According to the IMF's Middle East and North Africa Economic Update from April 2024, the MENA region is expected to see moderate growth of 2.7% in 2024, up from 1.9% in 2023. Both oil-importing and oil-exporting countries in the region are projected to grow at similar rates, with the gap between the Gulf Cooperation Council (GCC) economies and developing oil importers (excluding Egypt) expected to be around 1%. The region's GDP per capita is forecasted to increase by only 1.3% in 2024, primarily driven by the GCC nations. However, ongoing conflicts continue to weigh on the region’s economic activity, especially in Palestine. Gaza's economy, for instance, saw an 86% decline in Q4 2023 compared to the same period in 2022. Trade disruptions, notably through the Suez Canal, have also affected regional and global commerce.
Over the last decade, many MENA economies have faced rising debt-to-GDP ratios, particularly among oil-importing countries, which struggle to reduce these ratios due to high oil prices. The inability to lower debt through inflation, exacerbated by exchange rate fluctuations and off-budget factors (stock-flow adjustments), underscores the need for greater debt transparency. In contrast, oil-exporting nations tend to see smaller increases in debt-to-GDP ratios during periods of high GDP growth, and in some cases, a decrease.
Meanwhile, private equity (PE) and venture capital (VC) investments have gained momentum in the Middle East and Africa, reflecting a shift in investment trends. Data from Preqin and the Dubai International Financial Centre (DIFC) reveals that about 65% of regional investors plan to maintain or increase their exposure to private equity in 2024, with 56% expressing similar interest in venture capital.
Despite the challenges posed by geopolitical tensions, venture capital continues to play a crucial role in the region's investment landscape. Investors remain optimistic, with many reporting that their PE and VC investments have met or exceeded expectations. Key sectors attracting interest include fintech, technology, healthcare, and infrastructure.
As the region navigates the complexities of economic growth, debt management, and investment trends, it's clear that there are both challenges and opportunities on the horizon. Investors remain optimistic about the region's potential, however, it's essential for policymakers to prioritize debt transparency, economic diversification, and infrastructure development to unlock the full potential of the MENA region's economies. With that in context, let's take a look at the 10 worst Middle East and Africa stocks to buy according to short sellers.
Our Methodology
For this article, we used a Finviz stock screener to find 20 large companies in the Middle East and Africa, by market cap. From that list, we shortlisted companies that have the highest percentage of shares outstanding that were sold short. The list is sorted in ascending order of their short interest. We also mentioned the hedge fund sentiment around each stock.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Aerial view of a large gold mine in South Africa with many excavators and trucks working.
Gold Fields (NYSE:GFI) is a South African gold mining company with a diverse portfolio of operations in South Africa, Western Africa, Australia, Canada, and Peru.
In the first half Gold Fields (NYSE:GFI) showed a decline in production, the company produced 954,000 ounces of gold, 22.3% lower than the same period last year. Due to the low production, the company's all-in-sustaining costs increased by 43.86% to $1,745 per ounce, a significant rise that impacted profitability. Looking ahead, the company has revised its full-year production guidance to 2 million-2.15 million ounces, a slight reduction from its previous estimate of 2.2-2.3 million ounces. Gold Fields (NYSE:GFI) first-half results were impacted by severe weather, fatalities, and reduced mining access.
However, the company expects normalization of operations to occur in the second half of the year, driven by the resumption of mining at Gruyere Gold Mine in Western Australia and improved performance at St. Ives and South Deep gold mines. Gold Fields (NYSE:GFI) expects production to increase in the second half of the year. The company anticipates a 14% half-over-half increase in production at South Deep and a 49% increase at St. Ives.
The company is also implementing cost-saving measures to mitigate the impact of higher all-in-sustaining costs and aims to reduce costs through operational efficiencies and optimization of its mining processes. As gold prices are on the rise, Gold Fields (NYSE:GFI) is well-positioned to benefit from the current market trend. While 1.02% of the company's shares are shorted, 20 hedge funds have maintained a bullish sentiment on the stock as of the second quarter with stakes worth $174.49 million. Analysts expect the company to increase its earnings by 19.6% this year.
Overall GFI ranks 9th on our list of the worst Middle East and Africa stocks to buy according to short sellers. While we acknowledge the potential of GFI as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than GFI but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
