The 10 Best Kenyan Stocks Over the Past Five Years

Five years ago, Kenyans were in the midst of one of the darkest months in their nation’s history. A deeply flawed presidential election resulted in protests that rapidly descended into a spate of ethnic violence.

Unsurprisingly, the Nairobi Stock Exchange took a dive, losing $591 million on 2008’s first day of trading.

At the time, it was difficult to see how the country would recover. But Kenyan businesses picked up the pieces and carried on, producing goods and services, creating jobs, and investing in a better future.

As Kenyans warily enter into another election season (polls are scheduled for March), it can be difficult to see past the daily political headlines. They can cause even the most savvy investor to overreact – selling in a dip and buying on a bounce.

So, I think it’s helpful to take a closer look at how resilient Kenyan businesses have been in order to help us keep a long-term view.

Kenya’s Top Stocks Over the Past Five Years

Below is a list of the 10 Kenyan companies whose share prices have performed the best since January 15, 2008. The returns are listed first in US dollar terms and then in Kenyan shillings in parentheses.

[Note that dividend payouts were not included in the return figures, so total returns for long-term holders are substantially understated.]

10. Nation Media Group  +30.1%  (KES: +66.9%)

East Africa’s largest independent media house grew earnings per share at an annualized rate of nearly 17% since the end of 2007. It did it by launching a top-notch business newspaper, the Business Daily, a broadcast television station in Uganda, a new printing press in Tanzania, and popular radio programming. The company’s mid-term prospects look very good as it capitalizes on the growth of the region’s rapidly urbanizing and increasingly affluent population.

9. Diamond Trust Bank  +41.0%  (KES: +80.9%)

Five years ago, DTB was a small Kenyan bank with just 11 branches. Now, it is a bona fide regional player with 76 branches and 1,264 employees spread across four countries. The bank has grown earnings at a 39% clip since the end of 2007 by catering to the needs of small and medium-sized businesses. It achieved this by massively increasing customer deposits and lending. Now the bank’s management has its sights set even further afield, aiming to become a continent-wide player by 2020.

Photo by Lydur Skulason

Photo by Lydur Skulason

8. Williamson Tea Kenya  +44.4%  (KES: +85.2%)

This little tea plantation sure did add some sugar to investors’ portfolios over the past five years. Not only did its share price appreciate over 85% in local currency, but it dramatically boosted its dividend payout, too. The company may pay off big for investors over the next five years, too. The stock trades at an undemanding earnings multiple, and rumor has it that the company sits on some valuable real estate that it could parcel out if the tea market turns weak.

7. Equity Bank  +45.8%  (KES: +87.0%)

The Equity Bank growth story is well-known. It’s one of the fastest-growing banks in Africa and focuses on serving customers near the bottom of the wealth pyramid. The big surprise here is perhaps that the bank’s stock performance didn’t rank higher among its Kenyan peers. The stock still trades at a P/E ratio of 8.4 and carries a dividend yield of 3.9%. Expect this ticker to soar if the March elections come off without a hitch.

6. East African Breweries  +45.9%  (KES: +87.1%)

Investors toasted the strong performance of East Africa’s largest brewer over the past five years, boosting its share price over 87%. With sales rising at an annualized 16.5% during the period, management did all that it could to quench the region’s growing thirst. It installed additional bottling and packaging capacity, bought a controlling interest in Tanzania’s second-largest brewer, Serengeti, and expanded its distribution network into South Sudan, Burundi, and Rwanda. Now, it’s looking to distilled spirits to add a little something-something to medium-term growth.

5. Kakuzi  +79.8%  (KES: +130.7%)

This agricultural company has a history dating back more than a century and grows everything from avocados to pineapples. It’s got a green thumb when it comes to growing profits, too. Earnings have more than tripled since the end of 2007. It did this by expanding its macadamia nut production, branching out into forestry, and taking advantage of a brand new road that improved access to its farms. The road also raised the value of Kakuzi’s land, so, like Williamson it could parcel this asset off for development to the benefit of shareholders.

4. Athi River Mining  +115.7%  (KES: +176.7%)

One of East Africa’s leading cement manufacturers, ARM has grown profits at a phenomenal 30.5% annual pace since 2007. It has benefited from the Kenyan construction boom, but CEO Pradeep Paunrana has done much more than simply ride the trend. Under his watch, the company doubled its Kenyan production capacity and expanded operations into Tanzania. The company also cultivated its fertilizer business, which it intends to eventually spin-off to private investors or, perhaps, as a new listing on the Nairobi Securities Exchange.

