Analyst Shares His Favorite Argentine Stocks: Long Banks, Short Energy
Benzinga spoke with main analyst Federico Flom, who said there are a few Argentine stocks he's looking at, and shared his investment thesis.
"I am looking into going both long BBVA Banco Frances S.A. (ADR) (NYSE: BFR) and short YPF SA (ADR) (NYSE: YPF) as a play on the potential normalization in Argentina targeting returns of 30% in the next 6 months," he said.
The analyst went on to explain that, "Banking is probably the best sector to play this theme as there is huge potential for lending to expand to historical levels. As a quick reference, Argentina right now posts a 12% private loans/GDP vs. a historical rate of 20%. Banks are very well capitalized and non-performing loans are almost minimal in BBVA Banco Frances, Grupo Financiero Galicia S.A. (ADR) (NASDAQ: GGAL), and Banco Macro SA (ADR) (NYSE: BMA)."
On the other hand, YPF is "exposed to a declining oil trend and the company faces internal management pressures, as several of the directors represent the government that is about to leave, creating significant conflicts that have been evident in the recent weeks, as one of YPF’s top managers resigned."
In addition, he noted the company will need considerable investment to develop Vaca Muerta, a large shale oil filed that, in his view, "will be hard to get."
Lastly, Flom pointed out that, "banks are very strong from a technical perspective and YPF has been very weak, closing near significant support levels that if broken, could represent major downside going forward."
Disclosure: Federico Flom is short YPF
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