Outrageous Values in Argentina

The new pope hails from Argentina — maybe your next stock pick should, too!

The surprise announcement that the new Holy See, Pope Francis, is an Argentine could make the world take a closer look at that country.

More than likely, though, the spotlight on South America will fade when the current headlines go away. But for the investing-minded, we can find even-more surprises in areas like this that might not otherwise immediately jump to the forefront of bargain-hunters’ minds.

And if you’re looking for a stock-picker’s paradise, it doesn’t take a conclave to figure out that the prices of Argentina-based, U.S.-traded stocks are lower than they should be.

You might not be investing in Argentina for some of the same reasons a lot of investors haven’t yet explored it, not the least of which is that its government has created a tough situation for itself.

But don’t cry for Argentina. While the election of an Argentine pope may have put this country on the map, some of its companies’ stocks could soon become its real claim to fame.

3 Reasons Why Argentine Stocks are on Sale

Although the election of native son Cardinal Jorge Bergoglio as the world’s newest pope casts a positive spotlight on Argentina, there are three things that the country would probably rather the masses not know about.

First, Argentina continues its attempt to work out its debt obligations with some very feisty hedge funds. This is mired in external legal disputes and misadventures.

Then, the expropriation of its leading oil company YPF last year, left an unpaid request for a $10 billion payment of the stock. This created a lot of ill will among global investors. (Shares that were trading at $30 a year ago are now at $15 and change.) This event has also served to complicate the country’s recovery.

And finally, even locally the government is meeting resistance for limiting access to foreign currency and banning savings in U.S. dollars.

When this was not enough, Argentina’s president publicly reprimanded several of her ministers for savings in U.S. dollars.

Meanwhile U.S. dollar deposits from non-residents in neighboring Uruguay climbed 12% in the latest month.

But this could all change and go up like papal smoke someday, especially if the market senses another regime change is in the works.

Remember that, when you’re investing in developing economies, many have structurally inefficient capital markets. So it’s always best to do a reality check on the stocks that might look good from a distance.

I do my reality check in the form of consulting my proprietary 3-D stock ratings model. And in Argentina’s case, some of its stocks look even better under closer scrutiny!

8 Outrageous Stock Values in Argentina

So to get another view of these stocks, I went to my trusty stock-ratings model for a more-objective measure of the risk-vs.-reward profile of investing in this market.

Here’s what I found …

Nine stocks that hail from Argentina have already recovered from their lows and have rewarded investors who bought them right. Here are eight of them, with their respective bounces from their 52-week lows.

• Arcos Dorados (ARCO) — 30%

• MercadoLibre (MELI) — 48%

• Grupo Financiero Galicia (GGAL) — 40%

• Petrobras Energia Participaciones (PZE) — 45%

• Tenaris (TS)— 30%

• Telecom Argentina (TEO) — 69%

• Cresud Inc. (CRESY) — 38%

• YPF (YPF) — 68%

As for the ninth stock, which is the highest-rated of the nine Argentine stocks we currently track, just yesterday I recommended it exclusively to my Global Trend Trader subscribers.

While the average large-cap U.S. market has been up 22% from its 52-week low, these are up three times as much in the last year or so.

This is the reason we do this work — to find outrageous values.

And the type of stock price moves in developing markets is just too much to ignore.

3 Deep-Value Stocks to Consider

Fundamentally, there are some very deep-value stocks in South America. Here are three from the above list that could perform well in the coming year.

Cresud Inc. (CRESY) — As an agriculture and real estate play, Cresud has not seen the volatility others in this country have experienced. The company has been transforming itself into less of a corn, cattle and milk producer into a real estate specialty stock.

That’s a great idea, but I’m looking for a stock that will spend less time on the pasture and has more moo in it.

There are plenty of large agriculture-related stocks in developing markets. And with the potential for the sugar price supports to finally come down, there are some sweeter stocks out there I’m considering.

Next is a stock I’ve done well with, in the past.

MercadoLibre (MELI) — The eBay of Latin America popped higher this week and appears headed again toward the $100 mark.

I’ve been an active proponent of buying this one on pullbacks. The strategy worked then and still has some merit. So if a consolidation opportunity appears, MELI could hit lower prices before it permanently goes over the magic number.

YPF (YPF) — The company is having a hard time raising capital for its aggressive development of shale-oil fields. So citing the cost of higher equipment, YPF is scaling back its capital-expenditure plans.

Eventually, they will have to settle the challenges we mentioned earlier to create an opportunity for another oil company to enter into a venture for the oil.

News that some investors are seeking to mediate a settlement is a clear sign that a new view of the situation based on tougher market realities and a lower buyout valuation might make sense.

As I said earlier, I believe Argentine companies trading on U.S. exchanges are priced lower than they should be. Now is a great time to consider taking advantage of this “Argentine discount,” because any moderation in this discount could really light a fire under any of these stocks!

That’s my take on it.

Happy Trading!

Rudy

P.S. A global investment that never goes out of style is gold. Yet, a major precious-metals news outlet BANNED Uncommon Wisdom’s latest video from its site because it was too controversial. Here’s what their viewers missed … that YOU can use to your advantage!

This Argentine stock that I just recommended to my Global Trend Trader members has the potential to shoot up 40% from here!