3. Scangroup  +124.2%  (KES: +187.6%)

When I met Bharat Thakrar in Nairobi back in 2009, I came away impressed by his dynamism and commanding knowledge of Africa’s advertising industry. I must confess, however, that I failed to fully grasp the prospects of the company he founded and brought to market in 2007. It was my loss. Mr. Thakrar went on to quadruple his advertising firm’s profits in just four and a half years. And growth looks like it will continue apace considering that Scangroup has recently expanded into Nigeria and Ghana.

2. City Trust  +163.2%  (KES: +237.6%)

This little investment company really flew under the radar the past five years. Now that it has become the holding company behind up-and-coming I&M Bank, the company is squarely in investors’ sights. Headquartered in Kenya, I&M is rapidly becoming a regional player and already boasts a presence in Mauritius, Rwanda, and Tanzania. It helped City Trust to 38% earnings growth during its 2012 fiscal year.

1. British American Tobacco – Kenya  +185.3%  (KES: +265.9%)

Well, apparently there’s money to be made in sin stocks. Cigarette manufacturer BAT Kenya smoked all other Kenyan stocks over the past five years. It grew earnings at a 21% clip since 2007 in spite of new tobacco legislation and higher excise taxes. What’s more, the company pays out 100% of earnings in the form of dividends, so long-term holders of the stock reaped much more than the 185.3% capital gain would indicate. BATK began sending semi-processed tobacco to Egypt in 2010, which resulted in a big boost to revenue. Now it is eyeing the South Sudanese market.

Let’s Hear From You

It’s time to turn our attention to the next five years. Are you worried about a repeat of the election violence of 2008? Which Kenyan stocks will rank among the top performers in 2018? Let us know your thoughts in the comments.

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Comments

  1. I would bet on penny stocks. Access, CIC insurance, etc.

  2. Thanks! I expect Access to make up some lost ground in the next 2-3 years. It may be the only laggard but note the Somens are in a tough industry.

    • Interesting pick. I’ve never been able to fully understand their business model, but I am intrigued that Jonathan Somen has been buying shares of his own stock.

  3. What about Kenya Commercial Bank. I think it should be number 1. It has continued growing since 2003 when it broke even. It is also East Africa’s largest bank by assets and has now become the most profitable bank in Kenya. It has also expanded to all countries in East Africa and after reducing the staff costs we should be able to begin reaping the fruits.

  4. British American Tobacco is at highest top rank!! What a funny issue! The most harmful one is on the top. Kenya Commercial Bank should be number one in my point of view because it is expanding. But comparing to all these 10 companies and specially Tobacco company, there is always a BUT!!

  5. Your info is truly educational.

  6. jesse owato says:

    Hi, I’m thirteen and I am abroad. I would like to buy shares but I’m experiencing difficulties in deciding what company to invest in. Please help.

  7. thanks ryan hoover for the piece,i did appreciate the basic info…i just want more

  8. then should we all invest in the tobacco company….please help I’m in a dillema

  9. Dear Ryan,

    Could you give the best performing in East Africa in 2014 and perhaps a projection of the next 3-5 years?

    Thanks

    • Hi Susan,

      Here are some of the top Kenyan performers so far this year (in local currency through May 8).

      1) CIC Insurance +87.4%
      2) CFC Stanbic +55.2%
      3) Pan Africa Insurance +47.8%
      4) Liberty Kenya +47.8%
      5) EA Portland Cement +39.1%

      Stay tuned for my long-term picks in coming months ;)

  10. Hi, Ryan. Do you know which brokers deal with penny stocks?

    • Hi Ben,

      I’m not aware of any African brokers that specialize in penny stocks. As far as I know, all Kenyan brokers will deal in any share listed on the Nairobi Securities Exchange. Some of the small companies could be described as penny stocks (e.g. Home Afrika, Olympia, Marshalls) could be described as “penny stocks.” But be warned. Trading in penny stocks or micro-caps is a high-risk approach to investing. While some may produce nice returns, many will fail and lose investors’ money.

  11. Dennis Owini says:

    Hi ryan,

    Which are the best companies for begginers to invest in?

  12. Hi Ryan,
    How would you rate Athi River (ARM) shares and the just opened NSE shares as a short term investment?
    How about NIC bank as a longterm investment?

    Regards,
    Stella

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