Chip Krakoff's  Instablog

I subscribe to the “Stock Gumshoe” blog, which specializes in ferreting out the truth behind those teaser ads for scores of investment newsletters and tipsheets that promise you 1,400% returns in six months, but only if you take advantage of this limited time subscription offer, a $1,000 value for only $695. In addition to debunking these extravagant claims, the blog’s publisher and author, Travis Johnson, analyzes various investment opportunities he finds interesting, some of them off the beaten track, and he doesn’t charge you hundreds of dollars to reveal the names and details. Recently he posted a lengthy article on Africa, with a particular focus on Lonrho, a U.K.-based company with a long history in Africa and a newly revitalized Afro-centric investment strategy. Here is my comment, posted on Travis’s blog:

I am a big fan of Africa, probably a function of my having worked and/or lived there for about a third of my adult life, and I thank you, Travis, for focusing on a much-maligned and -neglected part of the world. As a business consultant and sometime private equity/finance adviser and investment banker, I lived in South Africa for seven years, most of the time working in the financial sector. I have also lived for extended periods in DRC, Botswana, and Zambia, and I have worked or done business in about 30 countries on the continent.

I believe that African risk, more than almost any other region’s, is overpriced. Part of this is because most people, especially in the U.S., think Africa is one country, and can’t distinguish between Sudan and Senegal. Of course there are risks, but most of them can be managed, and there is certainly a risk premium for investing there, but I have come across far too many supposedly sophisticated investors who won’t touch any part of Africa with a barge pole.

There are a lot of ways to get African exposure, but apart from investing in various Africa-focused ETFs or buying the shares of African companies with ADR listings, there aren’t too many pure Africa plays. You could invest in big mining companies like BHP, RTZ, or Freeport McMoran, junior mining companies, mainly listed on the TSX, or in various energy companies both big and small that operate around the continent. But except for a few juniors, most of these companies have exposure all across the globe. The same goes for companies like Diageo (which owns Guinness), Heineken, and SAB Miller, which dominate brewing across Africa, and for telecoms firms like MTN, which have extended (some would say overextended) into Asia and the Middle East. The big companies listed in Johannesburg, many of which have primary or secondary listings in New York or London, are not pure African plays either. SASOL, Sappi, Old Mutual, Anglo American, and others, have their roots in South Africa, but operate all over the world.

Lonrho (LONR in London, LNAFF on the pink sheets) is an exciting company, resurrected from the ashes of Tiny Rowland’s old company, which operates in some of the most promising growth areas on the continent. They do mine for diamonds in South Africa (not too exciting), but the real excitement is in some of the areas Travis mentions: the Luba Freeport in Equatorial Guinea, the new Fly540 airline operating out of Kenya, and big agribusiness plans across Southern Africa. As the world, and especially the Gulf countries, look to secure their food supplies, they are turning to Africa, which presents huge opportunities for investment in the sector. Lonrho also offers one of the few Zimbabwe plays around, and if you think this is a bad joke, don’t. Zimbabwe is starting to come back, and sooner than you think it will once again be a huge agricultural exporter, manufacturing center, and tourism destination. I think Lonrho is a classic buy and hold opportunity. Buy it now, forget about it, and in several years you could be holding something pretty valuable.

Lonrho, and Southern Africa, are not the only play on the continent. I have said before (you can look it up on my blog - http://www.emergingmarketsoutlook.com) that in the next 20-40 years Nigeria will be a more important economic (and possibly political) force than Russia, and I still believe that. Nigeria has a long way to go, but it looks like following a similar path to Indonesia’s, which has gone from military dictatorship to genuine democracy and which has made a significant dent in corruption.

By all means do your own research. If you are looking to start living off your retirement funds in the next five years, Lonrho and other Africa plays may not be for you. But if you are looking at the longer term, take a close look at these.

Disclosure: T. Rowe Price Africa and Middle East Fund (NYSE: TRAMX). Long Market Vectors Africa ETF (NYSE: AFK).

In the eyes of many Americans, “Sweden” is shorthand for everything we don’t want America to become. It’s a tradition that goes back some way. In the 1965 movie I’ll Take Sweden, Bob Hope is an executive whose company sends him to Sweden, and he takes his teenage daughter, played by Tuesday Weld, largely to get her out of the clutches of her dead-end, guitar-playing boyfriend, played by Frankie Avalon, whom she wants to marry. Long story short, Tuesday falls in love with a suave Swede, only to find he has some strange ideas about premarital sex. Enter Frankie, who has traveled across the sea to try to win his girl back. He breaks his guitar over the degenerate Scandinavian’s head, and takes Tuesday back to America and married life in a trailer park, with Dad beaming proudly.

To anyone who has studied anthropology – it was my major in college – a visit to Papua New Guinea can’t fail to excite. PNG, a country with over 1,000 tribes and 700 languages – nearly half the world’s total – has almost certainly been the source of more anthropological monographs than any other place on earth. They include Bronislaw Malinowski’s classic “Argonauts of the Western Pacific,” about the Trobriand Islanders, and Margaret Mead’s “Sex and Temperament in Three Primitive Societies,” which became a basic text of the feminist movement for its depiction of three tribes in the Sepik River basin, one of which was determinedly pacifist, one female dominated, and one in which women and men were equally warlike. The body of Mead’s work tends to reflect her own sexual and political fantasies more than it does closely observed social behaviors, but never mind that.

Crossing the Kasr el Nil Bridge that spans the Nile in central Cairo at eleven o’clock at night is like walking down 42^nd Street in New York at rush hour, only more crowded. Cairo is the real city that never sleeps, and never more so than the current month of Ramadan, when Muslims refrain from eating, drinking, and smoking from dawn to dusk and then pass the nighttime hours eating, smoking the shisha water pipe, and relaxing with friends and family. The streets are thronged: families having picnics on tiny patches of grass beside roaring four-lane roads; older men in serious conversation, smoking and playing backgammon in sidewalk cafes; groups of adolescent boys roaming around looking for adventure; and courting couples sitting chastely on park benches or standing together on bridges, whispering to each other and watching the lights of Cairo reflected on the water.

A few years ago I was in Sierra Leone, just a week after Angelina Jolie, in her capacity as  Goodwill Ambassador for the United Nations High Commissioner for Refugees, had visited. The owner of the Crown Bakery, the cleanest and best place to eat lunch in downtown Freetown, proudly pointed out the chair in which she had sat. Her visit, every minute of which was videotaped, highlighted the poverty and misery of the country’s children, the lack of the most rudimentary health and sanitation services, and the ferocious savagery of the civil war, in which rebels made a habit of cutting off people’s limbs with machetes.