GREK: Hidden Euro Growth For 7x Earnings

seekingalpha04-26

GREK is the only pure-play Greece ETF in the US, offering exposure to Greek equities at attractive valuations.The fund is concentrated in financials and mid-caps, with strong recent performance but ...

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Matteo Colombo/DigitalVision via Getty Images The Global X MSCI Greece ETF (NYSEARCA:GREK) offers investors exposure to Greek equity markets across market cap segments. It is the only pure-play Greece ETF traded in the US, and its story has been very compelling in the last year. The Greek economy has emerged as the star of Europe after several years of challenges following the sovereign debt crisis. However, its potential will likely be tempered by the near-term limited growth in the region. Even still, I like GREK because I think it has more room to run, and its valuation multiples are among the most attractive I've seen. The tides have finally turned for Greece After being Ground Zero of the European sovereign debt crisis a decade ago, Greece has made notable strides in repairing its finances and economic infrastructure. The country is projected to expand 3% in 2024, which is higher than the Eurozone average by 0.8%. The country is expected to reach GDP levels not seen since 2009.   Reuters While the headline takeaways are mostly positive, there are still obstacles for Greece on the horizon. For starters, its key trading partners are struggling with growth, which has been a challenge for Greek exports, which fell roughly 9% in 2023. Two-thirds of Greek exports head to the EU, and with sticky inflation impacting domestic consumption on the continent, demand will continue to be subdued. Demographic challenges also persist in Greece, with low birth rates and an aging population that will moderate growth. GREK offers concentrated, mid-cap value GREK was incepted in 2011, and as of April 2024, has around $195M in assets. As of early 2024, the ETF carried a weighted average market cap around $3.5 billion, tilting it more toward the mid-cap segment. I like mid-caps for their growth potential, and they can be harder to find in European single country ETF. GREK is a sector concentrated ETF, heavily allocated to financials, which account for over 40% of the fund. Other large allocations include industrials and consumer cyclicals.   Seeking Alpha GREK is also extremely concentrated from a holdings' perspective. The fund contains only 31 individual stocks, with over 70% of assets in the top 10 holdings. Major individual holdings include the National Bank of Greece, the country's oldest commercial lender.   Seeking Alpha Valuation GREK's current valuations are extremely attractive, boasting a weighted average P/B ratio of 1x, while earnings are currently priced at 7.4x. It offers an annual dividend that is currently averaging 2.4%. When compared to a range of European countries, GREK provides a cheap entry point.             GREK (GLOBAL X MSCI Greece ETF) EWG (iShares MSCI Germany ETF) EWQ (iShares MSCI France ETF) EWP (iShares MSCI Spain ETF) EWI (iShares MSCI Italy ETF)   P/B 1 1.6 2.1 1.4 1.5   P/E 7.4 13.5 17.9 10.8 10.4   Yield (TMM) 2.42% 2.50% 2.66% 2.63% 3.14%   Click to enlarge Performance After recovering from lows during the debt crisis, the Global X MSCI Greece ETF has delivered strongly positive total returns over the past five years, delivering 80% in total return. Performance has exceeded individual country performance in the Eurozone region, as well as a collection of European countries as represented by IEUR ETF. Data by YCharts The performance has been particularly strong within the last year, as the only other country within spitting distance of GREK's performance is EWI. Data by YCharts From a risk perspective, we see that GREK has a significantly higher volatility profile than the rest of its European peers. Its annualized standard deviation of monthly returns over the 5-year period is 32%. Interestingly, GREK's volatility spike in the COVID period was less dramatic than its peer group, which saw sharper increases and have remained at much higher levels of volatility subsequently. Data by YCharts We see a similar pattern in terms of downside protection, where GREK's max drawdown is significantly higher than the majority of single country European ETFs. I'll note that GREK's inception was in late 2011, while the country was in the throes of its economic crisis. Both max drawdown and volatility metrics are still impacted by the long shadow of the severity of this crisis. When looking at max draw-downs in recent years, we see GREK has begun to offer more downside protection (shown in the second chart). Data by YChartsData by YCharts Flows GREK has begun to see net inflows in 2023 and 2024, after 4 years of consecutive outflows beginning in 2019. While the flow activity is broadly positive as of late, the fund has not recuperated from the COVID years of 2020 and 2021, where net outflows exceeded 130M.   ETF.com Conclusion  After more than a decade of being on the back foot, it appears the Greek economy is entering a new era; its story is one of expansion despite the longer-term demographic challenges that plague the continent. GREK offers a unique exposure to key industries in the Greek economy, though it comes at the cost of a much heightened volatility. Still, ETFs with this level of volatility are typically not members of one of the most robust monetary unions on the planet. GREK is extremely cheap, with valuation multiples that are hard to come by in more developed economies. I see this as a unique opportunity and currently rate GREK as a buy.","kind":null,"is_publish_news":null,"is_publish_highlight":null,"is_publish_live":null,"is_publish_wemedia":null,"editions":null,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.22.4","shortVersion":"4.22.4","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2430368232"}