We recently compiled a list of the 10 Best Middle East and Africa Stocks To Buy According to Analysts. In this article, we are going to take a look at where Harmony Gold Mining (NYSE:HMY) stands against the other Middle East and Africa stocks.
MENA’s Economic Outlook for 2024 and the Rising Interest in Private Equity and Venture Capital Investments
According to the Middle East and North Africa Economic Update report published by the IMF in April 2024, the Middle East and North Africa (MENA) region will experience modest growth of 2.7% in 2024, up from 1.9% in 2023. Both oil importers and exporters in the region are expected to grow at similar rates in 2024. The forecasted growth difference between the Gulf Cooperation Council (GCC) economies and developing oil importers (excluding Egypt) is nearly 1%. GDP per capita is expected to rise by just 1.3% in 2024, driven almost entirely by the GCC economies. The impact of ongoing conflicts has ceased economic activity, particularly in Palestine. In Gaza, economic activity has nearly dropped by 86% in the fourth quarter of 2023 compared to the same quarter in 2022. The Palestinian economy’s outlook remains highly uncertain, heavily dependent on the conflict’s progression. The disruptions in maritime transportation, particularly through the Suez Canal, affected both regional and global trade.
Over the past decade, most MENA economies have seen increases in their debt-to-GDP ratios as MENA oil importers struggle to reduce their debt-to-GDP ratios due to high oil prices. Additionally, oil importers have been unable to lower their debt-to-GDP ratios through inflation, mainly due to exchange rate fluctuations and off-budget factors, known as stock-flow adjustments, highlighting the need for greater debt transparency. On the other hand, for MENA oil exporters, periods of high GDP growth are typically associated with smaller increases in nominal debt stocks, leading to a slower rise or even a decrease in the debt-to-GDP ratio.
However, interest in private equity (PE) and venture capital (VC) has been surging in the Middle East and Africa, reflecting a notable shift in investment preferences within the region. According to recent data, provided by Preqin, in collaboration with the Dubai International Financial Centre (DIFC), approximately 65% of investors in the region are either planning to maintain or increase their exposure to private equity this year. Similarly, 56% of investors are keen to do the same with their venture capital investments. This growing interest is partly due to the region’s historical under-investment combined with an optimistic outlook on the regional economic and market conditions.
Despite challenges due to geopolitical tensions, venture capital remains a critical component of the investment ecosystem. The sector is expected to recover as it adapts to the current economic conditions. In the Middle East, investor sentiment towards VC and PE is generally positive. A significant portion of regional investors have reported that their PE and VC investments have met or exceeded expectations. Sectors such as fintech, technology, healthcare, and infrastructure are particularly attractive to investors.
The Middle East and North Africa region is poised for a modest economic recovery in 2024, however, geopolitical tensions and conflicts continue to pose significant challenges. As MENA economies navigate through fluctuating global conditions and regional disruptions, the interest of private equity and venture capital investors reveals the region’s promising outlook for investors and economic stakeholders.
Our Methodology
For this article, we used Finviz and Yahoo Finance stock screeners plus online rankings to compile an initial list of the 40 largest companies in the Middle East and Africa by market cap. From that list, we narrowed our choices to the 10 stocks that analysts see the most upside to. The list is sorted in ascending order of analysts’ average upside potential, as of August 23. We also included the market cap of the companies as of August 23. The list is sorted in ascending order of their average upside potential as of August 23.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
An open pit mine with heavy excavation machinery toiling away against the backdrop of a hidden valley.
Harmony Gold Mining (NYSE:HMY)
Upside Potential: 92.52%
Market Cap: $6.33 Billion
Harmony Gold Mining (NYSE:HMY) is one of the largest gold mining companies in South Africa by production. Almost all of its gold mine assets are located in South Africa, which contributes to 90% of its total gold output. However, the company also has gold and copper assets in Papua New Guinea, and Australia. The company focuses on assets where it believes it can acquire the highest mineral grades to maintain strong operating margins.
Harmony Gold Mining’s (NYSE:HMY) gold production has shown impressive stability over the past three years. At the start of the financial year 2024, the management had projected that its production would remain stable as compared to the previous year. However, the company significantly exceeded expectations, as the gold production increased by 12% year-over-year in the first half of FY24, reaching 832,000 ounces. This remarkable performance was driven by an 11% increase in recovered grades from its underground gold mines. The strong production momentum continued into the third quarter and the management raised its full-year production target to 1.55 million ounces, surpassing the initial expectation of 1.38 million to 1.47 million ounces. In the latest operational update released on August 26, Harmony Gold announced that it will achieve a full-year production volume of 1.56 million ounces, marking a 6% increase year-over-year, with recovered grades also up 6% to 6.11 g/t.
Gold prices reached an all-time high of $2,531.70 per ounce on August 27, driven by strong demand and favorable market conditions. J.P. Morgan Research forecasts that gold will maintain a stable price of $2,500 per ounce by the end of 2024 and rise to $2,600 per ounce in the first half of 2025. Harmony Gold is exceptionally well-positioned to capitalize on the upward trend in gold prices. This leverage, combined with stronger-than-expected production growth from its core underground assets, sets Harmony Gold apart from its competitors.
Harmony Gold Mining (NYSE:HMY) is trading 11.11 times its earnings, which is a 31% discount compared to the sector median of 16.10. The company’s earnings are expected to grow by 68.61% this year. In the second quarter, Harmony Gold Mining’s (NYSE:HMY) stock was held by 17 hedge funds with stakes worth $171.88 million. Kopernik Global Investors is the largest shareholder in the company with a stake worth $26.90 million as of June 30. Industry analysts have a consensus on the stock’s Buy rating, setting an average share price target at $10.30, which represents a 92.52% upside potential from its current level.
Overall HMY ranks 1st on our list of the best Middle East and Africa stocks to buy according to analysts. While we acknowledge the potential of HMY as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than HMY but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.