The Less Flawed Global X MSCI Argentina ETF's Holdings (October 2024)
Argentina stock picks that are the holdings of the now less flawed Global X MSCI Argentina ETF (NYSEARCA: ARGT) and the ETF's performance under Javier Milei plus some economic updates.
It’s been roughly a year since Javier Milei was elected in Argentina - thus worth taking some time to take another look at the Argentina ETF and all of its holdings (some of which might be a better way to gain exposure to the country):
Global X MSCI Argentina ETF (NYSEARCA: ARGT)
P/E: 19.47 / Yield: 1.12% (Yahoo! Finance)
Last year before Argentina’s elections, I covered the ETF’s holdings (The Flawed Global X MSCI Argentina ETF's Holdings (September 2023) - when the ETF had a P/E of 11.52 and a yield of 1.55%) plus included a number links or resources covering the mess the country faces and how it got there which can also be summed up by this meme:
In our December 13th 2023 post, I also discussed non-mainstream media economics commentator, blogger, and podcaster Tom Luongo’s (Gold Goats N’ Guns) talk with Alex Krainer (he is on Substack and Twitter) - they both had interesting observations about Javier Milei and Argentina that you will not hear in the corporate press:
🎙️ Podcast Episode #163 – Alex Krainer and Shifting the Pile of Collateral East (Gold Goats N’ Guns) 1:22:41 Hours (December 2023)
Most of the discussion about Javier Milei and Argentina came between the 21:00 and 38:00 minute marks (after they discussed the Venezuela vs. Guyana conflict situation) with the key points being:
Luongo thought dollarization was just a “Wall Street thing” and that everyone just wants to open the country up to properly develop its resources plus “Wall Street” (aka the West) has fewer and fewer places to invest as the BRICs etc. continue to expand.
Krainer thought dollarization would only be good for one credit cycle and some good aggregate numbers (GDP, etc.); but ultimately it would turn Argentina into a colony (of the USA…). He noted that when Argentina’s railways were privatized by Menem (who last opened the country up to Wall Street…), the new private owners rapidly shrunk the footprint to maximize profits (but railways are needed to move resources and lower overall transaction costs…) with the economy dying in the regions where the railways were discontinued (although now they may be needed again to extract the country’s natural resources). Also see this interesting piece:
📰 Argentina’s Ruined Railways Will Force Milei to Confront Poverty (Bloomberg) December 2023 🗃️ - Those living off state subsidies in ghost towns abandoned by the once-robust train service fear the pain of the new president’s spending cuts will be acute
They then pointed out how the legislature is powerful in Argentina and how Milei “rails against ‘wokery,’ but where does all the ‘wokery’ come from?” [Hint: It ultimately comes from Western controlled institutions like the IMF, World Bank, Blackrock, etc. meaning its going to be hard to get rid of it when you are under their thumb…].
Luongo commented that Milei “seems like a cartoon” and that he (being more of a Libertarian) can tell when a Marxist tries to write or act like a Libertarian. Milei gives him the same feeling e.g. “this is the way they think we talk...”
Krainer then added that when you listen to Milei longer, he also gets the same impression e.g. when you start to think more about what he says, it triggers more questions that Milei does not have good answers for. All of this makes him very suspicious (Note that it was reported around the same time that Milei was backtracking on a number of promises or some of his rhetoric e.g. Argentina will stay in Paris climate agreement under Milei, negotiator says).
Krainer also observed how Argentines are fed up with inflation etc. and just want stability to plan their lives with the only real solution being defaulting on the IMF debt - but another country will have to take the risk of going first. In other words, its “new rhetoric, but the same outcomes…” for Argentina.
Their discussion then turned to the ultimate solution when it comes to odious debts that much of the developing world suffers from:
Either reform the UN, multilateral banks, and other such Western controlled institutions by changing legal frameworks, or…
Shifting alliances-legal frameworks, etc. towards the BRICs (e.g. Russia, China, etc.).
