As European countries step up in support of Greece (and by
extension the banks who are lending to that troubled country), it
should come as no surprise that major European bank stocks are
posting strong gains in Monday trading. Shares of Netherlands-based
Banco Santander (
Banco Bilbao Vizcaya (
are all up more than +20% today, while other banks such as
Allied Irish Banks (
are up roughly +15%.
This might prove to be a nice exit for investors that held on
through last week's panic. After all, the economic woes in Greece
could still spread throughout southern Europe, which would likely
crimp economic growth rates across the continent. It's worth
remembering that very few investors anticipated the absolute
meltdown among financial stocks a few years ago. And though many
banks' balance sheets have been recapitalized, the economies in
which they operate are still in for tough sledding. In this
environment, a massive rebound in bank stocks should lead you to
What the market taketh away, the market giveth. That's a reverse of
an old axiom, but certainly applies to
Central European Media (Nasdaq: CETV)
Central European Distribution (Nasdaq: CEDC)
. Both of these firms operate in Eastern Europe, both saw their
shares fall by double digits on Friday, and both have seen their
shares bid up by a similar amount this morning.
The wild swings in these two stocks are not the result of
Thursday's massive sell-off or this weekend's Greek bailout.
Instead, Central European Media noted a first-quarter slowdown in
ad spending on its cable TV systems in countries like Hungary,
Poland and Bulgaria, while Central European Distribution saw a
similar spending pullback for beer and liquor sales in the region.
Why the snapback? If you dig into the management commentary from
both conference calls, you'll hear an expectation for a
rebound in the second half of the year. That's because recent
austerity measures, which had crimped consumer spending, are
starting to ease.
Both of these firms have worked over the years to consolidate their
fragmented markets, making a never-ending string of acquisitions.
Those deals are still being digested, which accounts for some of
the hiccups in quarterly results. But as those deals are
fully-integrated, these two companies still look like the best way
to play the rising Eastern European consumer, whose per capita
spending still badly lags that of Western Europeans.
It's been a tough spring for many China-based stocks, as concerns
mounted that the world's fastest-growing major economy would soon
overheat and then sharply cool. Shares of many Chinese ADRs
currently trade closer to their 52-week lows than their 52-week
highs, but a slew of earnings reports this morning highlight the
fact that many companies are still growing at an impressive clip.
China Agritech (Nasdaq: CAGC)
, a leading fertilizer manufacturer, announced Monday that first
quarter sales had more than doubled. The news was good for a high
single-digit pop in the stock (albeit on a morning when many stocks
are making sharp upward moves). Despite the move, shares trade for
half their 52-week high and are valued at about seven times
projected cash flow (and a little less than 20 times projected GAAP
The key question is whether China's agricultural boom has more room
to run, or is the sector in fact reaching maturity. A shortage of
water in growing regions, coupled with a lack of arable land could
constrain further growth. Then again, if China eventually lets its
currency float , as many expect, then the government will be more
inclined to push for further gains in domestic agricultural
production to offset any lost revenue from manufacturing exports.
One thing is for sure: even if the factory sector cools, the
agricultural sector will still be in strong demand, as more Chinese
join the middle class. China Agritech is likely to continue to see
very strong demand during the next few years.
Among other Chinese stocks,
Harbin Electric (Nasdaq: HRBN)
, which makes electric motors, is up nearly +20% on strong
quarterly results. Small appliance maker
Deer Consumer Products (Nasdaq: DEER)
is up about +8% after also posting solid results. Shares have
slipped since P/E play.
Company Name (Ticker)
|China Agritech (Nasdaq: CAGC)
|Deer Consumer (Nasdaq:
|Harbin Electric (Nasdaq:
|Central European Media
Distribution (Nasdaq: CEDC)
|*Based on consenus estimates
prior to recent earnings release
-- David Sterman
Disclosure: David Sterman does not own shares of any security
mentioned in this article.
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