Analyst Shares His Favorite Argentine Stocks: Go Long Banks, Short Energy

• On Thursday, Benzinga had a chat with Federico Flom, MBA, the main analyst at StarBreakouts, a swing trading education and ideas platform.
• The expert shared a few of his favorite ideas for the week.
• So, let’s take a look at his insights.

Benzinga spoke with StarBreakouts’ main analyst on Thursday. The expert said there are a few Argentine stocks he’s looking at, and shared his investment thesis.

“I am looking into going both long BBVA Banco Frances S.A. (ADR) BFR and short YPF SA (ADR) YPF as a play on the potential normalization in Argentina targeting returns of 30% in the next 6 months,” he assured.

The analyst went on to explicate that, “Banking is probably the best sector to play this theme as there is huge potential for lending to expand to historical levels. As a quick reference, Argentina right now posts a 12% private loans/GDP vs. a historical rate of 20%. Banks are very well capitalized and non-performing loans are almost minimal in BBVA Banco Frances, Grupo Financiero Galicia S.A. (ADR) GGAL, and Banco Macro SA (ADR) BMA.”

On the other hand, he added, YPF is “exposed to a declining oil trend and the company faces internal management pressures, as several of the directors represent the government that is about to leave, creating significant conflicts that have been evident in the recent weeks, as one of YPF’s top managers resigned.”

In addition, he noted, the company will need considerable investment to develop Vaca Muerta, a large shale oil filed that, in his view, “will be hard to get.”

Lastly, he pointed out that, “banks are very strong from a technical perspective and YPF has been very weak, closing near significant support levels that if broken, could represent major downside going forward.”

Disclosure 1: Federico Flom is short YPF

Disclosure 2: Javier Hasse holds no positions in any of the securities mentioned above.