Which Stocks to Buy in Mauricio Macri’s Pro-Business Argentina?

Investment flow into Argentina

With its liberal investment regime and high level of transaction transparency, Argentina (ARGT) is an increasingly attractive investment destination. Recent investments into the economy relate to the energy and the agricultural sector.

  • Tecpetrol is going to invest $2.3 billion in Argentina’s Vaca Muerta shale fields through 2019.
  • Argentina’s grains transportation sector is said to receive more private investment in 2017 as President Mauricio Macri pledges incremental cuts in soybean export taxes. Argentina is the world’s top exporter of soymeal livestock feed and the third biggest supplier of raw soybeans.

Where does value lie?

So far in 2017, the industrials, utilities, financials, consumer discretionary, and telecommunication services sectors have risen with the tide (as highlighted in Part 1).

The share price of industrials sector firm, Agrometal SA, which is an agricultural soil break-up and sowing machinery manufacturer, is up over 47% YTD; 113% over the past 6 months; and 444.5% over the past year. However, the stock trades at a current price multiple of 37.7 times earnings.

Utility firms such as Pampa Energia SA (PAM), Transener SA, Cental Costanera SA, and EDENOR (EDN) have also done well so far this year, returning 46.4%, 41.8%, 31.7%, and 17.5% YTD. Of these, Transener SA and Cental Costanera SA are trading at attractive forward price valuations of 8.2 and 7.8, against an average forward valuation for the sector at 21.9.

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Banks such as Grupo Financiero Galicia SA (GGAL) and Banco Macro SA (BMA) have returned 39.7% and 28.04% YTD. However, these are currently trading at forward price to book multiples of 2.9, 2.7, and 2.4, respectively.

Telecommunication services firm Telecom Argentina SA (TEO) has returned 17.5% on a YTD basis and 22% over the past 6 months. The stock currently trades at a forward price to earnings multiple of 13.2.

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