Africa’s Top 10 Stocks Through the First Half of 2012

The Nairobi Securities Exchange posted a remarkable 28.5% return during the first half of 2012 – a performance strong enough to make it the world’s third strongest bourse. It should come as little surprise then, that the East African market is home to five of Africa’s 10 best-performing stocks since the first of the year.

Here’s a list of the Sub-Saharan stocks (not including South Africa) that have gained the most in US dollar terms since the start of the year.

(Note that each stock has averaged trade volume greater than $10,000 per day over the past month.)

10. United Bank for Africa +41.4% (Nigeria)

This Nigeria-based bank operates in 19 countries and has shot the lights out recently after having announced that first half earnings will likely increase by 50%.

9. Palm-CI +41.9% (Cote d’Ivoire)

Photo by Eduardo Zarate


The shares of Cote d’Ivoire’s largest palm oil plantation have benefited from a stabilizing political situation and strong global demand for edible oils.

8. KenolKobil +45.2% (Kenya)

This Kenyan oil retailer’s share price popped after Puma Energy, a Swiss firm, proposed a buyout of the company.

7. Kenya Reinsurance +45.3% (Kenya)

Kenya Re made shareholders very happy when it re-assessed the value of its real estate holdings upwards. Over a third of the company’s assets are invested in property – with much of it in the booming capital city, Nairobi.

6. NIC Bank +51.5% (Kenya)

This mid-sized Kenyan bank pleased the market by doubling the interest income it earned during the first three months of the year. It also plans to raise more capital from the exchange to fund expansion into Uganda and other countries in the region.

5. Societe des Caoutchoucs de Grand-Bereby (SOGB) +51.9% (Cote d’Ivoire)

Another beneficiary of the restored calm in Cote d’Ivoire, SOGB operates rubber plantations in the country’s southwest. Rubber prices are up nearly 10% since the start of the year. The stock is the only one on this list that also ranked among 2011’s top 10 performers.

4. British American Tobacco – Kenya +52.7% (Kenya)

This tobacco grower lit a fire under its share price when it nearly doubled its full year earnings in 2011. It rewarded shareholders by increasing the dividend by an equivalent amount.

3. Intercontinental WAPIC Insurance +61.2% (Nigeria)

A subsidiary of Nigeria’s up and coming Access Bank, Intercontinental WAPIC is one of the country’s oldest insurers. Its share price appears to have surged as a result of the company returning to profitability in 2011.

2. R.T. Briscoe +106.5% (Nigeria)

The Nigerian Stock Exchange’s top performer so far in 2012, this Toyota dealer also sells construction and farming equipment. This emphasis on agriculture placed it on many investors’ buy lists in May when the Nigerian president announced that the government will prioritize increased farm output.

1. Uchumi Supermarket +109.9 (Kenya)

Quite the redemption story, Africa’s star stock so far this year is a Kenyan grocer that, just a few short years ago, went bankrupt and was delisted from the Nairobi Securities Exchange. Now, the company is back, and while its share price has been volatile, investors are bullish about the company’s expansion into Tanzania and Uganda. They were also intrigued by news of financial trouble at the company’s main Kenyan rival, Tusky’s.

What Do You Think?

There you have it. Africa’s best stocks in 2012 so far. Did this list surprise you? Which stocks do you think will be among the top performers at the end of the year? Let us know in the comments!

[Disclosure: I have no position in any stock mentioned in this article, and I have no intention of taking any within the next 72 hours.]

Comments

  1. Critique says:

    Your limit of at least $10K in trading volumes has left some good performers who might be trading lower volumes on a daily basis but still enriched shareholders. At the end of the day, Its value created that is important.

  2. Critique says:

    The reason I do not agree with the limit is since its like ignoring Berkshire Hathaway in an analysis because it’s stock turnover at least of the A shares is much lower than other stocks. A better gauge would be free float and prob a limit of some trading per week or month. If I make a dollar on a less traded stock and make a penny on a more liquid stock. I still prefer the dollar. Don’t you think that’s better?

    • Thanks, Critique. I like stocks with low volumes, too, because they generally are less researched than their high volume counterparts. Nevertheless, I think trade volume does need to be a serious consideration before buying a stock.

      For example, let’s suppose an investor purchased $10,000 worth of a stock that has an average trade volume of less than $10,000 per month. If that investor would suddenly decide to sell his holding, it could take a month or more to exit the position. Or the investor would likely need to be willing to sell at a substantial discount to the market price in order to exit in a hurry.

      Thus, the market price of a low volume stock is less indicative of its actual value than a high volume stock. It is, therefore, unfair to include them in the ranking with the high volume stocks.

  3. Jonathan Kruger says:

    I agree liquidity is a huge consideration. Some returns look great on paper but execution is a different story and you won’t be able to realize the return in reality. Generally stocks with low daily volume have wider spreads, say 2 – 5%. Entering and exiting can erode returns dramatically (slippage). If it takes many days to liquidate a position in small chunks, transaction costs from the custody side can rapidly become very large in relation to the trade. Also the market impact of such a trade can be large. Better to source a block. Free float market cap is also very important. Dangote Cement is a massive company but with a very low free float. Easier to purchase a small company with a large free float. Improved liquidity will go a long way to deepen African markets and attract institutional investors!

  4. Samuel Gichohi says:

    Volumes matter alot especially on the Kenyan market. I made an interesting observation recently when looking at recent stock splits. Most splits are meant to increase liquidity and they invariably do, however a look at KPLC, BBK and Kenol Kobil splits shows that their prices rose sharply before the split and stagnated after the split in comparison to the KCB split where the opposite happened. ARM is planning a split and i am keenly watching that stock to see if this pattern is repeated. I believe that ARM will be on your list by year end.

  5. Samuel Gichohi says:

    I agree that liquidity is a major issue. I recently observed that most recent stock splits i.e. KPLC, Kenol and Barclays Kenya were characterised by sharp price spikes before and not after the splits as opposed to the KCB split. ARM is set to split this year so i am keenly watching to see if the pattern is replicated.

  6. Jonathan Kruger says:

    I think local African investors like the idea that you get more shares with a split, even though it is dilutionary and no value is created. I think prior to the split they are placing a premium on the fact that you will get more shares. You would expect a share price to drop after a share split because of the dilution.

  7. There are some great stocks in Zimbabwe which out performed your selection by wide margins. For example, Astra, BAT-Zim, Falgold and many others with returns northwards of 120%. You should consider investing on the Zimbabwe stock market.

    • I agree, Chris. The Zimbabwe Stock Exchange merits a very close look, and I have invested there. The stocks you mention posted outstanding performance in 2012, but they trade in relatively light volume, which makes them difficult to buy and sell. The stocks that appear on the above list all averaged daily trade volumes in excess of $10,000 per day at the time of publication.

Speak Your Mind