The faltering economy in Greece has made headlines all over the world. At the end of the last decade, the Greecian government announced that the nation was in a lot of debt, and much of it could have been attributed to government spending habits and the global economic crises. A year later, it was announced that their government did not give the general public a full and accurate report of the economic situation. After a financial reassessment, it was announced that they owed about 13.6%, which was the highest number of debt ever recorded by the GDP. The IMF along with other European countries have agreed in loaning Greece €45 billion Euros to cover their debts in addition to further financial packages as long as they agree to the withhold certain standards and closely monitor their debt problem.
The good news is that two years later, the Greek market is enjoying a comeback. The new Greece Global X FTSE Greece 20 ETF (NYSE:GREK) is up 20% this year alone despite the crumbling economy. The ETF follows the 20 largest Greek companies. The fund’s largest holdings include Coca Cola Hellenic 15.1%, National Bank of Greece 12.3%, Opap GA 8.7%, Hellenic Telecom 5.2%, Bank of Cyprus 3.5%, Hellenic Petroleum 3.4%, and Titan Cement Company 3.4%. Top sector allocations include Financials 35.1%, Consumer Discretionary 18.4%, Consumer Staples 12.7%, Industrials 9.3%, and Telecommunications 8.8%.
Lee Ainslie's Maverick Capital had a difficult third quarter, although many hedge funds did. The quarter ended with the S&P 500's worst month since the beginning of the COVID pandemic. Q3 2021 hedge fund letters, conferences and more Maverick fund returns Maverick USA was down 11.6% for the third quarter, bringing its year-to-date return to Read More
Below is a Bloomberg screenshot, which shows slightly lower returns, albiet much higher than most forecasters likely predicted:
Greek shares were super cheap in March of this year. Below are some valuation metrics compiled by Morgan Stanley in January:
Trailing Valuation PE(11.4) , PBV(0.70) ROE%(6.2), DY%(6.0) 10Y Govt (35.8)
Price Earnings 2011e (-) 2012e (91) 2013e (6.4)
FV/Sales: 2011e(0.95) 2012e(0.89) 2013e(0.74) 2012e(-10)
Price Sales: 2011e(0.58) 2012e (0.57) 2013e(0.55)
ROE: 2011e(-1.5) 2012e(7,3) 2013e (9.8)
Net Income Margin % 2011e(6.7) 2012e(6.7) 2013e(6.5)
Net Debt to FBITDA: 2011e (1.8) 2012e (1.6 ) 2013e (1.3)
One can see from the metrics how cheap shares became. Forward PE for 2013 was projected to be 6.4. Price to sales was 0.58, and ROE looked like it was ready to climb. Even after the 20% jump the market still looks cheap, and has room to rally as the valuations are still pretty cheap. There are likely individual stocks, which are far cheaper as well.
This is not surprising to value investors. When the German stock market re-opened in 1949, it had a cumulative return of over 4,000%, over the next ten years. The Japanese stock market had a cumulative ten year return over 6,000, (Adam Tooze-The Wages of Destruction: The Making and Breaking of the Nazi Economy)
The numbers are the key to prove that Greece is ready to make a big rebound as a country and to regain their finances. What this means for the rest of the world’s economic situation? It means that we are steadily rebuilding ourselves back. It also means that no matter how dire a country’s financial situation may become, that with a little faith and perseverance, it’s possible to regain ground. This is a big lesson for investors, that value investing wins in the end.