We recently compiled a list of the 10 Worst Middle East and Africa Stocks To Buy According to Short Sellers. In this article, we are going to take a look at where Harmony Gold Mining (NYSE:HMY) stands against the other Middle East and Africa stocks.
Moderate Growth Amidst Challenges
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).
An open pit mine with heavy excavation machinery toiling away against the backdrop of a hidden valley.
Harmony Gold Mining (NYSE:HMY)
Short Interest as % of Shares Outstanding: 1.44%
Number of Hedge Fund Investors in Q2 2024: 17
Harmony Gold Mining (NYSE:HMY) is one of South Africa’s largest gold producers, with approximately 90% of its gold output coming from its South African mines. In addition, the company owns gold and copper assets in Papua New Guinea and Australia. Harmony Gold Mining (NYSE:HMY) focuses on acquiring high-grade mineral assets to maintain solid operating margins.
Over the past three years, Harmony Gold Mining’s (NYSE:HMY) production has remained stable, and at the start of FY2024, the management projected similar levels to the previous year. However, the company outperformed expectations, increasing gold production by 12% year-over-year in the first half of FY24 to 832,000 ounces. This growth was largely driven by an 11% improvement in recovered grades from its underground mines. The production momentum extended into the third quarter, prompting management to raise its full-year production target to 1.55 million ounces, above the original estimate of 1.38 million to 1.47 million ounces. In a recent update on August 26, Harmony Gold Mining (NYSE:HMY) reported it would reach 1.56 million ounces for the full year, reflecting a 6% year-over-year increase, with recovered grades also up 6% to 6.11 g/t.
Gold prices have recently hit a record high, driven by strong demand and favorable market conditions. J.P. Morgan Research expects gold to remain around $2,500 per ounce by the end of 2024 and rise to $2,600 per ounce in the first half of 2025. Harmony Gold is well-positioned to benefit from these high gold prices, due to its strong production growth from key underground assets, giving it an edge over competitors.
Harmony Gold Mining (NYSE:HMY) is currently trading at 8.47 times its earnings, a 47.7% discount compared to the sector median of 16.20. The company’s earnings are projected to grow by 17.8% this year. While 1.44% of the company’s shares are shorted, 17 hedge funds have maintained a bullish sentiment on the stock as of the second quarter with stakes worth $171.88 million. Kopernik Global Investors is the largest shareholder, with a stake valued at $26.90 million as of June 30.
Overall HMY ranks 8th on our list of the worst Middle East and Africa stocks to buy according to short sellers. While we acknowledge the potential of HMY 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 HMY but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.