against its American counterparts Newmont Corporation (NYSE: NEM), Barrick Gold Corporation (NYSE: GOLD), and Freeport-McMoRan, Inc. (NYSE: FCX). Africa is the fastest-growing area for foreign direct investments with over 30% of the global mineral resources. In 2019, Africa’s mining exploration budget totaled $1.12 billion. In 2020, due to travel limitations and risk concerns amidst the COVID-19 pandemic, the exploration budget decreased by 10%. However, the region expects stronger metal demand and price increase as a result of the post-pandemic economic upswing due to the easing of the COVID-19 pandemic restrictions and vaccine rollouts.

Africa is home to some of the biggest names in the mining business, such as Sibanye Stillwater Limited (NYSE: SBSW). Sibanye Stillwater Limited is one of the best African stocks to invest in with a share price of $17.31. The company’s share price soared 75% in the last twelve months.

The Rise in African Technology

Africa’s technology sector is expanding at the same rate as its mining sector allowing the continent to compete with tech-heavy giants Microsoft Corporation (NASDAQ: MSFT), Amazon.com, Inc. (NASDAQ: AMZN), and Apple, Inc. (NASDAQ: AAPL). In 2020, Africa reported a total of 643 tech clusters, with Nigeria, Egypt, Kenya, and South Africa hosting the most. According to an article released by Further Africa, Africa’s internet economy is expected to be worth $180 billion in 2025, with e-based economic activity accounting for 5.2% of GDP.

Many African startups are relying on digital modernization to handle day-to-day issues such as M-Post. M-Post is a 2016 startup that allows its users to use their mobile phones as an official digital address service that allows more efficient distribution to remote areas. The clean-tech business EcoPost is another African startup that is gaining attention. Since its inception in 2010, the company has recycled over 2.5 million kg of plastic, which it converts into furniture, fence posts, and signposts, preventing it from decomposing or being eaten by termites.

One of the best African stocks to buy now in the tech industry is Naspers Limited (OTC: NPSNY). The company is well known for its technology and capital investing operating in over 130 countries. Shares of Naspers Limited climbed 1% over the last twelve months. The company operates in high-growth business sectors such as e-commerce and media platforms.

Photo by Jacques Nel on Unsplash

The African economy will continue to grow with its huge potential and major hedge funds and institutional investors look towards the region to benefit from the growth potential as they struggle to perform in established markets. The entire hedge fund industry is feeling the reverberations of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and February 26th, 2021 our monthly newsletter’s stock picks returned 197.2%, vs. 72.4% for the SPY. Our stock picks outperformed the market by more than 124 percentage points (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 16th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.

In light of this, let’s analyze the best African stocks to invest in. We took into account hedge fund sentiment, analysts’ ratings, future growth catalysts, and fundamentals while choosing these stocks.

Best African Stocks to Invest In

10. Mix Telematics Limited (NYSE: MIXT)

We start our list of the 10 best African stocks to invest in with Mix Telematics Limited (NYSE: MIXT). The South African-based provider of fleet management service as a software solution was founded in 1995 and invented several AI-powered fleet solutions such as the MyMix Tracking. MyMix Tracking is an app that specializes in tracking drivers in real-time to self-correct dangerous driving behavior.

MIXT has a P/E of 22.50. Shares of MIXT jumped 74% over the last twelve months. On May 28, Canaccord Genuity maintained a Buy rating on Mix Telematics Limited’s (NYSE: MIXT) and set a price target of $16.

Greystone Capital mentioned Mix Telematics Limited’s (NYSE: MIXT) in its Q2 2020 investor letter:

“In early April, clients may have noticed shares of MiX Telematics (MIXT) in their accounts during one week only to see them sold shortly after. During the quarter, we entered and quickly exited a position in MIXT, for the simple reasons of not wanting to own shares in a business quite levered to the oil and gas industry given the current industry dynamics. In a fragmented industry with few large-scale players, MIXT is a solid company with a strong product offering, a long track record of success, and a founder/CEO who is very much aligned with shareholders, having navigated the business through multiple cycles successfully. MIXT is currently available at what I feel is a cheap price, and their high-quality customer base, recurring revenue profile, and long runway for growth most likely mean the business will continue to perform well into the future. With that said, MIXT has a large exposure to the oil and gas industries through their customer base, especially in the US, where these customers represent the bulk of MiX’s highest margin revenue segment or ‘large fleet’ customers. I believe we are at a cyclical trough for many of these subscribers (representing a large chunk of revenues), and with so much uncertainty and carnage in the energy industry right now, I believe we will most likely see major fleet contractions moving forward, and a return to cyclical revenue/operating income lows similar to 2015-16. I realized very quickly after purchasing our shares that I had no special insight into whether the current situation surrounding oil prices is not as bad, different, or worse than 2015-16, and thought it would be best to watch things play out from the sidelines. The timing was on our side, as we did not experience any permanent losses of capital and broke even on the short-term trade.

