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Investing in Argentina and Argentina Stocks

Discusses *smart* ways of investing in Argentina, primarily thru ADRs on NYSE and NASDAQ. Covers companies like Grupo Galicia, GGAL, Banco Frances, BFR, IRSA(the biggest Real Estate Company in Argentina) IRS, Tenaris (TS), etc. UPDATED SEVERAL TIMES A MONTH.

Monday, February 20, 2006

Are Argentine Bank Stocks a Good Investment?

It is human nature to become very cautious if you have suffered a big blow in life recently. Whether it is being involved in a car accident, a financial loss in your investments, or your business suddenly taking a nosedive-we humans become very cautious soon after such a loss. Overcautious.

Argentina is suffering through this conservative and pessimstic business outlook at this time. The business confidence is low, the Government is conservative (they paid IMF $12B in advance in Dec. 05), and in general, you don't see people very positive on the economy.

I am writing this piece from Santiago, Chile; Chile has definitely pulled ahead in Latin America, and is the star of the region. Santiago living costs are 20-30% higher than Buenos Aires; not long ago, before the crisis, Buenos Aires was twice as expensive as Santiago. I visited Buenos Aires in 2001 before the crisis; and it felt that I was in New York, when it came to paying in Restaurants or Cabs or for the drinks. It is amusing to see the situation reversed between Santiago and Buenos Aires.

From an investment standpoint, this cautious approach by businesses and Governments bodes well for long term investors in Argentina. By long term I mean at least 3 years. Conservative managers and CEOs make great investments-especially when the whole thing has suffered a complete collapse recently. They invest wisely, avoid excessively risky bets, and are more prudent in doling our funds for new ventures. This is great for shareholders in these companies. Buy the fear, they said. And there is fear in Argentina business environment today-making it an ideal place to invest for bottom fishing investors.

Two big banks of Argentina are Banco Frances (BFR on NYSE) and Grupo Galicia (GGAL). If you have never been to Argentina, you can imagine these to be something like Bank of America and Citigroup in the US-yes Sir, they are like weed-everywhere. They remain an excellent proxy for Argentina. In fact, GGAL is 25% of the benchmark Index of Argentina, the Merval.

Add to this the biggest real estate company in Argentina, Inversiones y Representaciones (IRS on NYSE) and you know what my Argentine portfolio looks like (I am a trader-and I will see these securities without informing you, mind ye!).

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