This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

A Bull on the Argentine Farm

NEW YORK ( TheStreet) -- Two months ago, I wrote a column that expressed my concerns with investing in Argentina. The country's government has exhibited behavior that is unfriendly to business, and that is putting it nicely.

Over the past year and a half, the Argentine government has seized control of the country's largest oil and gas company, YPF (YPF - Get Report), and instituted price controls to combat inflation. Those moves were enough to send many investors looking for greener pastures.

I've owned some pretty green pastures in Argentine farming giant Cresud (CRESY - Get Report), which owns 1.6 million acres of farmland, roughly the size of Vermont, New Hampshire, and Connecticut combined.

Although I rarely move in and out names, I've owned Cresud on a few separate occasions. Last year, when Argentina moved to seize YPF, I avoided taking a new position until the dust settled and the price fell enough to present a large enough margin of safety.

Cresud fell from $13 in late March 2012 to less than $7 by early June. That created the margin of safety I required, and I took a new position, which was closed in November after a 20% run-up.

By this past April, shares were approaching $10, but something was not quite right, and was the basis for my April column on Argentina. Cresud had declared a fat dividend of 50.4 cents in November that it still had not paid by April.

Historically, the company's November dividend is paid in December. While details were sketchy, it was first reported that the Argentine government was not allowing dividend payments to foreigners, and later that the company needed the Central Bank of Argentina to approve the distribution. Either way, this was yet another reason to be wary of Argentina.

Since April, Cresud has fallen nearly 35%, and the dividend was finally paid in mid-June. While there are still concerns about investing in Argentina, that price drop and the ultimate overdue payment of the dividend created enough margin of safety to re-establish a position in Cresud.

Besides the massive amounts of farming land, Cresud owns a 64% stake in Argentine real estate company IRSA (IRS - Get Report), which alone is worth about $260 million based on IRS' current market cap.

Cresud's current market cap is just $342 million. The stock trades at less than nine times 2014 earnings estimates and 62% of book value. The company does have substantial debt of $725 million.

Cresud is not for the faint of heart, for sure. It operates in an country where hyper-inflation is a risk and the government is not a friend to business. The company's package of assets, however, is the reason I've owned it in the past and have taken a new position.

Buyer beware!

At the time of publication, the author was long on Cresud.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
At the time of publication, Heller was long XXXX.

Jonathan Heller, CFA, is president of KEJ Financial Advisors, his fee-only financial planning company. Jon spent 17 years at Bloomberg Financial Markets in various roles, from 1989 until 2005. He ran Bloomberg's Equity Fundamental Research Department from 1994 until 1998, when he assumed responsibility for Bloomberg's Equity Data Research Department. In 2001, he joined Bloomberg's Publishing group as senior markets editor and writer for Bloomberg Personal Finance Magazine, and an associate editor and contributor for Bloomberg Markets Magazine. In 2005, he joined SEI Investments as director of investment communications within SEI's Investment Management Unit.

Jon is also the founder of the Cheap Stocks Web site, a site dedicated to deep-value investing. He has an undergraduate degree from Grove City College and an MBA from Rider University, where he has also served on the adjunct faculty; he is also a CFA charter holder.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
CRESY $10.00 0.00%
IRS $14.65 0.00%
YPF $19.43 0.00%
AAPL $95.18 0.00%
FB $117.43 0.00%


Chart of I:DJI
DOW 17,750.91 -140.25 -0.78%
S&P 500 2,063.37 -18.06 -0.87%
NASDAQ 4,763.2240 -54.37 -1.13%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs