In this article, we will discuss the 10 best African stocks to buy now. If you want to skip our discussion on the economic outlook of Africa, go directly to the 5 Best African Stocks to Buy Now.
During the current period of rising interest rates and high inflation in the developed world, emerging markets provide an attractive opportunity for investors to diversify their portfolios. Emerging markets are rapidly growing as they have an increasingly young population and an emergence of a middle class with handsome disposable income. One emerging market that requires a closer look is Africa. The size of the African economy stands at $2.96 trillion as of 2022 and is experiencing strong growth. According to the International Monetary Fund (IMF), the sub-Saharan Africa region is expected to record YoY GDP growth of 3.6% in 2022 and 3.7% in 2023. On the other hand, if we look at the economic forecast for a developed economy like the US, the Organization of Economic Co-Operation and Development (OECD) anticipates the US economy to grow at a rate of 1.8% only in 2022. Furthermore, with a possibility of a mild recession, the GDP growth forecast for the US stands at 0.5% in 2023.
Africa has the youngest population in the world, with an average age of 18 years as opposed to 30 years for other continents. Furthermore, the continent is home to 313 million individuals belonging to the middle class. In the last three decades, the middle-class population has increased three times and represents 34% of the total population of the continent, according to a report issued by the African Development Bank (AfDB). Some of the prominent countries with booming economies in Africa are Algeria, Egypt, Kenya, Morocco, Nigeria, and South Africa. These economies are acting as economic hubs for underdeveloped regions surrounding them.
Strong Economic Outlook
The strategy to invest in emerging markets focuses on companies that fulfill the needs of the rising middle-class population with decent purchasing power. Usually, the companies addressing these needs belong to the commodities, infrastructure, and technology sectors. It must be noted that although emerging markets provide the potential for higher growth, they also come with higher risks. Africa is prone to economic and political uncertainty. There are always concerns related to weak governance, transparency, and regulation. However, this risk can be countered by diversifying investment through different countries and sectors across the continent.
The expansion of access to technology across the continent will also act as a significant impetus in the strong growth outlook. The sub-Sahara region of Africa is expected to have 613 million mobile subscribers by 2025 as opposed to 515 million in 2021, reflecting a compound annual growth rate (CAGR) of 4.5%. This would cover 50% of the population as opposed to 46% in 2021. Over half of these connections would provide access to 3G internet solutions. Meanwhile, a third would provide access to 4G internet connectivity. Furthermore, smartphone penetration is expected to rise from 49% in 2021 to 61% by 2025. Some of the best African stocks capitalizing on the emerging trends and developing infrastructure in the region include Kosmos Energy Ltd. (NYSE:KOS), Sibanye Stillwater Limited (NYSE:SBSW), and IHS Holding Limited (NYSE:IHS).
We have looked at the growth prospects, business fundamentals, and analyst ratings for these companies. These stocks offer significant exposure to various sectors of the African economy. Given the positive growth outlook of the African region, these stocks are expected to provide decent upside potential to investors in the long run. We have ranked these stocks in terms of hedge fund ownership as of Q3 2022.
10 Best African Stocks to Buy Now
10. Impala Platinum Holdings Limited (OTC:IMPUY)
Number of Hedge Fund Holders: N/A
Impala Platinum Holdings Limited (OTC:IMPUY) is a Johannesburg, South Africa-based parent company. The firm owns numerous entities that conduct mining operations with a focus on producing platinum and other metals like cobalt, copper, nickel, palladium, and rhodium.
Nkateko Mathonsi at Investec upgraded Impala Platinum Holdings Limited (OTC:IMPUY) stock from a Hold to a Buy rating with a target price of $12.34 on September 30. South Africa is responsible for the global production of 80% of rhodium and one-third of palladium. Experts see Impala Platinum Holdings Limited (OTC:IMPUY) in a strong financial and operational position with a fair valuation.
Furthermore, Impala Platinum Holdings Limited (OTC:IMPUY) received a boost after the regulatory authorities in South Africa gave the company the go-ahead for the acquisition of Royal Bafokeng Platinum. However, some conditions need to be fulfilled to complete the acquisition. The deal will create one of the biggest platinum group companies in the world, making Impala Platinum Holdings Limited (OTC:IMPUY) one of the best African stocks to hold in the long run.
9. MiX Telematics Limited (NYSE:MIXT)
Number of Hedge Fund Holders: 3
MiX Telematics Limited (NYSE:MIXT) is a Stellenbosch, South Africa-based company that uses the power of software-as-a-service (SaaS) to deliver telematics solutions related to vehicle tracking and fleet management to its customers in over 120 countries.
