Which Institutions Are Buying Up Greece?

Greece has been the ultimate contrarian investment and some investors are looking to profit from that.

Jul 4, 2014 at 7:20AM

In two other parts of this series, I have written about the investments by major companies and investors in Ireland and Spain. In this part, I will cover investments made in one of the most damaged Eurozone economies: Greece.

The ultimate contrarian pick
For most of the last several years, Greece has carried nearly every characteristic that makes a country a risky place to invest. Greek sovereign debt was repeatedly downgraded as fears spread of a default, unemployment soared, property values plunged, and banks required billions in capital leading to massive share dilution.

Added to all of this were frequent protests and the possibility that the current party in power may be replaced by one further to the left or right.

Bank buyers
Greece's banks have been among the hardest hit banks in the world as they have dealt with a slow economy, rising nonperforming loans, and a collapse in the value of their sovereign debt holdings.

But some major investors have been moving to buy parts of Greece's banks. Paulson & Co. invested in Alpha Bank and Piraeus Bank, and Prem Watsa of Fairfax Financial (TSX:FFH) considered an investment in National Bank of Greece (NYSE:NBG) until NBG was unable to grant Watsa the terms he wanted due to government bailout conditions.

But Fairfax did manage to play a leading role in the consortium that recapitalized Eurobank (NASDAQOTH:EGFEY)earlier this year, thereby putting the bank back in majority private hands thereby making it the first major Greek bank to accomplish this task. Fairfax continues to hold its Eurobank stake and considers it a long-term investment.

Other Greek companies
The downturn has caused major discounts for a lot of Greek companies and Fairfax has been ready to invest in nonbanking areas. The company has taken stakes the Greek real-estate company Eurobank Properties as well as in the Greek industrial company Mytilineos Holdings

Both investments have enabled Fairfax to diversify away from the banking sector and play a rebound in Greek real estate and the industrial economy in general.

New Greek debt
Greek debt was once considered highly toxic with yields soaring well into the double-digit range, but sentiment has reversed as the nation has stabilized and investors search for yield. Demonstrating the effects of this combination, a recent offering by the Greek government priced its five-year bonds at 4.95%. 

To fill this offering, Greece was able to tap the broader bond market, which is hungry for yield considering similar German bonds yield less than 1%. Unlike the previous investments made by select major investors, the sale of these bonds reflects improving Greek sentiment across a larger part of the bond community.

Buying contrarian
Greece was not a low-risk investment and has yet to become a safe investment today. But investors in search of major returns have been able to find them in their purchases of major Greek banks and other Greek investments.

While the Greek economy still makes its companies above average in risk, those willing to bear this risk have a lot of major investors on their side.

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Alexander MacLennan owns shares of Mytilineos Holdings (Athens listed). He also has the following options: long January 2015 $7 calls on National Bank of Greece (ADR) and long National Bank of Greece warrants. 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.

A Financial Plan on an Index Card

Keeping it simple.

Aug 7, 2015 at 11:26AM

Two years ago, University of Chicago professor Harold Pollack wrote his entire financial plan on an index card.

It blew up. People loved the idea. Financial advice is often intentionally complicated. Obscurity lets advisors charge higher fees. But the most important parts are painfully simple. Here's how Pollack put it:

The card came out of chat I had regarding what I view as the financial industry's basic dilemma: The best investment advice fits on an index card. A commenter asked for the actual index card. Although I was originally speaking in metaphor, I grabbed a pen and one of my daughter's note cards, scribbled this out in maybe three minutes, snapped a picture with my iPhone, and the rest was history.

More advisors and investors caught onto the idea and started writing their own financial plans on a single index card.

I love the exercise, because it makes you think about what's important and forces you to be succinct.

So, here's my index-card financial plan:


Everything else is details. 

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