Stock Tips for a Senegalese-American Hip Hop Star

Akon,

Your success as a singer, songwriter, and producer is nothing short of remarkable. I’m sure you never dreamed while a boy in Dakar, Senegal that one day your music would dominate record charts, or that you would perform with the likes of Michael Jackson, or earn an eight-figure income. You’ve been ranked among the most powerful celebrities in the world, and I’m sure your upcoming album will add to your long list of achievements.

True, your success wasn’t overnight or without controversy. But you seem to sincerely want to give back and do good in the world.

Moreover, you’re serious about investing in the continent that you call home. You write about it in songs. You talk about it in interviews. You even own a South African diamond mine.

Could we talk a little bit about that last one?

Diamond Mines Aren’t a Rapper’s Best Friend

I have to admit that music’s not my strong suit. My musicianship begins and ends with a tortured, ukelele-plucking rendition of “Somewhere Over the Rainbow,” and my dance moves are sick (and not in a good way).

I do, however, have some experience with investing in Africa, and I’m doubtful that the diamond mining business is going to end up a great investment for you.

You see, diamond mines sound sexy, but the South African mining industry is beset by a host of labor issues and, frankly, diamond mines just haven’t been very profitable.

Check out how some of them have performed over the past five years. Shares of Lucara Diamonds are down 25%. Anglo American fell 54%. Rockwell Diamonds dropped 96%. Ouch. With performance like that you won’t remain the “number one hustler gettin’ money” for long.

Photo by Abdulmajeed Almutawee

Photo by Abdulmajeed Almutawee

Anyway, who needs a diamond mine when you’ve got a mine’s worth of platinum and gold records hanging on your trophy wall?

African Stocks That Will Get You Paid

Let’s consider some alternative African investments that actually stand to build your wealth and African economies at the same time. Here are a few that, given your unique background, you might find attractive.

Sonatel (BRVM)
P/E Ratio: 11.7, Dividend Yield: 7.5%

One of West Africa’s largest telecommunications companies, Sonatel is based in your beloved Senegal, where it dominates the cellular market. It also does lots of business in Mali, Guinea, and Guinea Bissau.

And it’s growing fast. The company added more than 3.7 million mobile subscribers in 2012. Earnings grew 11% while sales increased by 4% in spite of all the political turmoil in Mali. This year, Sonatel management is looking to reduce its operating costs and considering opportunities to expand elsewhere in fast-growing West Africa.

The company’s always  been very generous about paying dividends. So you can just sit back and let those checks roll in while you watch their growth story develop. Take a look at that juicy 7.5% yield!

Ecobank Transnational (Nigerian Stock Exchange)
P/E Ratio: 5.2, Dividend Yield: 8.4%

I know from your interviews that you’re a Pan-Africanist, so Ecobank’s business model should appeal to you. They boast the most geographically diverse banking network on the continent with operations in 32 countries.

The stock is up 43% over the past 12 months, and with its rapid growth rate and “cheap as chips” P/E ratio, I’m pretty sure there’s lots more growth to come. And you can enjoy the 8.4% dividend yield in the meantime!

Moreover, investing in banks is a great way to catalyze economic growth. By doing so, you lower the bank’s cost of funding, which allows them to loan more money to businesses large and small – from cement plants to record studios.

Kagiso Media (Johannesburg Stock Exchange)
P/E Ratio: 15.6, Dividend Yield: 3.6%

Finally, let’s capitalize on your expertise in media and entertainment.

As you likely know, radio remains big in Africa and Kagiso owns some of South Africa’s most lucrative stations. They’ve also diversified into print, internet publishing, and television production.

The company generates a lot of cash and I expect that we will see it expand into East and West Africa in the near future. They’re also making noises about getting into the pay-TV business.

Kagiso’s boosted its dividend at an annualized 12% rate over the past five years, and it stands a good chance of keeping that pace over the near term.

What Do You Think?

So there you have it, a tailor-made trio of stocks for Akon.

If you were Akon’s investment adviser, what would you include in his portfolio? Let us know in the comments!

Related Reading

How to Invest on the Nigerian Stock Exchange
How to Invest in the BRVM

Comments

  1. Glad to hear about Ecobank Transnational’s major contribution to the current and potential economic growth in Nigeria. Such an interesting piece. Keep up the good work!

  2. Akon’s African link gives him a unique opportunity that his fellow American Artists don’t have. Those guys brag about money but the richest of them Diddy and Jay Z have never touched the billion mark, infact their actual wealth is under 0.5B. What is the possibility that someone like Diddy or Jay could manage to buy a sizable stake from a company like Arcelor Mittal or AT&T, but Akon can buy a sizable piece of Sonatel. What are the chances that one of these flashy hip-hopers can secure a serious business appointment with someone like Warren Buffet or Paul Balmer. I am sure if he tries, Akon can get Dangote’s attention or Motsepe’s. This would open up a whole new window of opportunity and catapult him to wealths no Hip Hop Artist has ever seen.

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