Tuesday, November 26, 2024

Bought an Argentina stock

Last night I bought an Argentina ADR.  Its a company thats part of an oligopoly in a cyclical industry.  Should do well as the economy recovers.

Reasons for buying:

  • Hedgeye projects that Argentina's recession ended this quarter with two more quarters of increasing growth and decreasing inflation.
  • Their past year GDP and inflation numbers are so bad that theirs plenty of room for improvement.  Going from triple digit inflation and 1 plus percent real growth, these numbers could improve for years.
  • Argentina is rich in natural farming and energy resources, if they can just get their government policies right.  They need enough capitalism to encourage business, and enough protection for workers so income gap is kept down and they don't become socialists again.

Its a 1.5% position.  The reasons for the caution and small position size are:

  • The stock has broken out, always overbought.  And it has bigger price moves than bitcoin.
  • Company has high debt, normal for its industry.
  • Inflation is expected to fall over the next 6 months: from triple digits to double digits!  This is unimaginable to me.  How the fuck to people live like that?  A time series measured in pesos is incomprensible.  I learned theres an IFRS standard for reporting in hyper-inflationary currencies.
  • Argentina has failed for the last 100 years.  Betting that this time is different.
  • No idea of politics in Argentina.
We'll see if Milei gets re-elected in Oct 2025.

This ideas is from John Polomny.



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