They also believe this gives an opening for China and Russia as the West can’t sanction, invade (e.g. Libya, Iraq, etc.), or color revolution everyone. In other words, all it would take is one country to take the risk of standing up and defaulting on their debts to the West (IMF, Blackrock and other bond holders, etc.) with Russia/China etc (in a pre-coordinated manner) saying we will have your back (with credit lines, military assistance, etc.). If that were to happen, it might create a domino effect of other countries doing the same…
As for some gauge of how well Milei might be doing trying to fix things, here is some Argentina economic data:
[Note: This might be the official rate which does not reflect reality]
With all of that said about Argentina, here is a look at the more recent performance of the Argentina ETF covering the COVID period (the charts are linked back to Yahoo! Finance):
And the long term performance chart:
That’s a strong recent performance and an indicator of either foreign and/or local investor confidence in or speculation that Argentina might finally turn a corner. However, stock markets in places like Turkey and Zimbabwe have seen inflows of money from local investors trying to stay ahead of hyperinflation and currency devaluations.
However, a look under the hood of the Argentina ETF’s holdings last year revealed a potentially big red flag:
This time around, exposure to pan-Latin American eCommerce and fintech player MercadoLibre (NASDAQ: MELI) (now headquartered in Uruguay) is down to around 20%:
Note that Latin America’s version of Amazon has been doing well since its post-COVID dip:
The ETF’s other holdings also includes similar stocks that would only be deriving a portion of their revenues directly from Argentina (meaning investors looking for more direct exposure to Argentina, for better or for worse, should look more closely at the ETFs individual holdings). Again, this would be a function of the need for an ETF to hold stocks that have liquidity (many of the Argentina ETF’s holdings have listings on the NYSE - see our Argentina ADRs list which includes other Argentina resources).
To make your life easier, this post has a much shorter description (from our North & Latin America Stock Index) than past posts to make the whole post easier to skim through (an autogenerated Substack table of contents with the names of each stock holding will appear as small lines on the left side of desktop browsers) and includes:
🌐🌏 etc. This is fairly subjective as, for example, many stocks are part of global supply chains rather than purely domestic companies.
🏛️ State owned, controlled, or influenced companies.
👼🏻 ESG friendly stock e.g. renewable energy. This is fairly subjective.
🅿️ Preference shares available (Note: I don’t see a comprehensive list of preference shares or preferred stocks readily available on the Internet…).
A very short description of the stock with links to the IR page and stock quote(s) on Yahoo! Finance or other sites.
Any Wikipedia page (denoted by 🇼) and a Substack stock tag link (denoted by 🏷️) linked to any post under EM Stock Pick Tear Sheets.
A price/book (most recent quarter) ratio plus forward or trailing P/E and dividend yields linked back to the Yahoo! Finance statistics page.
The latest long term technical chart linked back to Yahoo! Finance.
And as always, this post is provided for informational purposes only (and to make your life easier by providing you with relevant information, links, and charts). It does not constitute investment advice and/or a recommendation…
Adecoagro Sa
🇦🇷 🇧🇷 🇺🇾 Adecoagro Sa (NYSE: AGRO) - Luxembourg HQ’s agro industrial company that produces & manufactures food & renewable energy. 3 segments: Farming; Sugar, Ethanol & Energy; & Land Transformation. 🏷️
Price/Book (Most Recent Quarter): 0.88
Forward P/E: 11.03 / Forward Annual Dividend Yield: 2.88% (Yahoo! Finance)
Arcos Dorados Holdings Inc
🌎 Arcos Dorados Holdings Inc (NYSE: ARCO) - World’s largest independent McDonald’s franchisee. Exclusive right to own, operate & grant franchises of McDonald’s restaurants in 20 Latin American & Caribbean countries & territories. 🇼 🏷️
Price/Book (Most Recent Quarter): 4.02
Forward P/E: 14.51 / Forward Annual Dividend Yield: 2.63% (Yahoo! Finance)
Banco Macro Sa
🇦🇷 Banco Macro Sa (NYSE: BMA) - A universal bank providing a wide range of financial services with focus in low & mid-income individuals & SMEs. 🇼 🏷️
Price/Book (Most Recent Quarter): 1.37
Trailing P/E: 9.46 (no forward P/E) / Forward Annual Dividend Yield: 29.79% (Yahoo! Finance)
