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 ZIM Shipping (NYSE:ZIM) 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).
A fleet of vessels docking at a busy harbor, signaling the company’s presence in global marine shipping.
ZIM Shipping (NYSE:ZIM)
Short Interest as % of Shares Outstanding: 17.00%
Number of Hedge Fund Investors in Q2 2024: 26
ZIM Shipping (NYSE:ZIM) is an Israeli company that specializes in containerized cargo shipping. The company operates one of the largest shipping networks in the world and provides a full range of shipping solutions to more than 32,000 customers at approximately 300 ports in 90 countries.
In the first half of 2024, ZIM Shipping (NYSE:ZIM) reported that its revenues increased 30% year-over-year to $3.5 billion, due to an increase in average freight rates, which stood at $1,674 per TEU in Q2. In Q2, ZIM Shipping’s (NYSE:ZIM) carried volume increased to 952,000 TEU, marking an 11.7% increase compared to the same quarter last year and a 13% increase compared to the first quarter of 2024. ZIM Shipping (NYSE:ZIM) has a fleet of 148 vessels, including 132 container ships and 16 car carriers, and has a capacity of 755,000 TEUs.
The company is replacing its older vessels with larger, new-builds through its fleet renewal program, of which 38 of the 46 new-build container ships have already been delivered. These new vessels are fuel-efficient as they use liquefied natural gas (LNG) and are better suited for the company’s trade routes. This helps the company to reduce costs, and improve fuel efficiency.
While 17% of the companies shares are shorted, 26 hedge funds have maintained a bullish sentiment on the stock as of the second quarter, with stocks worth $455.13 million. D E Shaw is the largest shareholder in the company, holding $107.43 million worth of stock as of June 30. Industry analysts expect the company to grow its earnings by 100% this year and maintain a consensus Buy rating, with an average price target of $20.03, representing a 12.5% upside potential from its current levels.
Overall ZIM ranks 2nd on our list of the worst Middle East and Africa stocks to buy according to short sellers. While we acknowledge the potential of ZIM 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 ZIM 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.