Cheap but risky stocks in Greece

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If you’re looking to invest in some cheap but risky stocks, Greece might be the place to go.

 Greece has been the black sheep of the euro zone. The country has been going through massive financial troubles since 2009, with total debt amounting to almost 110 percent of its GDP , and some of its major stocks have dropped by as much as 80 percent.

 “There are a lot of assets that you could buy at very low prices in Greece but there’s a lot of risk attached to it,” said Adolfo Laurenti, deputy chief economist at Mesirow Financial.

But with the European Union and International Monetary Fund stepping in to bail out Greece with 110 billion euros, the country’s financial markets are likely to stabilize and yield big profits in the long run.

 “Time horizon is very important. If you’re looking for short-term gains, Greece isn’t the place, but in ten years some of the stocks could yield good results,” Adolfo added.

 Diana Shipping Inc. (DSX), a shipping company based in Athens, is one stock to buy on the cheap right now, at a current price of $11.65. The company posted better-than-expected second quarter results, with an earnings per share (EPS) of 42 cents, beating  the Wall Street estimate by a penny. Analysts at JP Morgan have given the stock an “overweight” rating in a research note dated August 6.

 “The company’s fleet provides stable and visible cash flows and earnings, and we forecast [third and fourth quarter ] EPS to come in exactly in-line with the 2Q results,” the report stated.  Moreover, the company has a strong balance sheet with ample liquidity.  According to JP Morgan, Diana Shipping ended its second quarter with $298.2 million of cash and a total debt-to-capital ratio of 22.5 percent, much lower than any of its competitors.

 Another potential company to look into is Hellenic Petroleum (HLPN.F), Greece’s largest oil refiner. 

The company was given an “equalweight” rating on August 25, by Euroxx Securities. According to the Athens-based research firm, Hellenic petroleum ended the second quarter with strong results due to improved refining margins and effective cost controls over the last 18 months.

Any stock play on Greece is probably risky in the short-term due to the probability that Greece won’t  be able to pay back its loans to Europe on time, Laurenti said.  That argues for a healthy dose of patience on the part of investors willing to invest in Greek stocks.

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