Greece Has A New Finance Minister. What Does It Mean For Investors In Greek Equities?

Disclosure: I own GREK, NBG, CMRE, and DRYS

Forbes

Yannis Stournaras is out and Gikas Hardouvelis is in — via a Greek government restructuring announced by Prime Minister Antonis Samaras recently.

Like Stournaras, Hardouvelis brings strong academic credentials to the country’s most important ministry, and a wealth of experience as an advisor to the former Prime Minister Costas Simitis, and as chief economist at Eurobank Group.

Mr. Hardouvelis’ appointment comes at a time the country is striving to get out of a depression which parallels that of the Great Depression in the 1930s.

And it is good news for investors in Greek equities, as it promises continuity of the policies that have helped the country put its public finances and return to debt markets in order.

That’s why we want to re-affirm our previous recommendations:

1. Buy an ETF that invests in the Athens Exchange, like ALPHA’s FTSE Athex 20, and NBGAM Athex, bearing in mind that these funds may not be readily available to small investors. A more convenient choice is Global X FTSE Greece 20 ETF (NYSE:GREK), which mirrors the performance of the FTSE/Athex 20 Capped Index.

2. Buy shares of Greek companies trading in US exchanges—larger companies with a dominant position in the Greek and Balkan markets.

One of these companies is National Bank of Greece (NYSE:NBG)—the country’s largest bank, with a strong presence in the Balkan region, Turkey, and Egypt — though this is a choice for aggressive investors.

Another choice is Hellenic Telecom (OTC:HLTOY), a former government monopoly that remains a conglomerate with diverse interests, from broadband to Greek and Balkan. The problem is that the stock had a big run up, from less than $1 during the crisis to above $8 currently.

But there is another sector that holds a better promise in my opinion — Greek shipping stocks. Greece continues to be a leader in this sector. Moreover, the sector is poised to benefit from a rebound in the global economy, as discussed in a previous piece.

Here I like DryShips (NASDAQ:DRYS) as a short-term speculative play, as it is popular with the momentum crowd longing for the nostalgic days when the stock was trading north of $100.

I also like Costamare CMRE +1.66% as a long-term play—the company owns a luxury hotel resort in Southern Greece, enjoys large operating margins, and pays a hefty dividend north of 6 percent.

A few words of caution: Greece still faces several hurdles that may lead to early elections which could change the rules of the game. Investors must be prepared for turbulence, which could in turn re-ignite old fears. Hype should never be a substitute for due diligence.