Would You Buy These Cheap Greek Stocks?

It has been months now since the Greek debt crisis first burst onto the stock market's radar screen. Even though several of the PIIGS countries had been experiencing stagnant growth and were plagued by loads of federal debt, the Greeks were the first domino to fall.

And fall they did. Check out how these Greek companies have fared over the past six months:

Company

6-Month Change (%)

Recent Price

Price-to-Earnings Ratio

National Bank of Greece (NYSE: NBG  )

(58%)

$2.41

10.32

Hellenic Telecommunications (NYSE: OTE  )

(48%)

$3.96

15.65

DryShips (Nasdaq: DRYS  )

(44%)

$3.72

11.54

Navios Maritime (NYSE: NM  )

(31%)

$4.76

5.97

Diana Shipping (NYSE: DSX  )

(24%)

$12.09

8.51

Paragon Shipping (NYSE: PRGN  )

(28%)

$3.58

2.98

Source: Yahoo! Finance.

Dry shipping hitting a floor?
Companies like DryShips, Navios, and Paragon Shipping ship dry bulk cargo such as iron ore, coal, fertilizers, and much, much more around the world. Revenues are primarily earned by charging fees to customers -- either through long-term contracts or based on spot rates. The Baltic Dry Index (BDI) is an exchange that measures the changes in the cost to transport raw materials, and is generally a good indicator of how the shipping business will perform. Yesterday, the BDI hit a 14-month low, marking 31 days of a consistent decline -- the largest drop on record. Typically, this would spell disaster for shipping companies.

Also, the threat of a double-dip recession in Europe and the U.S. makes some investors think twice about an economic recovery that would lead to increasing spot rates. However, surprisingly enough, DryShips seems to stand out in the crowd; its stock price has gone up 13% in the past week!

CAPS member goduwinravi seems to think that the stock still has nowhere to go but up.

This stock has fallen too much when compared to S&P and unless it goes out of business it is expected to see a big correction. Bad news about euro zone or greece will last only for so long and reversal is a clear possibility.

Could the other big-time Greek shippers follow suit?

Telecom companies, again?
A few days ago, I asked readers whether foreign telecom companies were finally getting cheap enough to buy. In particular, I liked Spain's Telefonica (NYSE: TEF  ) because it has been beaten down pretty badly because of the economy at home, although it gets about 65% of its sales elsewhere. It pays a solid 6.7% dividend, and with a recent European Union ruling, it has even more growth opportunities in Brazil. Hellenic Telecommunications doesn't have the type of diversification that Telefonica has, and as citizens in Greece get hit with more and more austerity measures, you have to assume this company's bottom line is going to take a hit. I don't think the stock is an absolute dud, but if you're going to take a risk on Greece, I think there are better places to put that hard-earned dough.

Banks, banks, and more banks
It's no surprise that the National Bank of Greece has taken such a beating over the past six months. As concerns about the government's ability to pay down debt spiraled out of control, despite the EU's extraordinary bailout package, investors have come up with many reasons to sell this stock. Earnings decreased in 2009, the outlook is grim for next year, and any future downgrades could destroy National Bank of Greece's ability to refinance.

However, the EU package of nearly $1 trillion provides plenty of backstop should things get worse. In addition, the bank isn't a one-trick pony: It has substantial growth opportunities in Turkey and plans to diversify even further. Trading at six times next year's earnings, there's a lot of upside for investors long National Bank of Greece.

The Foolish bottom line
Investing in Greece certainly isn't for the faint of heart. You have to be OK with the ups and downs of the market, extreme volatility, and the possibility that yes, everything could go down the tubes. However, there's enormous upside for many of these companies -- especially the bulk shippers, which don't even earn the majority of their revenues in Greece, but rather from the U.S. and the EU.

What do you think about the companies mentioned above? Do these beaten-down stocks deserve your investing dollars? Sound off in the comments box below.

Jordan DiPietro owns shares of National Bank of Greece and Telefonica. Try any of our Foolish newsletters today, free for 30 days. The Motley Fool has a disclosure policy.


