Greece Bounces Up From the Bottom

NEW YORK (TheStreet) -- With U.S. markets hitting record highs, the S&P 500 now commands a price-earnings ratio of 19.7. Even bulls admit that plenty of stocks are no longer in the bargain basement. Many forecasters say that the pricey S&P can only produce single-digit returns in coming years. To get outsized results, investors may have to look to Europe and the emerging markets where stocks are still unloved.

To spot cut-rate choices, screened for the country ETFs with the lowest price/earnings ratios. The cheapest by far was Global X FTSE Greece 20 (GREK) with a P/E of 1. "You can't help but be somewhat amazed at the price," says Paul Baiocchi, an analyst for

Baiocchi concedes that any investment in Greece is risky, but he says that the rock-bottom price should intrigue aggressive investors. Individual stocks only reach such low multiples when they are on the verge of going out of business. That cannot happen to an entire country. In fact, the picture in Greece is improving -- and investors are starting to recognize the change. During the past year, the Greek ETF returned 39.8%, according to Morningstar.

The rally has been triggered by a variety of signs that the country is hitting bottom. In August, the Greek unemployment rate was 27.3%. While that figure was abysmal, it was down from 27.5% in May. In the September quarter, the Greek GDP declined 3%, compared to a drop of 3.7% in the previous quarter. Now the European Commission predicts that the GDP will grow 0.6% in 2014. The International Monetary Fund estimates that the countrys current account deficit will shrink to a healthy 0.8% of GDP this year, down from 15% in 2008. The economy is being boosted by tourism revenue, which grew 13.7% in the first eight months of the year.

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