*Please note this is not a recommendation to take any investment action. Please perform your own due diligence before making any investment decisions. No positions are held in any companies mentioned or will be initiated within 48 hours.

A popular saying in the investment world, coined by Baron Rothschild in the 18^th century, goes: “ A time to buy is when there is blood on the streets”. Value investors live by this maxim, and search for opportunities when others shy away. Companies that were busy buying during the Great Recession, when stocks were at 20-year lows, have likely benefitted from the broad economic rebound since 2011.

The current Greek crisis is no exception, and after the ‘No’ vote by the Greek population then turnabout leading to parliament approval of a bailout package, has made markets nervous and raised questions surrounding Greece’s future.

An opportunity could lie in those companies that are affected only minimally by the economic and political crisis, but being valuated based on the surrounding events, sometimes unjustifiably.  A careful investor, interested in searching for value within Greece should investigate those companies that do well despite the drama.

A few things to consider when looking for opportunities in Greece:

• The risks are real, and even though some companies in Greece are only perceived to be affected by the crisis, investors may continue to punish these companies for longer periods than they should. The Greek FTSE 20 may very well go lower, therefore any investor in Greece now, should be prepared to wait in order to reap benefits from a longer-term rebound.
• Companies in Greece that are shielded from the drama include companies that derive a large proportion of revenue from international, more stable countries. The more a company relies on foreign customers for sales, the more likely it will be protected from local events.
• Companies that achieved positive earnings throughout other grim moments in Greece’s history are likely to weather the impending storm in the coming months/years. Such a history of positive earnings likely reflects some structural protection from the domestic economy, or very effective rainy-day planning.
• Some companies do well during downturns; consumers have a tendency to flock to certain sectors when the economy is hurting.
• Even with a bailout package, the problems that got Greece into this crisis are still there. We would not be surprised if a year or two from now, this story replays itself. This means volatility should be expected and for the time being, we think this geography only suits high-risk investors.
• If things fall apart and Greece leaves the Euro, currency volatility should be expected to be quite high which means any Greek investment in Canadian dollars should also be volatile.

Two good examples of Greek stocks guarded, at least by way of revenue, from the Greek crisis, but negatively impacted in terms of stock price are Coca Cola Hellenic (CCH.L), Coca Cola’s bottling company and the Greek Organization of Football Prognostics.

Coca Cola Hellenic’s bottling company is headquartered and listed outside of Greece, but most of its bottling operations occur in the country, and over 2/3 of its products are sold outside of Europe.  There is a bit of a premium on these shares but with a beta of 1.1 and dividend yield of 1.9%, this could be a name that should benefit from any improvement in the Eurozone while paying a dividend to patient investors that has room to grow as indicated by a payout ratio close to 50%.

The Greek Organization of Football Prognostics (OPAr.AT) is a company involved in the lottery and gambling industry. This is higher risk than Coca-Cola Hellenic but with no debt, a liquid balance sheet and positive EPS dating all the way back to 2005 there is some potential that this is a name that should not be lumped in with all the others. There is a risk that revenues slow down given a poor economy but the most recent quarter as of March 2015 actually showed a higher revenue number than the year prior. 

In this Greek crisis, like any other crisis – buying opportunities certainly exist, and lay hidden beneath the news-driven happenings of the moment. Be warned though, value investors must be committed to long-term holdings as depressed valuations can persist and the drama is likely far from over.

No positions are held in any companies mentioned nor will a position be initiated within 48 hours of the posting date.