February 21, 2010: National Bank of Greece Not An Achilles Heel

As the Greek philosopher extraordinaire Plato would have it, the realm of ideas is absolute reality, and truth itself is an abstraction. The Greek government(s) have been denying truth, reality and ideas for too long, and now they will be, in part, held to account. If the assumption that the EU will not let Greece fail is correct, there is an opportunity in Greek securities that may be appropriate for their speculative portfolio.

I have been following three Greek stocks that are traded as ADR's. These are Coca-Cola Hellenic (CCH) which trades at $23.17 with a 1.70% yield and has a wide presence outside of Greece, Hellenic Telecom (OTE) which trades at $6.35 with a 8.17%yield and may be at some risk short term to the Greek meltdown, and the National Bank of Greece(NBG) which trades at $3.71 with no dividend.

None of the three common stocks listed above thrill me. CCH appears fully priced, OTE may not hold the dividend and also will suffer distress from a very weak Greek consumer, and the NBG common stock, while holding promise, does not pay you to wait for better times.

What to do? Investors may want to explore the National Bank of Greece $2.25 Preferred Shares (Euronext symbol NBGPRA, or look for the National Bank of Greece Preferred Class A security, NBGpA). This security is liquid, averaging about 160,000 shares traded over the latest 10-day period. Trading at $20.80 and yielding 10.82%, investors stand a good chance to be handsomely rewarded with a high yield and the possibility of a capital appreciation as the security has a $25.00 call feature which can be exercised in 2013. Note that the preferred goes "ex" on March 3rd with the dividend paid shortly thereafter. Dividend are in US dollars taxed at the low 15%rate.

A downside to this security is that the dividends are not cumulative. In case they are skipped,or dropped, you lose. I view this as unlikely now that Europe is propping up the monetary system. The National Bank of Greece, like J.P. Morgan in the US at the height of the banking crisis, may pay little or no common stock dividends but will likely continue to pay on the preferred.

As James Altucher, managing director at Formula Capital, stated on CNBC recently, "It's the safest bank in Greece....they've got a solid balance sheet and trade at seven times earnings."

If you are gaming Greece, it may be better to hopefully control your bat for a line drive hit rather than swinging for the fences.