The top-performing Africa equity manager over the past five years, Bellevue AM’s Malek Bou-Diab, has revealed that a surprise stock has powered a short-term surge in performance.
Bou-Diab said Egyptian group Elsewedy Electric, which makes up 4.6% of the Bellevue African Opportunities fund, had emerged as an unlikely candidate for the fund in the wake of a difficult period of performance.
The utilities group caught Bou-Diab’s eye when the company hired a new CFO in 2013, which marked an attempt to start fresh following the economic crisis and Arab Springs.
In his latest update, Bou-Diab said: ‘[The CFO] set a credible plan to clean the balance sheet, removing the uncertainty that was negatively affecting the share price.
‘At that time, Egypt was also facing an acute electricity and energy crisis with frequent cuts threatening the economy with a great leap backward.’
Elsewedy Electric’s stock more than doubled between late 2013 and the end of 2014 but weakened significantly towards the end of 2015. Despite seeing the stock’s lowered performance, Bou-Diab leaned on his knowledge of development in Egypt’s energy sector and increased the exposure of the fund.
His commitment to the stock coincided with Elsewedy Electric’s share price rising from below EGP 35 (CHF 1.88) in December 2015 to over EGP 145 (CHF 7.79) in December 2017.
‘The rally was powered by a return on invested capital jumping from a low single digit to over 25% and solid cash flows generation allowing dividend yields hovering around 11% in 2017,’ said Bou-Diab.
Following the success of his strategy, Bou-Diab’s fund is now ranked first out of Citywire’s six funds in the African Equities sector. It has returned 2.5% over the three years to the end of January 2018 compared to a sector average loss of 5%.