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John Thomas graduated with a bachelor’s degree in biochemistry with honors and a minor in mathematics from the University of California at Los Angeles (U.C.L.A.) in 1974. He moved to Tokyo, Japan where he was employed by a medium-sized Japanese securities house. Thomas became fluent in... More
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  • Look at Africa for the Long Haul 0 comments
    Oct 24, 2009 06:04 PM | about stocks: AFK, GAF
    Feel like investing in a state sponsor of terrorism? How about acountry whose leaders have stolen $400 billion in the last decade andhave seen 300 foreign workers kidnapped? Another country lost four warsin the last 40 years. Still interested? How about a country thatsuffers one of the world’s highest AIDs rates, endures regularinsurrections where all of the westerners are massacred, and racked up5 million dead in a continuous civil war? Then Africa is the place foryou, the world’s largest source of gold, diamonds, chocolate, andcobalt! The countries above are Libya, Nigeria, Egypt, and the Congo.Below the radar of the investment community since the colonial days,the Dark Continent has recently been attracting the attention of largehedge funds and private equity firms. Goldman Sachs has set up EmergingCapital Partners, which has already invested $1.6 billion there. Chinasees the writing on the wall, and has launched a latter daycolonization effort, taking a 20% equity stake in South Africa’sStandard Bank, the largest on the continent. In fact, foreign directinvestment last year jumped from $53 billion to $61 billion, whilecross border M & A leapt from $10.2 billion to $26.3 billion. Theangle here is that all of the headlines above are in the price, thatprice is very low, and the perceived risk is much greater than actualrisk. Price earnings multiples are low single digits, cash flows arehuge, and returns of capital within two years are not unheard of. Thereality is that Africa’s 900 million have unlimited demand for almosteverything, and there is scant supply, with many firms enjoying localmonopolies. The big plays are your classic early emerging markettargets, like banking, telecommunications, electric power, and otherinfrastructure. For example, in the last decade, the number oftelephones has soared from 350,000 to 10 million. It reminds me of theearly days of investing in China in the seventies, when the adventurousonly played when they could double their money in two years, becausethe risks were so high. This is definitely not for day traders. If youare willing to give up a lot of short term liquidity for a high longterm return, then look at the Market Vectors Africa Index ETF (AFK),which has rocketed by 82% from the March lows to the recent highs, andthe SPDR S&P Emerging Middle East & Africa ETF (GAF).
    Stocks: AFK, GAF
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