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Invest in Greece while it’s still cheap
Right now, investing in Greece may seem plain mad. But Greece is dirt-cheap. And buying cheap stocks typically pays off in the long run. Matthew Partridge picks the best ways to buy in.
After this summer, investing in Greece may seem less contrarian than plain mad. The market is down by nearly 50% on last year's (it's back at the same level it was three years ago, at the height of eurozone fears). However, fresh elections are due in just over a fortnight's time, with talks on possible debt relief to follow. This means the choice between a substantial write-down of debt, or a euro exit, both of which should benefit the nation in the longer run, cannot be postponed any longer. Meanwhile, surprisingly strong second-quarter GDP data suggest the economy has the potential to recover once the disruption is over.
And from an investor's point of view, Greece is dirt-cheap. It's on a cyclically adjusted price/earnings ratio of just two. For perspective, the next cheapest market (Russia) is on a Cape of just under five, while the UK's is more than 12. The Greek market is also cheap on current measures, trading at a 46% discount to the value of its net assets, compared with a 75% premium for the FTSE 100. Sure, it's not a market to bet the house on. But buying cheap stocks typically pays off in the long run.
If you feel bold, the simplest way in is via an exchange-traded fund (ETF) that follows the Athex 20, the 20 largest Greek companies by market capitalisation. Lyxor ETF FTSE Athex 20 (Paris: GRE) is one option, but the Global X FTSE Greece 20 ETF (NYSE Arca: GREK) is also worth considering. It has a slightly higher management fee of 0.55% (Lyxor's is 0.45%), but it kept trading during the capital controls this year. This is worth remembering if Greece does leave the single currency or has another stand-off with its creditors, then restrictions are likely to be imposed again. The Athex 20 includes everything from a bottling firm to a lottery operator, and has relatively low exposure to banks. But if you want a slightly more diversified ETF, you may prefer the Lyxor UCITS ETF FTSE Atex Large Cap (Paris: INGRE), which covers the 25 largest companies.
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Join more than 165,000 subscribers and keep yourself informed with latest financial news, insights and expert analysis to help you understand what really matters when it comes to your finances.
Join more than 165,000 subscribers and keep yourself informed with latest financial news, insights and expert analysis to help you understand what really matters when it comes to your finances.
Greece's woes have also hit property prices. But if these bottom out with the economy, it could be good for Greece-focused investment trust Dolphin Capital Investors (LSE: DCI), which owns several properties in Porto Heli, including two resorts, golf courses and seafront villas. It trades at six times current earnings.
Join more than 165,000 subscribers and keep yourself informed with the latest financial news, insights and expert analysis to help you understand what really matters when it comes to your finances.
