David Tawil, Co-Founder and President of Maglan Capital, was a guest on Benzingas PerMarket Prep Thursday morning. The investor talked about his bullishness on Argentina, the second-largest economy in South America, only trailing Brazil in terms of GDP. Argentinas GDP per capita is about 40 percent higher.
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The Mis-Valued Argentine Economy
When asked about his setup in the country and the securities in which he's active, Tawil explained that Maglan usually seeks situations where there are very good and healthy tailwinds, where the market -for a bunch of reasons- whether theyd be optical or technical, is not necessarily valuing securities properly.
Generally, this mis-valuation happens in particular sectors or specific companies. In Argentina's case, it's the whole country that's not properly valued by the market, Tawil said. Argentina "defaulted on its debt about 15 years ago, [but] recently cleared up that debt default," he explained, adding that for those 15 years, the country didn't have good access to international markets.
Now, with a new President in office, Argentina is returning to the international markets as the President has pledged to go ahead and bring growth to the country, although Tawil acknowledged the issues the country faces in relation to inflation and growth. Nevertheless, Maglan sees Argentina as one of the best places, on a macro basis, in the world, to go ahead and invest... [as] a number of industries will immediately benefit from what the President and his cabinet are doing.
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Big Opportunities In Energy
Among the hedge funds long-standing positions is MADALENA ENERGY COM NPV (MDLNF), a company that is gaining some very good traction in this market," explaining that Argentina counts with the second-largest deposit of oil and gas in the globe, in its shale, at Vaca Muerta, and is interested in having companies exploit these resources, as its current production covers only half its populations consumption.
Seeking to achieve energy independence, Argentinas President met with Exxon Mobil Corporation (XOM)s CEO, who said the company expects to invest about $10 billion in Vaca Muerta over the next 20 years. Tawil said this is incredible in the current energy environment, where drilling and production are not expanding anywhere else in the world.
Other Good Investments
Other industries that Tawil likes amidst the aforementioned reforms backdrop are financials, banks, agriculture (a huge business in Argentina) and commodities.
While companies aren't especially big in Argentina, Maglan Capital is currently raising an active fund (not an ETF) to invest $100 to $150 million in equities (about 8 to 10, mostly long, positions) over the next couple of years, in what they consider to be the best macro story in the world right now."
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