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Could Greek Stocks Rebound Like Argentina in 2002?

September 12, 2011 | About:
matsandalex

matsandalex

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With most expecting Greece to default on its debt in the next few weeks, value investors are already anticipating whether any stock bargains will be emanate from the eventual re-structuring.

After Russia defaulted in 1998 and Argentina defaulted in 2001, both countries had bargain stocks that value investors scooped up for pennies on the dollar.

First, I went back and researched some blue chip Argentine stocks that were absolutely crushed after the Argentine government defaulted. For example, Telcom Argentina (TEO) went from $45 to $0.65 in 2002. However, the price quickly rebounded to over $10 a share after Argentina defaulted.

I also remember Marc Faber recommending Cresud (CRESY) after its shares dropped from $10 to about $4 at the peak of the crisis. Faber’s recommendation was brilliant as the shares quickly rebounded to $15 only two years after the government default.

One of the country’s largest banks, BBVA Banco Flores dropped from $30 to $1.45. Only a year after the default the shares rebounded to $10.

Will a similar situation play out in the aftermath of a Greek default? If so, what are the stocks that are likely to rebound the quickest?

In the Argentine example, blue chip companies that provided essential services were the survivors. Banks, telecom, electricity, and food were all industries that had to survive in one capacity or another.

Thus, the Greek ADR’s that would most likely rebound would be National Bank of Greece (NBG) and Hellenic Telecom (OTE.F).

It’s important for value investors to be patient and perhaps wait as much as six months after the Greek default to purchase assets. The Argentine washout took several months and it was not uncommon for vulture investors to lose their shirts as the cheap stocks got even cheaper.

Rating: 4.4/5 (29 votes)

Comments

HG2001
HG2001 - 2 years ago


I am from Europe. I think Greece might go throught the same process like Agentinia. Russia case seems to be somhow different, because at the time they got finally money from IWF and could recover. Argentinia on the other side was not able to controll their debts and IWF decided not to pay further support. Agentinia tried to bind pesos to US$ and after 2001 everything went downhile. The bank styem collapsed. Many other things happened, however, in August 2002 the Merval went up from around 200 (in 7/2001) to 1200 in 2004. Today is around 2700...

In my opinion Greece will have to exit EURO and will introduce his old currency again. They need hyperinflation for a while in order to get rid of their debts or - negotiate the debt cuts. there is ahihg chance that the first debt will crash and the introduce new debt. However, after all this mess the will recover in my opinion.

However, i am not sure who will suvive this deseaster. In argentinia most of the banks went bancrupt. However, i would suggest to put money on an index fund (managed by non greece bank) and distribute risk. I might do this.

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