What to buy now
One of my most interesting interviews for this piece was with Fabian Kon, the CEO of Grupo Financiero Galicia (Nasdaq: GGAL),
one of the largest banks in Argentina. He explained how his bank was reduced to carrying out transactional activities in pesos – as its exposure to dollar-denominated assets is capped at 5%. Despite everything the bank is profitable, investing heavily in fintech and innovative credit products that allow it to lend to farmers by using their production as repayment.
The stock has slipped by 70% from its 2018 peak, when the last government appeared to be normalising the economy. I don’t expect it to get that high again in the short term, but it will be a major beneficiary when capital controls are eased in Argentina. As a bank with customers across the economy, it will also gain as energy, mining and agricultural production increases.
I’ve had the pleasure of interviewing many good lithium companies in Argentina over the last few weeks, but my favourite is Australia-listed Allkem (Sydney: AKE). The reason I like Allkem is that it is already producing battery-grade lithium in an Argentine project that is set to upgrade. The fact that it is producing cash flow and knows how to build profitable lithium operations helps reduce some of the risk. Allkem also has a new mine that will come online in a different part of Argentina. As Goldman Sachs points out in a recent research note, Allkem has plenty of lithium and low costs that should protect it if frothy lithium prices decline.
When it comes to energy, the largest player is partially-listed, national oil company YPF (NYSE: YPF). I have no idea if this would be a good investment. Its engineers are well respected but I’d imagine the amount of political interference behind closed doors is immense. If you are feeling brave, YPF is worth looking into as a contrarian bet on Argentina’s return to normality.
A safer option is Pampa Energia (NYSE: PAM). It has sizeable operations in the Vaca Muerta region that it will be able to ramp up once more pipelines and LNG terminals are built. It also generates electricity, so it would benefit when the current subsidies, which are economically unsustainable, are removed.
Argentina has some incredibly successful technology companies, such as Mercado Libre and Globant, that are listed in the US and easily available for UK investors. However, these are regional or global technology companies whose share price isn’t really driven by events in Argentina.
But one company worth a punt is Bioceres (Nasdaq: BIOX). It is an agriculturefocused biotech company that develops seeds and solutions to help farmers grow more crops. For example, it has a droughtresistant wheat variant that outperformed traditional wheat by 40% in the current drought. Around 40% of sales stem from Argentina, while its development of new products will benefit from the country’s impressive human talent.