Welcome to the World's Richest "Frontier Market"

Banking unreasonably good returns - 20% or more per year - requires an unconventional approach to investing and a global perspective.

As Americans, we sit smack dab in the middle of one of the biggest, richest, most diversified, and most developed markets on Earth. A lot of times, U.S. investors don't see the need to look elsewhere for opportunities, even if they offer outrageous profit potential.

Sure, we hear a lot about the rise of China, for instance, or India, and there's plenty of money to be made there. But for truly phenomenal profit potential, I'm looking even further afield.

I'm looking at Africa. And as a guy who loves to rake in money, I like what I see.

The headlines don't inspire confidence: deadly floods in East Africa, the ultra-violent militants of al-Shabaab, Cape Town's potentially fatal water crisis. The media sensationalizes the place as rife with violent conflicts, corrupt governments, and starvation.

All of this only reminds me of the words of legendary investor John Templeton. He advised, "People are always asking me where the outlook is good, but that's the wrong question. The right question is: Where is the outlook most miserable?"

He was touting the benefits of not following the crowd, and I think that applies here. Fortunes are born in troubled markets, in no small part from folks' burning desire to not be so troubled anymore. And huge parts of Africa currently qualify as uncertain, if not outright distressed.

That's why some of the biggest investment funds in the world are quickly pouring money into these uncertain and distressed - and undervalued - areas...

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The Growth Story You're Not Being Told

By definition, it's always the smart money that is first to recognize undervalued situations with the potential for huge returns. And in the past decade, heavy hitters like Apollo Global Management LLC (NYSE: APO) and The Carlyle Group LP (Nasdaq: CG) have been increasingly looking toward Africa for opportunities.

The opportunity is enormous when you consider not only everything that people desperately need, but what 15 million-odd, increasingly wealthy middle-class households in 49 countries desperately want.
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According to the African Private Equity and Venture Capital Association (AVCA), the list of essential infrastructure in extremely high demand goes on and on...

  • Roads
  • Railway lines
  • Modern ports
  • Airports
  • Power generation
  • Mass housing
  • New schools
  • Hospitals

And the AVCA pointed out how the opportunity has produced unreasonably good returns.

From 2007 to 2017, those completed deals in Africa outperformed the public markets by about 90%. Since 2011, the smart money has invested more than $25 billion in Africa, and the number is growing every year.

A good rule of thumb over the years has been, if smart money is interested in a region, it's probably worth further investigation by "aggressively patient" investors like ourselves.

And while the scarier news reported by the media makes investors want to avoid what appears to be a dangerous place to invest, the truth is that there's a lot of growth happening throughout Africa today.

In fact, many African nations are growing much faster than the global averages. New infrastructure is coming online every day.

Africa's electrification increased from 38% to 43% in 2016; fortunes - big ones - will be made providing power to the rest of the continent.

So how do U.S.-based investors get involved with what could be a multigenerational wealth-building opportunity?

That's what I'm here to show you today.

First, let's establish the ground rules...

Here's How to Make Money from Africa's Seismic Growth

Let's start with the hopefully obvious: As with any kind of investment, don't bet the entire house on African companies. As we saw with the AVCA's data from 2007 to 2017, the long-term returns here are enormous, so a small investment can still yield the same profits.

Second, do not touch exchange-traded funds (ETFs) with a 10-foot pole. Given the inevitable volatility of African markets, the liquidity issues faced by ETFs could be disastrous if we face a period of sustained selling.

There are some American depository receipts (ADRs) you might want to consider to gain exposure in Africa. ADRs are shares of foreign companies that trade in the United States, either over the counter or on exchanges.

Shopright Holdings Ltd. (OTCMKTS: SRGHY) is the largest grocer in Africa. Although it's based in South Africa, the firm has stores across the continent, with a total of more than 2,300 grocery stores, pharmacies, and liquor stores.

Another is MTN Group Ltd. (OTCMKTS: MTNOY) - a screaming candidate for aggressive long-term investment in Africa. It's the continent's largest cell phone provider, and the ADRs boast a dividend yield well over 5% at the current price.

For those looking for a more balanced approach to investing in African companies, the good old-fashioned mutual fund is always an option.

Many of the leading firms, like T. Rowe Price Group Inc. (Nasdaq: TROW) and Nile Capital Group LLC, offer Africa-specific funds that expose you to the opportunities developing in the region. Theses can help you benefit from the long-term changes we see developing over the next decade.

All of these are viable ways to put your money to work instead of submitting to the distorted, fear-mongering picture of Africa that the media provides.

After all, the smart money is already ahead of the curve, recognizing that the continent's modernization will be wildly profitable.

There are roads, electrical grids, schools, and hospitals to be built. New industries will move into the region to take advantage of lower labor costs as the African nations begin to develop adequate infrastructure.

It may look ugly at the moment in places, but 50 years ago, so did China, India, and Latin America - all former frontier markets where patient, aggressive investors have made fortunes.

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About the Author

Tim Melvin is an unlikely investment expert by any measure. Raised in the "projects" of Baltimore by a single mother, he never attended college and started out as a door-to-door vacuum salesman. But he knew the real money was in the stock market, so he set sights on investing - and by sheer force of determination, he eventually became a financial advisor to millionaires. Today, after 30 years of managing money for some of the wealthiest people in the world, he draws on his experience to help investors find "unreasonably good" bargain stocks, multiply profits, and build their nest eggs. Tim tirelessly works to find overlooked "hidden gems" in the stock market, drawing on the research of legendary investors like Benjamin Graham, Walter Schloss, and Marty Whitman. He has written and lectured extensively on the markets, with work appearing on Benzinga, Real Money, Daily Speculations, and more. He has published several books in the "Little Book of" Investment Series and a "Junior Chamber Course" geared towards young adults that teaches Graham's principles and techniques to a new generation of investors. Today, he serves as the Special Situations Strategist at Money Morning and the editor of Peak Yield Investor.

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