Experts believe that the telematics industry is still in its infancy with a huge market potential. According to estimates, there are 216 million commercial vehicles across the world that can generate annual revenue of $91 billion for the telematics industry. Furthermore, 80% of the industry is still un-penetrated. MiX Telematics Limited (NYSE:MIXT) has a long-term goal of achieving 20% annual recurring revenue (ARR) growth and taking the annual subscription growth from 15% to 18%. MiX Telematics Limited (NYSE:MIXT) is already operating at a healthy gross profit margin of 63.8% and intends to increase it to 70% in the long term. Analysts consider MiX Telematics Limited (NYSE:MIXT) one of the best African stocks as the telematics industry offers substantial room for expansion.
As of Q3 2022, MiX Telematics Limited (NYSE:MIXT) was held by 3 hedge funds.
8. DRDGOLD Limited (NYSE:DRD)
Number of Hedge Fund Holders: 5
DRDGOLD Limited (NYSE:DRD) is a Roodepoort, South Africa-based gold producer that is transitioning from deep-level underground mining to a more environmentally sustainable retreatment of mine dumps and tailing dams. The tailing process is more environmentally sustainable as it brings grey water into use, reducing the use of fresh water.
DRDGOLD Limited (NYSE:DRD) is facing challenges like declining gold prices and load shedding in South Africa. However, the company has a strong cash position that will aid it in seeing out the impact of depressed gold prices. Experts consider DRDGOLD Limited (NYSE:DRD) a stable gold producer. Furthermore, DRDGOLD Limited (NYSE:DRD) offers an attractive forward dividend yield of 6.65% as of November 25. Moving forward, the company intends to focus on Ergo and Far West Gold Recoveries (FWGR) to boost production and take the business into the next phase of growth.
As of Q3 2022, DRDGOLD Limited (NYSE:DRD) was held by 5 hedge funds.
7. Sasol Limited (NYSE:SSL)
Number of Hedge Fund Holders: 6
Sasol Limited (NYSE:SSL) is a Sandton, South Africa-based diversified chemical and energy company that was founded in 1950. The company has a presence in 22 countries.
Experts anticipate Sasol Limited (NYSE:SSL) to become a beneficiary of strong pricing momentum in the chemicals and energy sector. The company is experiencing better-than-expected cash flow growth and making its holdings efficient through asset disposals. Like some of the other stocks on the list, Sasol Limited (NYSE:SSL) offers an enticing forward dividend yield of 4.76% as of November 25. The company intends to issue a bond worth $750 million to refinance its debt and conduct wider commercial activities. The bond will mature in 2027. Sasol Limited (NYSE:SSL) is also working on finalizing an agreement to purchase 600 megawatts (MW) of renewable energy for its facilities. The move will be in line with the company’s target of lowering its greenhouse gas (GHG) emissions by as much as 30% by 2030.
Citadel Investment Group raised its stake in Sasol Limited (NYSE:SSL) by 816% during the third quarter of the year.
6. Jumia Technologies AG (NYSE:JMIA)
Number of Hedge Fund Holders: 8
Jumia Technologies AG (NYSE:JMIA) is a Lagos, Nigeria-based company with a presence in 11 African countries through its e-commerce platform. The e-commerce platform comprises a marketplace bringing thousands of buyers and sellers together and is also integrated with digital payment and logistics solutions.
Jumia Technologies AG (NYSE:JMIA) became the first African unicorn company from the technology sector to be listed on the NYSE in 2019. Experts have termed Jumia Technologies AG (NYSE:JMIA) the “Amazon of Africa.” The company has undergone a restructuring effort that required the expulsion of co-CEOs, the introduction of new management, and other moves to ensure that the business achieves profitability. Jumia Technologies AG (NYSE:JMIA) intends to cut-off non-performing businesses from its portfolio and lower its marketing outlay. Analysts think Jumia Technologies AG (NYSE:JMIA) stock can offer investors strong upside potential, making it one of the best African stocks to hold in the long run.
Of the 920 hedge funds in Insider Monkey’s database, Jumia Technologies AG (NYSE:JMIA) was held by 8 hedge funds at the end of the third quarter of the year.
In addition to Jumia Technologies AG (NYSE:JMIA), Kosmos Energy Ltd. (NYSE:KOS), Sibanye Stillwater Limited (NYSE:SBSW), and IHS Holding Limited (NYSE:IHS) are also some of the popular African stocks attracting investors' attention.
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Disclose. None. 10 Best African Stocks to Buy Now is originally published on Insider Monkey.