When asked for a favorite stock pick for 2020 as part of Real Money's series, I shuddered. I am not a big fan of these type columns if for no other reason than it is difficult (for me, that is) to accurately make a short-term call (remember, I am a value investor, and a year is but a day in that world) on one stock. However, I volunteered for the assignment anyway. Have to face those fears!
So I've decided to go big (rather than going home) and select a name that I own now, and have owned on and off for many years. It's not for the faint of heart due to its size, geographic location, political situation in that country, economic conditions, and weak currency. In addition, TheStreet's current Quant Rating on the stock is D- (Sell). Sounds pretty convincing so far, right?
My pick for 2020 is Argentine farming and real estate name Cresud Sociedad Anonima Comercial, Inmobiliaria, Financiera y Agropecuaria (CRESY) , whose ADRs (American Depositary Receipts) trade in the states on the Nasdaq. The shares cratered in 2019, falling 65% through early November. A significant amount of damage was done on Aug. 9, when the stock fell 38%. On that day, Argentine markets crashed when pro-business President Macri suffered a stunning primary defeat in a then potential return to Argentina's political past of anti-business, government control regimes (with former President Cristina Kirchner as Vice President). Macri indeed went on to lose the October general election.
Argentina is a mess economically but that's nothing new. This time could be worse, but I've owned CRESY previously during some rough times, and the punishment that the stock took in 2019 seemed to be overkill. I began building my position in early November just below $5, not expecting instant gratification, but a longer-term hold. The shares actually recovered a bit, but are still down about 47% in the last 52 weeks, and are well below the mid-$22 range shares exchanged hands for in early 2018.
CRESY remains a sum-of-the parts story, but only for those with extremely strong stomachs. Among its assets are owned and/or managed 800,000 hectares of farm and agricultural land in Argentina, Brazil, Paraguay and Bolivia; that's the equivalent of nearly 2 million acres, or an area twice the size of Rhode Island. In addition, it owns 62.4% of IRSA (IRS), Argentina's leading real estate company. In turn, IRS owns, among other assets, 29.9% of Banco Hipotecario and 82% of IRSA Propiedades Comerciales S.A. (IRCP). CRESY also owns a 43% stake in Brasil Agro (LND). You can try and do a sum-of-the-parts analysis on all of these assets, but I'll save that exercise for another day.
CRESY does hold significant debt, and since that debt is denominated in U.S. dollars, a further weakening of the Argentine Peso could be devastating. Keep those Tums handy if you are inclined to give this long shot a whirl.
Happy New Year!
