{"id":24112,"date":"2011-09-27T13:03:18","date_gmt":"2011-09-27T17:03:18","guid":{"rendered":"http:\/\/countingpips.com\/fx\/2011\/09\/27\/3-greek-stocks-to-consider-after-the-default\/"},"modified":"2011-09-27T13:03:18","modified_gmt":"2011-09-27T17:03:18","slug":"3-greek-stocks-to-consider-after-the-default","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/fx\/2011\/09\/27\/3-greek-stocks-to-consider-after-the-default\/","title":{"rendered":"3 Greek Stocks to Consider AFTER the Default"},"content":{"rendered":"

By The Sizemore Letter<\/a><\/p>\n

The market is breathing a rather massive sigh of relief\u00a0this week as it appeared that Greece would not be defaulting and that the global financial system would not be melting down after all\u2014or at least not at the moment.\u00a0 Hopes are high that Europe’s political class is finally taking the debt situation seriously and that a deal is in the works that will prop up the Continent’s banking system in the event of a sovereign default.\u00a0<\/p>\n

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Guys, I’m good for the loan…really!<\/dd>\n<\/dl>\n

Investors are confident that new Greek austerity measures will pass the Greek parliament and convince lenders to release the next traunch of bailout funds.\u00a0 And if that wasn\u2019t enough, the world\u2019s major central banks\u2014including the European Central Bank, the U.S. Federal Reserve, the Bank of England, the Swiss National Bank, and the Bank of Japan\u2014jointly pledged two weeks ago to make available virtually unlimited dollar credit to any European bank facing a liquidity crunch.<\/p>\n<\/div>\n

So that\u2019s it.\u00a0 The crisis is over.\u00a0 The Eurozone is saved, and it\u2019s time to pile into Greek stocks.<\/p>\n

And if you believe that, to take a line from the country singer George Strait, I\u2019ve got some oceanfront property in Arizona to sell you.<\/p>\n

The recent developments do indeed preclude a liquidity<\/em> crisis like the one that wrecked the U.S. financial system in the wake of the 2008 Lehman failure.\u00a0 They do nothing, however, to address Greece\u2019s solvency <\/em>issues.\u00a0 The country\u2019s debts are expected to be 166 percent of GDP next year, and that debt ratio is almost certain to rise<\/em> even if Greece toes the austerity line and reduces government spending because the denominator\u2014GDP\u2014is shrinking, even while debt continues to rise.<\/p>\n

There is no happy ending here.\u00a0 Greece will never pay back its debts, and the only way out of this mess is default.<\/p>\n

The Europeans know this, of course.\u00a0 But the longer they postpone the inevitable, the longer their banks have to shore up their capital bases and the better the chances that Greece\u2019s default is \u201ccontained\u201d and fails to spread to the other \u201cPIIGS. \u201c<\/p>\n

A Greek default, when it eventually happens, will almost certainly create some fantastic opportunities for investors with the intestinal fortitude to, as Warren Buffett says, be greedy when others are fearful.<\/strong>\u00a0 It is during these \u201cblood in the street\u201d moments when investors are able to pick up solid assets for pennies on the dollar.<\/p>\n

That day is most certainly not<\/em> today, however.\u00a0 Greek stocks are fairly cheap by world standards (The Financial Times<\/em> reports that the Greek market sports a P\/E ratio of 9.4 and a dividend yield of 4.6%), but this is hardly cheap enough given the macro risks facing the country and given that the \u201cE\u201d in the ratio\u2014earnings\u2014are highly questionable at the moment.<\/p>\n

Still, in waiting for that day when Greece eventually does<\/em> default, I recommend patient investors put a handful of Greek ADRs on their watch list.<\/p>\n

