Open Portfolio Buying Greece ETF GREK - Mike Swanson (08/17/12)


Just bought 833 shares of GREK @ 11.92

If you have been following my work than you know Greece is something I have been talking about for well over a year - and eventually investing in Greece. I am taking an investment position in Greece today. The Greece stock market is so undervalued that it has the same type of cyclically adjusted P/E valuation that the United States did at the bottom of the Great Depression.

I had thought Greece would default and that would bring a great buying opportunity, but at this point the Greece stock market may have bottomed no matter what and is trading in a way that it is in danger of breaking out to the upside. It could open up 5% higher one morning and I don't want to not be in it if that were to happen. Next month we will know whether they are going to get bailed out or will default once the trioka team gives its report and as I posted the other day the ECB has been covertly propping Greece up.

If they get another bailout Greece stock market will rally higher again.

If they don't they won't default for several more weeks. That means that over the next few weeks no bad news is going to come out of Greece. To me this makes the immediate term risk is to the upside and missing out.

I want an investment position in Greece no matter what so I am making one small enough that I can hold it. At this point the risk to the downside would be to the June lows, that's about a 20% drop for the Athens stock exchange. From there I would expect it to make a double bottom.

But it seems at this point more likely to just breakout before the month is over or go up on more bailout news.

Here is a chart of the Greece stock market.

GREK is an ETF that holds the largest Greece stocks. As you can see it is trading in a very narrow range with resistance at 12 and support at the moment around 11. I fear that it could just gap up one morning and take off so I am taking a position in it.

GREK has a P/E of 4!

After today I am more than fully invested with the money currently in my portfolio and do not plan on doing anymore buying until there is a 5-10% pullback in the markets later this year - probably sometime in the Fall. Then I will buy more. I also hope to add more money to the account over the coming months.

I did some buying yesterday in GDXJ, GLD, and GCC as you can see from yesterday's update by going here.

This GREK position is about half the position size of the investments I have been making. That is so I can give it more room and not worry if bad news does come out. At the same time I expect GREK to go up once it finally goes into a new bull market enough that even a small position can become a big one.

One note GREK is thinly traded, but I don't care because I'm not looking to trade this. This is an investment position.

The GREK ETF only has 5.9 million in assets in it. This is because institutional investors have fled from Greece over the past few years. Mutual fund managers are too scared to have any Greek holdings on their portfolio's because they are afraid if they do than their investors will think they are crazy or think they have been holding them as they have collapsed. This is one reason the P/E for GREK is 4. But that is where I believe opportunity comes in.

For a full spreadsheet of my portfolio click here.

For a list of transactions in the portfolio click here.

Will do a video update in a few days.

Matt Frailey also did a video update on his site about the markets. To watch it click here.

Matt is running a discount for his trading service. I am now investing in stocks and positions with a long time horizon. Matt does much more short-term trading so if you are looking for quick trades you might want to check out what he has to offer. His special ends today. To check it out go here.

Comments

I would wait for that breakout and the next pullback and then buy. The second mouse always gets the cheese. :)

I haven't bought yet as I have a bond that is paying down and I have to decide whether to hold it a bit longer or sell. I've made tons of money on it (tripled my money..it was a Z-type of CMO issued in 1992 which all the brokers freak out over, since it is so amazing...and it was sheer accident, I had no idea it was "special." LOL!)

In the meantime, any chance you could put your buy prices in? It would be easier to see how my buys would track with yours when I decide to purchase some of the selections you've made.

THANKS!!!!!

NMNJGRL=Gloria

much appreciated...

NMNJGRL=Gloria

Greece could be messy for a while. Germany has had about enough of their dithering. I believe the Greeks will be booted before year's end, with a bit of support. That will be when the rubber meets the road for them. Expect more civil unrest. After that the bottom will probably be in when they are truly forced to make the hard reforms.

Mike,

Could you please explain the rational behind the odd lot sizes you are buying?
Also, do you have stops in place on any of these holdings?
Thanks

I'm dividing the money amount I want to buy by the price to come up with the position size. Not using stops. I'm not trading in and out of these positions. I do have mental stops and an idea of where they would go to if wrong, so GREK would fall about 20% most likely if it broke down.

Mike,
I have been wondering if you are re-investing the high dividends on the stocks you bought a couple weeks ago?

no I just plan let it go into my account and will buy what and when I want to with it.

Mike, Thank you for insights into your mindset. I think you are poised well, with your sequel investments (subject to market conditions) being in tranches. Your key motivation for this venture seems to be the PE value of 4, in the face of so many uncertainities ahead. Good Luck to you, Mike !

Mike,
I see the base in this and the wisdom or the risk/reward. But my concern is the currency devaluation. So let's assume Greece defaults, then is forced back into using the Drachma or some other currency. Now if the new currency starts trading at 50% or 75% discount to the euro or dollar what happens to this fund? That is my worry. Overnight does this fund which is trading at $12 has to get revalued to $6 or $3? Then I could see it rallying, but that is a big hole to come out of. This seems a very good play if they stay in the euro, as there is no currency risk. What do you think?

And thank you for your thoughtful posts and market guidance.
Mike


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