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At an inflation rate of nearly 100%, Argentina has the world’s second-highest inflation rate, only behind its South American counterpart Venezuela. Hyperinflation can lead to several economic challenges, such as reduced purchasing power of the domestic currency, lower consumer spending, and higher interest rates (tighter monetary policy).
However, the Global MSCI Argentina ETF shows that a stock market can still move higher, despite the debilitating effects of rampant inflation.
Three main reasons exist for this phenomenon:
1. Companies can benefit from higher prices: Though prices increase, companies can raise profits further, improve earnings, and thus improve stock prices.
2. Equities can be an inflationary hedge: Rather than holding cash and watching inflation eat it away, an investor may use the stock market as a way of hedging.
3. The stock market discounts the future: While government data is often delayed, the stock market is a forward looking, discounting mechanism. Because of this, the worst may already be priced in. Economic conditions may be improving, and inflation may be retreating.
Today we will cover 3 ADRs that look set to continue to take advantage of Argentina’s booming stock market, including:
Zacks Rank #1 (Strong Buy) stock Sociedad Anonima
Sociedad Anonima is a government-owned energy company engaged in the production, refining, and transportation of oil and gas. Last quarter, YPF produced robust top and bottom-line growth. EPS rose 174%, and revenue rose 36%, year-over-year. Consensus estimates are also attractive:
YPF is growing rapidly and benefiting from higher energy prices. Meanwhile, the company remains reasonably valued. YPF’s forward P/E is 2.3x, about a third of the industry average.
YPF is expected to report earnings on March 9th. The stock is currently set up in a bullish consolidation above its 50-day moving average.
Zacks Rank #1 (Strong Buy) stock Mercadolibre
Mercadolibre is Argentina’s largest company in terms of market cap and arguably the most stable. Since going public, the stock is up by more than 4,000 percent, far outpacing the S&P 500 Index and most international stocks.
On February 23rd, MELI reported robust earnings growth of 457% on top-line growth of 41%. MELI has a history of producing healthy, consistent growth.
Though the stock is off its highs, earnings are at their highs and only expected to grow more over the next few years. Now is a rare opportunity to scoop up shares of this high-performer at a discount.
Zacks Rank #3 (Hold) stock Macro Bank
Banco Macro Bansud is a leading bank in Argentina. The bank boasts the country’s most extensive private-sector branch and provides standard banking products and services to a nationwide customer base.
BMA is attractive for three reasons. First, it has the strong tailwind of the Argentine stock market. Second, the stock is part of the Zacks Banks – Foreign group, which ranks in the top 9% out of all industries tracked by Zacks. Lastly, the stock is pulling into its 50-day moving average for the first time since breaking out – providing an attractive reward-to-risk zone.
Takeaway
The Argentinian stock market is fast becoming one of the biggest contrarian trades of 2023. While most continue to discuss rampant inflation in the Latin American country, the Argentine stock market is quietly outperforming the S&P 500 Index and the world. Look for the strength to continue.
Why Haven’t You Looked at Zacks' Top Stocks?
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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Zacks Investment Ideas feature highlights: Global MSCI Argentina ETF, Sociedad Anonima, Mercadolibre and Macro Bank
For Immediate Release
Chicago, IL – March 8, 2023 – Today, Zacks Investment Ideas feature highlights Global MSCI Argentina ETF (ARGT - Free Report) , Sociedad Anonima (YPF - Free Report) , Mercadolibre (MELI - Free Report) and Macro Bank (BMA - Free Report) .
Is Argentina the Biggest Contrarian Trade of 2023?
Argentine Stock Market Flourishes Amid Hyperinflation
At an inflation rate of nearly 100%, Argentina has the world’s second-highest inflation rate, only behind its South American counterpart Venezuela. Hyperinflation can lead to several economic challenges, such as reduced purchasing power of the domestic currency, lower consumer spending, and higher interest rates (tighter monetary policy).
However, the Global MSCI Argentina ETF shows that a stock market can still move higher, despite the debilitating effects of rampant inflation.
Three main reasons exist for this phenomenon:
1. Companies can benefit from higher prices: Though prices increase, companies can raise profits further, improve earnings, and thus improve stock prices.
2. Equities can be an inflationary hedge: Rather than holding cash and watching inflation eat it away, an investor may use the stock market as a way of hedging.
3. The stock market discounts the future: While government data is often delayed, the stock market is a forward looking, discounting mechanism. Because of this, the worst may already be priced in. Economic conditions may be improving, and inflation may be retreating.
Today we will cover 3 ADRs that look set to continue to take advantage of Argentina’s booming stock market, including:
Zacks Rank #1 (Strong Buy) stock Sociedad Anonima
Sociedad Anonima is a government-owned energy company engaged in the production, refining, and transportation of oil and gas. Last quarter, YPF produced robust top and bottom-line growth. EPS rose 174%, and revenue rose 36%, year-over-year. Consensus estimates are also attractive:
YPF is growing rapidly and benefiting from higher energy prices. Meanwhile, the company remains reasonably valued. YPF’s forward P/E is 2.3x, about a third of the industry average.
YPF is expected to report earnings on March 9th. The stock is currently set up in a bullish consolidation above its 50-day moving average.
Zacks Rank #1 (Strong Buy) stock Mercadolibre
Mercadolibre is Argentina’s largest company in terms of market cap and arguably the most stable. Since going public, the stock is up by more than 4,000 percent, far outpacing the S&P 500 Index and most international stocks.
On February 23rd, MELI reported robust earnings growth of 457% on top-line growth of 41%. MELI has a history of producing healthy, consistent growth.
Though the stock is off its highs, earnings are at their highs and only expected to grow more over the next few years. Now is a rare opportunity to scoop up shares of this high-performer at a discount.
Zacks Rank #3 (Hold) stock Macro Bank
Banco Macro Bansud is a leading bank in Argentina. The bank boasts the country’s most extensive private-sector branch and provides standard banking products and services to a nationwide customer base.
BMA is attractive for three reasons. First, it has the strong tailwind of the Argentine stock market. Second, the stock is part of the Zacks Banks – Foreign group, which ranks in the top 9% out of all industries tracked by Zacks. Lastly, the stock is pulling into its 50-day moving average for the first time since breaking out – providing an attractive reward-to-risk zone.
Takeaway
The Argentinian stock market is fast becoming one of the biggest contrarian trades of 2023. While most continue to discuss rampant inflation in the Latin American country, the Argentine stock market is quietly outperforming the S&P 500 Index and the world. Look for the strength to continue.
Why Haven’t You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +6.2 average gain per year. Amazingly, they soared with average gains of +46.4%, +49.5% and +55.2% per year. Today you can access their live picks without cost or obligation.
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.