Quintuple Your Money Through Rising Prosperity

Erika approached the woman at the counter in the British Airways lounge at London’s Heathrow Airport. We were soon to start the second leg of our two-week research trip to Africa, and we were looking to upgrade our seats into business class for the flight to Ghana.

“Actually,” the agent said, “our African destinations are really popular. Business class is oversold.”

It’s a refrain we heard on every segment of our journey into, through and out of Africa, regardless of the airline.

Despite perceptions throughout the U.S., economies across Africa are booming – a trend that’s highly visible in the airline space. Heck, spend any time at the Jomo Kenyatta airport in Nairobi and you’ll see it. Gates are packed with travelers flitting around Africa, the Middle East, India and parts of Europe. In some corners of the crowded airport, it’s like a refugee camp of travelers and their bags.

It’s a hassle to deal with when you’ve been living out of a suitcase for two weeks … but it also points to a big opportunity for investors.

I write a great deal about prosperity – the fact that it’s shrinking in America while it’s rising in many developing parts of the world. It’s an important indicator for investors because prosperity has a measurable benefit on the accumulation of wealth. High or rising prosperity trends point to strong fundamentals underlying an economy, which, in turn, points to the great likelihood of long-term outperformance of local stock markets.

Indeed, over the past decade, the developed-country stock markets that performed best were Norway, Sweden, Denmark, Canada, Hong Kong, Singapore — countries that rank high on a global prosperity index. Their returns — between 6.5% and nearly 12% on an annualized basis — have outpaced the sub-5% returns generated over the same 10-year period in America, a country where prosperity is actually falling.

African countries still rank low, befitting their “frontier” status. But their rankings are improving because prosperity is on the rise. And that rising prosperity is flowing through the continent’s consumer aviation market.

Kenya Airways, for instance, is expanding across Africa and the Middle East, and has just announced plans to start a budget carrier to court the exploding numbers of Africans who now earn enough to travel, though they can’t yet afford a full-frills tickets. Air India is looking to add new routes into Africa. And Air Seychelles is partnering with European carriers on code-share flights that will make the tropical island more accessible to Eastern European travelers.

These new routes speak to the same theme of prosperity that created big wealth for investors in Asian air carriers … companies like Malaysia-based Air Asia, which is up more than 23% a year since 2010. That’s why I am recommending an airline in Africa that, I think, could triple your money.

The carrier is Fastjet (London: FJET).

It operates mainly in Tanzania, Angola and Ghana, but recently has worked to expand into other parts of Africa. I originally recommended Fastjet back in January, and the shares are down from there. But as I noted then – and as I must reiterate now – Fastjet is a long-term and highly speculative investment.

Fastjet is tapping into African prosperity in trying to build itself into the continent’s first pan-African discount carrier. The company is looking to begin operations in Kenya, has an agreement to operate a low-cost airline in Nigeria, and is in talks with Emirates, Dubai’s fast-growing airline, to expand into other parts of Africa through code-sharing arrangements.

The biggest announcement came earlier this month when the company received a permit to operate in South Africa, providing service from Tanzania – a route that currently fetches over $600 per roundtrip flight, but which Fastjet could price as low as $100. Once the initial route is up and running, the company will focus on developing a stronger presence in South Africa.

Turning $1 into $4 or $5 … or More

Fastjet’s revenues increased more than 20% last month and total passengers carried surged 52% from May to June. The company’s planes are now filled at 78% capacity, up from 10 percentage points in just one month.

The stock price has had a rough glide path in recent months, partly because of the U.S. Federal Reserve actions that caused a global sell off and partly because Fastjet is a very small company operating in Africa and trading in London.

Still, for a speculative and patient investor who understands the prosperity sweeping across Africa, Fastjet is a calculated speculation that could turn every dollar invested into $4 or $5 – or more – over time.

Until next time, stay Sovereign …

Jeff D. Opdyke
Editor, Profit Seeker