GREK - GREK: A Surprise Winner

2023-11-15 10:10:49 ET

Summary

• Greece's economy is showing strong signs of recovery and growth, making it an opportune time to consider investing in Global X MSCI Greece ETF.
• The GREK ETF provides exposure to the Greek economy and has performed well, outperforming the S&P 500.
• Investing in GREK offers the advantage of exposure to a recovering economy, low expense ratio, and strong performance, but carries risks associated with the Financials sector and country-specific uncertainties.

Remember the Greece crisis of 2011?

Yeah.

Me neither.

What an incredible comeback story (that needed a lot of help to write), and one that can continue. With Greece's economy showing strong signs of recovery and growth, now could be an opportune time to consider investing in Global X MSCI Greece ETF (GREK). It's had a big run, but there could still be more to go depending on macro conditions globally.

The Global X MSCI Greece ETF provides exposure to the Greek economy. It specifically targets the MSCI All Greece Select 25/50 Index, which includes some of the largest and most liquid companies listed or headquartered in Greece. The fund has an expense ratio of 0.57% and assets under management ("AUM") of roughly $156 million.

The exchange-traded fund, or ETF, was launched on December 7, 2011, and has since offered investors a unique opportunity to gain exposure to Greece's markets. After a strong rebound from the global downturn, Greece's GDP grew at a rate exceeding 5% in 2022 and is expected to continue its upward trend with annual growth rates of more than 1.5% projected for 2023-2026. It remains the surprise momentum play in Europe.

Holdings of GREK

GREK currently holds 26 individual equities, with Financials making up the largest sector allocation at 35.3%. The ETF's top five holdings, which account for approximately 44% of the total portfolio, are primarily concentrated in the Financials sector. These include Eurobank Ergasias (10.98%), National Bank of Greece (8%), and Alpha Services (8.01%). Other top holdings include Mytilineos S.A., an industrial conglomerate, and OPAP S.A., a state-owned gaming company.

Despite the concentration in Financials, the fund maintains diversification with exposure to sectors such as Industrials, Consumer Discretionary, Utilities, Energy, Communication Services, Materials, Real Estate, and Consumer Staples.

Performance of GREK

The performance of GREK has been quite impressive coming out of the Covid lows. The fund has meaningfully outperformed the S&P 500 (SP500) in what is otherwise a strong year for U.S. large-cap averages (as noted in prior writings primarily due to the Magnificent 7).

While most single-country ETFs have experienced volatility due to economic uncertainties and geopolitical risks, GREK has bucked the trend lately. There aren't any pure play Greece funds out there, which makes GREK one of the only real options for a diversified exposure to the country.

Pros and Cons of Investing in GREK

Pros

The primary advantage of investing in GREK is the exposure it provides to the Greek economy, which has demonstrated strong recovery and growth potential. The fund's concentration in the Financials sector, which is expected to benefit from improving economic conditions in Greece, can also be seen as an advantage.

The fund's relatively low expense ratio is another plus, making it a cost-effective way to gain exposure to the Greek market. Finally, the fund's strong performance, particularly in recent years, is helpful for momentum investors

Cons

The fund's concentration in the Financials sector exposes it to the volatility and risks associated with this sector. Also, as a single-country ETF, the fund is more susceptible to country-specific risks, including economic, political, and regulatory uncertainties.

Conclusion: To Invest or Not to Invest

Investing in the Global X MSCI Greece ETF is an opportunity to gain exposure to a recovering and growing economy. While the fund does carry certain risks, its strong performance, growth potential, and low expense ratio make it an attractive investment for those looking for exposure to emerging markets. The Fund isn't a large one - which I actually like as it suggests most investors aren't paying attention to the recent momentum. There's room here to run I think, but as always the macro environment becomes important to keep an eye on as well. Greece continues its incredible economic comeback, which is why the Global X MSCI Greece ETF presents an attractive investment opportunity for those willing to navigate the risks.

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