Implications of Banco Macro Bansud (BMA) Listing on Argentina and Argentina Markets

BANCO MACRO BANSUD (BMA) got listed a couple of days ago on the NYSE. The stock is up 10% from the pricing, a good deal for the investors.

The Company CEO, Jorge Brito is very positive about the growth of this bank; their strategy is mostly acquisitions and working economies of scale to boost profits. See Story here. Nowhere do economies of scale work better than in Finance-the rules are established and the bigger the fish, the more profitable it is.

What is interesting to see is the very positive reception to the offering-people are warming up to investing in Argentina again and Argentina is cleaning itself up (I am writing this blog from Buenos Aires). This will be a mega bull market, just like the Russian stocks after their collapse in the late 90's. The stock market is up 27 times (Yes!) From the bottom. See Russian Market Stock Chart here.

I expect the Bank stocks in Argentina to lead the Market for the next few years.

Sanjay John G.

The Argentine Telecom Stocks-TAR and TEO (NYSE)

The two big telecoms in Argentina are Telefonica de Argentina, TAR, and Telecom Argentina, TEO. The stocks trade on NYSE.

Telefonica de Argentina, TAR, is majority owned by Telefonica of Spain, a major Telecom operator in Europe. It has 3.4M fixed lines in Argentina (Argentina Population is 37M) and provides a host of data, internet etc services. It is also the owner of Telefonica Movil/Movistar, the biggest Cellular services provider in Argentina. Movistar is one of the most popular brands in South America-with presence in all major South American countries.

The ownership of Telecom Argentina is quite incestuous. It majority owned (55%) by Nortel Inversora, a shell company which is controlled by Sofora, which in turn is backed by Telecom Italia. Telecom Argentina is bigger than TAR. Their mobile business goes by the Telecom Personal brand, and they service about 6M cellulars in Argentina. See their latest quarterly report here.

Together, these companies are in essence the Argentine Telecom Market.

Sanjay John G.

Argentina is Improving, and is a Contrarian/Value Investor's Dream Buy

After the crisis of 2001, Argentina is on it's path to recovery. However, the general sentiment of Argentines toward their country is very pessimistic-they don't trust the banking system, and are hesitant to hold money in banks. Many of them want to hold hard assets like land, or sometimes, do have cash stashed under their mattresses.

Businesses in Argentina are conservative. They invest carefully-they know that the dollars and pesos they have today are precious.

The contrarian/value investor loves this scenario. I like it when businesses are conservative, the general population has a mistrust in the Government and the Banking system. Argentina is basically being treated by the Argentines themselves as some undeveloped (not developing) country and this will change. If you travel in South America today, Colombians and Bolivians seem to more upbeat than Argentines!

Argentina will catch up and be par with Mexico. and Brazil, comparing PPP and GDP/Capita, etc.. It probably has a long way to go before it becomes as efficient as Chile, the true star of South America, but still, a recovery or Argentina is guaranteed, the Financial system will mend itself, and this is the time to be IN Argentina.

You can pick a bunch of Argentine ADRs which trade on the NYSE and Nasdaq. Some good ones are BFR, GGAL, YPF, IRS, TAR, TEO, CRESY, and MGS.

I personally am long BFR, GGAL and IRS in my portfolio. I expect the Merval (the benchmark Buenos Aires Index) to keep going up for years to come, and bank stocks like BFR and GGAL continue to gain in the coming years (annualized returns of 20-30% is my expectation).

Argentina is hopelessly undervalued, and presents the best opportunity for Investing in Latin America.

Sanjay John G.