2017 was a great year for U.S. stocks. But it was an even better year for Argentina stocks—and one Argentina stock in particular.
In the search for emerging market stocks, Argentina tends to get lost in the shuffle. The so-called BRICs (Brazil, Russia, India and China) used to attract most of the emerging-market attention, as four of the fastest-growing economies on the planet. But a series of embarrassing political scandals have stunted Brazil’s growth, and Russia … is led by Vladimir Putin. So, really, emerging markets investing has become almost exclusively about China and India.
Argentina Stocks Beating China, India
Chinese stocks such as Alibaba (BABA), Baidu (BIDU) and Weibo (WB) are part of Wall Street’s mainstream these days, and India is revered by U.S. investors for its surging economy under Prime Minister Narendra Modi. With a mere 0.9% GDP growth in the third quarter, Argentina’s economy isn’t expanding nearly as fast as China’s or India’s. Nevertheless, Argentina stocks were up more than 60% in 2017, and there are twice as many Argentina stocks available on U.S. exchanges as India stocks.
According to Yardeni Research, the 60% return in Argentina’s benchmark Merval Exchange was second-best in the world last year, trailing only the Ukrainian stock market by a slight margin. It was the sixth straight year of double-digit returns for the Merval. That growth is easier for U.S. investors to access than you might realize.
There are 21 Argentina ADRs (American Depositary Receipts), more than twice the amount of Indian ADRs (10). The lack of Indian stocks on U.S. exchanges is due in large part to the robust nature of the Indian stock market; aside from the prestige it brings, Indian companies don’t really need to be listed on U.S. exchanges to improve their standing.
Still, the comparative glut of Argentina stocks on U.S. exchanges speaks to the South American power’s recent growth. It’s especially impressive when you consider that Argentina’s market still doesn’t technically qualify as “emerging”—MSCI deems it a “frontier” market, though it’s been on the upgrade review list for a while, according to our emerging market expert, Paul Goodwin.
Here’s what else Paul had to say about Argentina in a recent letter to his Cabot Global Stocks Explorer advisory subscribers:
“[MSCI] was pleased by Argentina’s removal of capital controls and restrictions on foreign exchange, but felt that the country needed more time before the policy changes could be considered irreversible.
“When Argentina does gain emerging status … Argentinian stocks will enjoy a big buying boost as the companies who offer emerging ETFs and mutual funds buy the stocks necessary to emulate the MSCI Argentina portfolio.”
Paul decided to beat those investors to the punch!
Argentina Stock: 29% Return in Four Months
In September, Paul decided to add an Argentina stock to his Cabot Global Stocks Explorer portfolio. It’s a bank that trades on a U.S. exchange, and its sales and earnings have grown by double-digits in each of the last three quarters. The company expects full-year 2017 earnings per share to come in at 35%, with another 31% EPS growth this year.
The stock has been publicly traded for less than two years, but it has already more than doubled from its IPO price. More importantly, it’s up 29% since Paul recommended it to his subscribers in late September—triple the 9.5% return in the S&P 500 during that time.
In the meantime, keep an eye on Argentina stocks. If the Merval posts a seventh straight year of double-digit returns, they may soon become increasingly difficult to ignore.