I’m not able to remember a time when I’ve entered and exited a position so quickly following the completion of my research/due diligence process, but in the case of MIXT I believe it made sense to do so from a risk management standpoint. I will be monitoring the situation closely over the next 12-18 months and would be happy to re-visit an ownership position at lower prices or when I feel as though there is more clarity surrounding a large portion of MiX’s customer base. Clients were emailed a more detailed writeup outlining the opportunity and my thought process behind initially making the investment. The writeup as an appendix to this letter will also be available on our website.”

9. DRDGOLD Limited (NYSE: DRD)

Ranking 9th in our list of 10 best African stocks to invest in is DRDGOLD Limited (NYSE: DRD). The South Africa-based gold producer was founded in 1895 and is one of the best African stocks to invest in with a market cap of $938 million. In 2020, South Africa’s Sibanye-Stillwater (NYSE: SBGL) acquired 12% interest in the company where the earnings will be used to support the early stages of phase 2 of the company’s tailings retreatment project.

In the same year, the company produced a total of 174,385oz of gold. DRDGOLD Limited (NYSE: DRD) posted a decrease of 6% quarter-on-quarter in gold output to 1,328 kilograms. DRD shares currently have a P/E of 10.24. Shares of DRD jumped 10% over the last three months. On May 6, analysts from HC Wainwright & Co. maintained a Buy rating on DRDGOLD Limited (NYSE: DRD) and raised the price target to $19.25.

Like Microsoft Corporation (NASDAQ: MSFT), Amazon.com, Inc. (NASDAQ: AMZN), Apple, Inc. (NASDAQ: AAPL), Newmont Corporation (NYSE: NEM), Barrick Gold Corporation (NYSE: GOLD), and Freeport-McMoRan, Inc. (NYSE: FCX), DRDGOLD Limited (NYSE: DRD) is one of the best stocks to consider for long-term gains.

8. Harmony Gold Mining Company (NYSE: HMY)

Ranking 8th in our list of 10 best African stocks to invest in is Harmony Gold Mining Company (NYSE: HMY). The gold mining company is one of the largest in South Africa with a market cap of $2.46 billion. In 2020, the firm received clearance to purchase AngloGold Ashanti Limited’s (JSE: ANG) remaining gold mining assets in South Africa for $300 million.

The mining company was founded in 1950 and operates over nine underground mines and many surface operations in South Africa. HMY shares currently trade for $3.91 and have a P/E of 10.16. The current dividend yield is 1.97%. Shares of Harmony Gold Mining Company (NYSE: HMY) jumped 2% over the last five days.

7. AngloGold Ashanti Limited (NYSE: AU)

AngloGold Ashanti Limited (NYSE: AU) ranks 7th in our list of 10 best African stocks to invest in. AngloGold Ashanti Limited was founded in 2004 and operates as one of the top global gold mining companies with headquarters in South Africa. Earlier this year metal company Sibanye Stillwater Limited (NYSE: SBSW) stated that combining Gold Fields Limited (NYSE: GFI) and AngloGold Ashanti Limited (NYSE: AU) would create one of the top gold mining corporations in the world, capable of dethroning industry leader Newmont Corporation (NYSE: NEM). However, they are still debating on a possible merger, and it is not yet finalized.

AngloGold Ashanti Limited (NYSE: AU) posted basic earnings per share of $203 million or 48 cents per share in the first quarter of 2021. The company’s revenue from product sales in the first quarter of 2021 came in at $979 million in the first quarter of 2021, an increase from $905 million in the same period of 2020. Shares of AU jumped 4% over the last five days. On March 8, HSBC analyst Leroy Mnguni upgraded AngloGold Ashanti Limited (NYSE: AU) to a Hold rating from a Reduce rating with a $24 price target.

Like Microsoft Corporation (NASDAQ: MSFT), Amazon.com, Inc. (NASDAQ: AMZN), Apple, Inc. (NASDAQ: AAPL), Newmont Corporation (NYSE: NEM), Barrick Gold Corporation (NYSE: GOLD), and Freeport-McMoRan, Inc. (NYSE: FCX), AngloGold Ashanti Limited (NYSE: AU) is one of the best stocks to consider for long-term gains.

6. Gold Fields Limited (NYSE: GFI)

Johannesburg, South Africa-based Gold Fields Limited (NYSE: GFI) ranks 6th in our list of the 10 best African stocks to invest in. Gold Fields Limited operates one of the biggest gold mining firms worldwide. Gold Fields Limited (NYSE: GFI) continues to expand its services to meet the market’s growing demand.

The company currently has a market cap of $8.4 billion. In the first quarter of 2021, the company reported a revenue of $1.7 million. Shares of GFI jumped 2% over the last five days. On May 24, RBC Capital maintained a Sector Perform rating on Gold Fields Limited (NYSE: GFI) and raised the price target to $10.75.

Like Microsoft Corporation (NASDAQ: MSFT), Amazon.com, Inc. (NASDAQ: AMZN), Apple, Inc. (NASDAQ: AAPL), Newmont Corporation (NYSE: NEM), Barrick Gold Corporation (NYSE: GOLD), and Freeport-McMoRan, Inc. (NYSE: FCX), Gold Fields Limited (NYSE: GFI) is one of the best stocks to consider for long-term gains.

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