I\u2019ll start with the Coca-Cola Hellenic Bottling Company S.A. ($<\/span>CCH<\/a>).<\/strong>\u00a0 Outside of buying a prime tourist property on one of Greece\u2019s picturesque islands, this is probably the safest and most durable investment you can make in the Eastern Mediterranean.\u00a0 Coca-Cola Hellenic Bottling is a bottler of Coca-Cola products. The company produces, sells, and distributes carbonated soft drinks juices, waters, sports and energy drinks, and other ready-to-drink beverages. \u00a0Drinks makers tend to be recession resistant, though a deep enough recession will bite into Hellenic\u2019s sales, as would a prolonged tourism drought.\u00a0 The company trades for a modest 0.73 times sales, though it will almost certainly get cheaper in the event of a Greek default.<\/p>\n

Another stock to consider is Hellenic Telecommunications Organization SA (HLTOY.PK<\/a>)<\/strong>.\u00a0 I was explaining my bullishness on the global telecom sector to a colleague recently, and his reply struck me as profound: \u201cEven if the world ends, people are still going to want to call and talk about it.\u201d<\/em>\u00a0 While folksy in a Yogi Berra-esque sort of way, it is nonetheless true.\u00a0 Fixed-line telecom has been in decline in the Western world, but mobile telecom and internet have become essential services for modern life.\u00a0 Hellenic Telecom provides these essential services in Greece, Albania, Bulgaria, and Romania. The stock trades at just 0.34 times sales, though again, I have little doubt it will get cheaper.<\/p>\n

Finally, investors should keep an eye on National Bank of Greece SA ($<\/span>NBG<\/a>)<\/strong>, the largest and most influential Greek banking group with operations in Turkey, the United Kingdom, South Eastern Europe, Cyprus, Malta, Egypt, and South Africa. We all know what happened to the American banking sector in the 2008 meltdown, of course.\u00a0 But in 2009, many of the banks that survived the meltdown delivered triple-digit gains for investors brave enough to scoop up shares at the bottom.\u00a0\u00a0 National Bank of Greece trades for just 0.36 times book value.\u00a0 Of course, in the event of Greek default, that \u201cbook value\u201d won\u2019t be worth all that much.<\/p>\n

I want to repeat a very important point:\u00a0 do NOT buy these today<\/em><\/strong>.\u00a0 While fine companies, they have the misfortune of operating in a basket-case country and are simply not cheap enough given the probability of and eventual Greek meltdown.\u00a0 This is the time to be patient. \u00a0After a default, wait a few weeks or even a few months for the dust to settle.\u00a0 You probably won\u2019t time it exactly right, but that\u2019s ok.\u00a0 Like horseshoes and hand grenades, \u201cclose\u201d will likely be good enough.<\/p>\n

And while we wait, the circus continues.\u00a0 \u00a0Just two weeks ago, Gunther Oettinger, the top German representative in the European Union, proposed that the European Union invade Greece and seize its assets as collateral for its loans.\u00a0 This is the same Mr. Oettinger that earlier suggested that Greece and the other PIIGS be forced to fly their flags at half-mast on all EU buildings as a mark of shame for their excessive debts.<\/p>\n

It should be emphasized that Mr. Oettinger is not a fringe member of parliament; he is a high-ranking European minister, and his comments make Texas Governor Rick Perry\u2019s recommendation to put Fed Chairman Ben Bernanke on trial for treason seem almost<\/em> reasonable by comparison.<\/p>\n

So again, anyone who believes the Euro crisis is over may contact me at any time about that Arizona oceanfront property\u2026<\/p>\n

If you liked this article by Sizemore Insights<\/em>, you\u2019d probably enjoy The Sizemore Investment Letter<\/em>, our premium members-only newsletter. Click here<\/a> for more information.<\/p>\n","protected":false},"excerpt":{"rendered":"

By The Sizemore Letter The market is breathing a rather massive sigh of relief\u00a0this week as it appeared that Greece would not be defaulting and that the global financial system would not be melting down after all\u2014or at least not at the moment.\u00a0 Hopes are high that Europe’s political class is finally taking the debt … <\/p>\n

Continue reading “3 Greek Stocks to Consider AFTER the Default”<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-24112","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts\/24112","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/comments?post=24112"}],"version-history":[{"count":0,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts\/24112\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/media?parent=24112"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/categories?post=24112"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/tags?post=24112"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}