Read/Post Comments (11) | Recommend This Article (35)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 10, 2010, at 9:13 AM, brewer12345 wrote:

    Dry bulk shippers have almost nothing to do with whatever happens to the Greek economy. The companies are not even registered in Greece (most of them are Marshall Islands corporations). The BRIC countries have vastly more influence over this group of companies.

  • Report this Comment On July 11, 2010, at 7:47 AM, Tradersinfo wrote:

    NBG and OTE seem cheap right now, and both are forecast to beat their respective industries. Telecommunications won't be so severely affected by the Greek downturn, I think. So Hellenic Telecommunications is a longer-term bull. (3-5 years).

  • Report this Comment On July 11, 2010, at 2:49 PM, SeeknDestry wrote:

    You should add Genko Shipping, GNK. They have tons of cash and are undervalued as well. I have bought Paragon shipping already, considering GNK.

  • Report this Comment On July 12, 2010, at 2:50 AM, ozzfan1317 wrote:

    I have Calls In Nbg might give OTE calls a look as well :)

  • Report this Comment On July 12, 2010, at 10:58 AM, KanataMark wrote:

    Diana shipping fleet utilization for the past three months was at 99% on long term charters. They are taking delivery of two new build container ships that will be employed by their subsidiary this month. They are a well run company with possibly the best balance sheet in the business and are setting aside 100million to buy back their very cheap stock. This trash talk by financial industry pundits doesn’t change the fact that there will be continued growth in the BRIC countries.

  • Report this Comment On July 12, 2010, at 3:02 PM, Tradersinfo wrote:

    The chart of GSL looks better than GNK. I'd recommend that instead as a value-shipping play. But both are undervalued relative to their sector, that much is true.

  • Report this Comment On July 12, 2010, at 10:29 PM, nemo1107 wrote:

    I like that paragon is getting into the container sector. Their share price seems depressed right now, as it is with most shipping companies, but I like the way that this company is being run. When I bought into it I was envisioning a 1-2 year hold, so the current price doesn't really scare me.

  • Report this Comment On July 14, 2010, at 11:26 PM, vipyr wrote:

    I added PRGN at 3.45 last week, as this is a big discount in my opinion. And on top of that, it pays a nice dividend.

  • Report this Comment On July 15, 2010, at 3:19 PM, IntelligentAsset wrote:

    I'm going to have to agree with Tradersinfo because I feel GSL is a true undiscovered gem! Mr.Market has seriously devalued this company at the moment because GSL has a solid balance sheet and their long-term charter revenues and caps on operating expenses and a desire to give out dividends in the near future this company should be selling at around $12/share if not more! I purchased GSL with real money and have made some tidy profits already. I won't sell my shares until it reaches at least $13.75

  • Report this Comment On July 18, 2010, at 3:08 PM, ob213 wrote:

    Greece is bancrupt. I wonder where those stocks will be in September.

    http://online.barrons.com/article/SB500014240529702044619045...

    "Here are the six criteria that Greece was supposed to meet or exceed in the first six months of the year:

    1) The cash deficit of the central government was to be no more than €5 billion.

    2) The primary spending of the central government was not to exceed €34 billion, which means the government was supposed to have collected €25.1 billion in tax revenue.

    3) The government must not have had any arrears in its payments as of the end of June. This is to prevent Greece from making the spending target by stiffing government workers, contractors or pensioners.

    4) The government must not have borrowed any more money from the financial markets, not that it could have.

    5) The government must not have incurred any new off-balance-sheet liabilities, such as loan guarantees to state-owned enterprises.

    6) The government must have made all of its scheduled coupon payments on its sovereign debt."

    "WE HAVE NO REASON TO BELIEVE Greece will achieve any of these targets ..."

  • Report this Comment On July 23, 2010, at 7:20 PM, SeeknDestry wrote:

    None of these stocks operate in Greece, they're all international shipping companies. Thats why if they are beat down along with other Greek stocks it is largely irrational.

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