It’s been three years since Hosni Mubarek was ousted during the Arab Spring. Then last summer, protesters forced the Egyptian army’s hand and President Mohamed Mursi was also sent packing. Now comes today’s big news of Egypt’s government resigning, creating an opening for a powerful army chief to run for president.
No doubt this is a situation with a lot of uncertainty, but for the speculative investor the setting could be one with a huge reward. “In general with the markets, you want to be long doubt, and short hope,” says Jonathan Hoenig of CapitalistPig Hedge Fund in the attached video. “There’s probably no more doubt anywhere across the world than when it comes to Africa, and Egypt specifically.”
Africa “has been on an amazing tear,” Hoeng says since last year, and some macroeconomic and technical factors at play here. Hoenig, who was actually buying Egypt last year, is still invested. “We're still long names like EGPT, the ETF that tracks the Egyptian market, and even AFK, it’s the ETF that tracks Africa broadly.”
Deep political unrest and government instability make investing in the country a dicey proposition, but it is these situations where the payoff for an investor can be worth the risk.
In Hoenig’s mind Africa is like South America 20 years ago, and Egypt is basically Brazil in this analogy. “Think of it like Latin America back in the early 2000s, it’s almost impossible to imagine back then… but back in early 2000s no one wanted anything to do with Argentina, with Brazil, with Peru,” as most investors avoided those risky areas. Ten years later they were kicking themselves as the markets developed.
Hoenig doesn’t recommend investing heavily in the area, but suggests it’s a potential area for your portfolio to get some needed high-growth exposure. “For a portion of [your] portfolio, I still think this is a great bet; and Egypt, despite all the worries, is my number one choice.”
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- Jonathan Hoenig