For most investors, Greece represents economic catastrophe and is seen as a good way to make money disappear. But the worst may be coming to an end in this mediterranean nation and investors could be ready to pour the money back into the Hellenic Republic.
Progress so far
Although Greece still has unemployment figures north of 25%, meaningful progress is being made in other categories. In a recent article in The Guardian, Greece's finance minister, Yannis Stournaras, highlighted some of the examples.
- Current estimates predict positive economic growth for Greece in 2014
- 10 year Greek bond yields have dropped significantly to within 550 basis points of German debt
- Major Greek banks are successfully raising capital
- Unemployment appears to be stabilizing
- Government reforms are making Greece more competitive
- Net tourist receipts increased 18.1% for 2013 and exceeded targets
- Exports of goods and services rose 1.8% for 2013
Return of the money?
For the past few years, raising money in Greece has been extremely difficult. In mid 2013, only three of the four major banks were able to raise even 10% of their capital needs from private investors and National Bank of Greece (NYSE:NBG) just squeaked over the minimum requirement for private capital sourcing. At the same time, the Greek government itself was reliant upon loans from the troika to meet its own obligations.
The situation is very different today for both Greek companies and their government. To meet capital requirements, Piraeus Bank and Alpha Bank raised a combined 2.95 billion euros from private investors. National Bank of Greece needs to come up with 2.2 billion euros in additional capital but has already said it will not need to issue new common shares while naming asset sales as a potential way to raise capital. Even virtually nationalized Eurobank is attracting private investor interest where interest from private investors currently exceeds the bank's minimum capital requirement.
The Greek government could also begin to tap the private sector again. Recent reports suggest that the government is looking to return to the private markets in the next three months through the sale of a five year bond.
How to invest in Greece
U.S. based investors have a limited number of ways to invest in Greece due to the small number of Greek companies on major U.S. exchanges. To get a larger selection of investment options, you may want to consider opening an account with greater access to international trading. Many platforms offer trading on the Frankfurt Stock Exchange, which has a few additional Greek companies, but to get a larger selection, an account with access to the Athens Stock Exchange would be a major advantage (Fidelity is one of the most popular online brokers that offers this service).
From within the U.S., you can still invest in National Bank of Greece common stock, National Bank of Greece Series A preferred stock (NYSE:NBG-A), and a few other companies on the over the counter exchange. For a broad based exposure to Greece, the Global X FTSE Greece 20 ETF (NYSEMKT:GREK) holds a basket of Greek stocks across major industries.
The last five years have been painful ones for Greece. Unemployment tops 25%, property values have plunged, and the nation's GDP is about 25% lower than before the recession. But there is light at the end of the tunnel. The economy is expected to post a small gain for 2014 at the same time Greece could return to the private markets for bond issuances.
Comparing bank capital raising results and Greek debt yields, investors look closer to loving Greece again. And if investors love Greece more, the money could begin to follow.
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Alexander MacLennan has the following options: long January 2015 $7 calls on National Bank of Greece (ADR) and long December 2017 National Bank of Greece warrants (Athens listed). This article is not an endorsement to buy or sell any security and does not constitute professional investment advice. Always do your own due diligence before buying or selling any security. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.