GREK - GREK: A YTD Olympian Eyeing More Gains Ahead

2023-06-20 13:30:00 ET

Summary

• Greece's stock market is up nearly 40% in 2023, outperforming other major geographic equity areas.
• The MSCI Greece ETF (GREK) offers a solid value with improved technical trends and a low P/E ratio.
• Risks include a concentrated portfolio and soft seasonal trends through August, but the summation of factors makes GREK a buy.

What’s the best-performing major country stock market this year? It is not the USA, Japan, or even Argentina (which has been quite strong, by the way).

Greece is up nearly 40% in 2023, as measured by the MSCI Greece ETF ( GREK ). Amid a world focused on the AI boom and mega-cap glamour growth stocks, it’s the Financials-dominated GREK that beats all other geographies.

And it remains a solid value. With improved technical trends, A+ momentum, and a very low P/E ratio, there’s still time to jump aboard. As of this writing, GREK is the top-ranked international equity ETF. Let’s outline why GREK is a buy today.

Year-to-Date Country ETF Performance: Greece Earns the Gold So Far

According to the issuer , GREK follows the price and yield performance, before fees and expenses, of the MSCI All Greece Select 25/50 Index. It invests in among the largest and most liquid companies in Greece. Global X notes that after a strong rebound from the pandemic, Greece’s GDP grew at a rate exceeding 5% in 2022. It is expected to continue annual economic growth rates of more than 1.5% from 2023 to 2026. GREK is the first and only ETF to directly target Greece, per the issuer.

The ETF features a moderate annual expense ratio of 0.57% while net assets total a rather modest sum of just $187 million as of June 16, 2023. Holding just 27 individual equities, tradeability is not strong with GREK – the 30-day median bid/ask spread is remarkably high at 0.45%, so it’s wise to use limit orders when transacting the fund. The yield is not very high, but it is above that of the S&P 500 at 2.0%.

Digging into the portfolio, data from Morningstar illustrate that GREK is very much a value-oriented ETF. Just 9% of the allocation is considered growth while there is no large-cap exposure whatsoever. So, there is a bit more risk with this strategy compared to a blue-chip portfolio. But with a P/E under 8 and robust long-term EPS growth expected, the PEG ratio is barely more than 1. Considering that attractive valuation, and with such strong momentum on the factor scale, GREK has favorable near-term and long-term prospects in my view.

GREK: Portfolio & Factor Profiles

But in addition to its poor liquidity, the sector breakout is risky. Nearly one-third of GREK is in the volatile Financials space while the cyclical Consumer Discretionary and Industrials sectors make up another 30%-plus of the fund. There is no tech exposure. Thus, I expect it to move quite a bit differently compared to the growth-heavy S&P 500.

GREK: Heavy Into Cyclicals, Light on Growth

Now could be a time to be choosy about your entry time on GREK. According to data from Equity Clock , GREK tends to bottom out in the July-August stretch, so we could get corrective price action over the next two months, but those dips may be worth buying into. Let’s identify some price levels on the chart.

GREK: Price Tends To Trough in July and August

The Technical Take

Readers know I don’t often pull back the chart zoom 10 years, but GREK’s price action warrants a long-term perspective. Notice in the graph below that the fund was sideways from 2015 through 2022 after peaking in 2013 and 2014 – following the post-European debt crisis rebound. That much-needed digestion finally broke this year.

GREK rallied above a downtrend resistance line on big volume earlier this year. Moreover, the ETF’s long-term 40-week moving average, which is basically the same thing as the 200-day moving average, is now trending higher, indicating the bulls are in control. Following a successful retest of the trendline in Q1, GREK thrust higher to its loftiest price since early 2015. I see more gains on the horizon with little resistance until the mid to upper-$50s.

GREK: Long-Term Upside Breakout, Light Resistance Ahead

The Bottom Line

GREK has many positive fundamental and technical attributes. A low P/E, decent EPS growth rate, and extremely high momentum all suggest further upside is in the cards. The risks include a concentrated portfolio and soft seasonal trends through August. Overall, I have a buy rating on the fund when weighing it all together.

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