AFK: So Contrarian, It Just Might Work (New Buy Rating)

2025-02-14 11:54:52 ET

Summary

• AFK invests in a portfolio of stocks that do most of their business on the continent of Africa. It is the only US-traded ETF that can say that.
• South African gold miners are part of the portfolio but don't dominate it, there is good non-tech diversification here.
• AFK's portfolio sells for about 10x trailing earnings. That, the chart pattern (long-term) and the potential for this market to be discovered make it a speculative buy.

I am a firm believer that among the biggest misjudgments investors make regarding ETFs are these:

• They pay too much attention to past performance. There's only one guarantee there...that you can't have that past performance. Not if you are just looking it the ETF or stock for the first time now.
• They assign too much importance to an ETF's expense ratio. Lower "ER" is better, but if there's a good reason it is higher, I don't care if the ER is 1% or even 1.5%. You often get what you pay for. Funds that saved investors' retirements via hedging techniques were worth the slightly higher imbedded fees. I would pay an extra 1% any time, if I believed it would limit a 20% drop in portfolio value to a small fraction of that, or even to make money in a bear market. That's actually my investing career in a nutshell. It is also why the investing group I run here is not the least expensive. I play defense, not just offense, and teach my subscribers to that in whatever way they see fit.
• They don't look through to the ETFs holdings to get a better sense of what they truly own. And they gravitate to ETFs that sound different from others they have, but effectively are not. I call that a "collection of ETFs" and not a coordinated portfolio.

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