Market Overview

This Hedge Fund Manager Believes Argentina Is 'The Best Macro Story In The World'

This Hedge Fund Manager Believes Argentina Is 'The Best Macro Story In The World'

David Tawil, Co-Founder and President of Maglan Capital, was a guest on Benzinga’s 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. Argentina’s GDP per capita is about 40 percent higher.

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 they’d be optical or technical, is not necessarily valuing securities properly.”

Related Link: Fitch On South America's Big Economies: Shaves Brazil, Upgrades Argentina

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.”

Big Opportunities In Energy

Among the hedge funds’ long-standing positions is MADALENA ENERGY COM NPV (OTC: 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 population’s consumption.

Seeking to achieve energy independence, Argentina’s President met with Exxon Mobil Corporation (NYSE: 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."

For more trading ideas and insight on day trading, check out PreMarket Prep LIVE every morning from 8–9:30 a.m. ET here. You can also listen to complete episodes on Soundcloud, iTunes and Stitcher.


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