Here’s an emerging markets stock that beat analysts’ earnings by $0.08 last quarter. Wall Street expects the company to grow by 24.10% annually over the next 5 years.
Grupo Supervielle (SUPV)
From Cabot Emerging Markets Investor
Financial institutions aren’t, let’s face it, the most fascinating stories in the stock world. But when you have bets down on the hottest companies in the top sectors of the biggest economies, sometimes it pays to take a look outside the spotlight’s glare.
Grupo Supervielle (SUPV) is an Argentina-based holding company that operates in the financial sector. Among the company’s subsidiaries are Banco Supervielle (bank services), Cordial Compania Financiera (credit cards, consumer loans and insurance for Wal-Mart Argentina customers), Tarjeta Automatica (credit cards), Cordial Microfinanzas (financing for micro-enterprises), Supervielle Seguros (insurance), Supervielle Asset Management (investment funds) and Espacio Cordial Servicios (sales of electronic equipment, computers and appliances).
But in practical terms, the bank is the dominant business, making up 97.3% of total assets
when Grupo Supervielle came public in 2016. The group as a whole has total assets of about $3.3 billion.
Argentina is subject to some intense financial tides, and Grupo Supervielle’s revenues were flat in 2016. But over the past three quarters, revenue has grown 15% (Q4 2016), 29% (Q1 2017) and 24% (Q2 2017). Earnings were up 26% in Q1 of this year and 153% in Q2. And analysts are forecasting earnings growth of 35% this year and 31% in 2018.
SUPV came public in May 2016 at 11 and wasted no time climbing to 16 by September. The stock went through a post-IPO correction to 12 in December, but pushed out to new highs in March 2017. At that point, the stock took a break, trading flat at 17 through April and part of May, then under resistance at 18 through June and July. SUPV broke out in mid-August, ripping above 20 by the end of the month and has traded up to 23 in September, with a couple of major volume spikes.
The stock experienced some major action last week when its secondary stock offering was fully subscribed, allowing the company to raise $412 million. The offering will increase the stock’s liquidity, making it more attractive to institutional investors who prefer stocks with larger volume. Argentina is still technically a frontier market according to MSCI, which is the recognized authority on such classifications. The country has been on the upgrade review list for a while, and likely came close to achieving emerging status during MSCI’s review in June 2017. Everyone 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, SUPV and other 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.
We’re not really banking on that, but it’s nice to know that it’s a possibility. Our recommendation of SUPV is based on our traditional mix of story, numbers and chart. With plenty of added liquidity to work with, this sound (and soundly diversified) financial stock looks like a good addition to our portfolio. A small dividend completes the package. BUY.
Paul Goodwin, Cabot Emerging Markets Investor, www.cabotwealth.com, 978-745-5532, September 21, 2017