Unless you’re a glutton for punishment, I wouldn’t bother investing in the same old emerging markets that underperformed U.S. equities by 50% last year.
Of the 20 countries labeled as emerging markets, just five ETFs representing them are in the black over a one-year period: Israel (16.5%), Argentina (6.5%), Taiwan (6%), Vietnam (1.9%) and Hong Kong (1.6%). The field narrows to two if you adjust the time period to the past three months: Israel (4.8%) and Vietnam (8.5%).
You can lump the mighty BRICs—Brazil, Russia, India and China—in the losers bracket as well.
It’s not as though high debt, weakening currencies and close correlation to any drama going on in the U.S. and other developed worlds will suddenly disappear.
One alternative is frontier markets — countries largely insulated from outside influences, rich in resources, manpower and motivation to grow strong. The iShares MSCI Frontier 100 ETF (FM) gained 23.7% in 2013 while its Emerging Markets counterpart lost 3.7%. But you have to be able to stomach the risk of countries like Nigeria, South Africa, Ghana, Tanzania, Zambia, Pakistan and Bangladesh.
No worries. I found a country that once was classified as developed, is now considered emerging, yet has many of the profitable attributes of a frontier: Greece.
Greece lost its “developed market” status in the MSCI universe after investors shunned it for a six-year recession and default that forced the country out of the euro. As a result of the loss in economic firepower, Greece was banished to the Emerging Market grouping in June of 2013.
Greece benchmark surges 146%
It’s sounds much worse than it is. In fact, Bloomberg reports that the country’s ASE Index (ASE) has surged 146% since the announcement through 2013, topping all 94 national benchmarks globally, except Venezuela. Additionally, yields on Greece’s 10-year bonds have dropped to 8.31% from a peak of 33.7% in March 2012.
Because emerging markets is a smaller, riskier investment class it should attract a larger base of investors. Better yet, Greek stocks will double their weight on respective indexes.
That said here are three stocks for investing in the rebirth of Greece:
National Bank of Greece
This largest bank of Greece, National Bank of Greece (NBG) has a widespread presence in the Balkan region, Turkey, and Egypt. Some analysts compare its financial situation with Bank of America (BAC) and Citibank (C) due to its P/E of 23, an operating margin of 22%, and $4.83 billion cash flow.
Moody’s recently raised the rating of Greece’s government bonds, stating that the upgrade reflects the $13.5 billion bank’s more favorable asset quality, funding profile and earnings than other banks.
While NBG is down 66% over the past year, it has rebounded admirably posting six-month gains of 76%.
With just a $423 million market cap, Tsakos Navigation (TNP) is a large oil tanker owner and operator with solid financials and an experience management team. The company has $262 million in cash and $91million free cash flow and pays a 3% dividend.
TNP is up nearly 28% over the past month, due in part to rising manufacturing in the United States. The US is the world’s largest crude oil importer and crude tankers benefit under such circumstances.
DryShips (DRYS), like many other shipping stocks, has been exposed to volatility due to a long glut of shipping capacity that seems to be subsiding. As a result, its stock is up 108% over the past six months.
After hitting a 52-week high of $5 back on Dec. 26, 2013 it has pulled back down to $4 so this might make a good entry point. DryShips owns 42 dry bulk carriers with tonnage of approximately 4.4 million tons and 10 tankers that can hold 1.3 million tons. Founded in 2004, it is headquartered in Athens.