🗞 Forget Messi, Argentina's Hope Rests on Milei

WHILE YOU POUR THE JOE… ☕️ 
Don’t Get Lost in the Sauce, Become the Sauce

A man in Singapore died of a heart attack after he suddenly won $4 million at the casino. Obviously, he’s never traded stock options on margin before 😅 .

After a minute of silence, you may be wondering whether the market is under the same intoxicating feeling when it comes to shares of Nvidia Co. (NASDAQ: NVDA).

Maybe it is another spin of the market roulette; maybe there’s something nobody knows. There are other much more attractive companies out in the semiconductor space, like Taiwan Semiconductor Manufacturing (NYSE: TSM), which controls over 80% of the world’s chip supply chain 🌎️ .

To avoid the speculative behavior that has taken over this sector, you can watch this YouTube video on how to build a DCF model in Excel to properly value a company.

It'll come in handy for those interested in investment banking, as the model is a walk-through video from an ex-J.P. Morgan banker.

Speaking of properly valuing a company country, let’s get onto today’s email 📧 …

THE GLOBAL MARKETS SCENE
Milei’s Genius: Argentina Now a VC Country

It’s crystal ball time 🔮 
Here’s the breakdown we came up with when trying to project the future of Argentina’s economy so that we could build a portfolio around this thesis:

1. Remove all government subsidies and central bank functions (do these guys ever do an honest day’s work?🤔). This will either devalue the Peso to the point where the country dies, or the next option will be taken: The US dollar will be the main currency.

2. Either way, the country will likely experience its most profound recession/depression ever. Why? All functions that relied on government (energy, resources, agriculture) will now be out of business, and unemployment will likely skyrocket 📈.

3. After Argentina closes its doors, who will be responsible for reopening it? That’s where foreign investment comes into play 💵, revolutionizing the failure of the former subsidized industries. This is when stocks show bullish price action, so watch out for this sign.

4. When foreign investment comes in, and this new capital makes the country more efficient/profitable, Argentina’s credit rating (based on USD) will likely increase. By the way, this helps the USD retain its value in global markets, so it’s a win-win as BRICS is looking to take the currency down.

5. Unfortunately, the country will become wealthy, and corporate profits will lead to greed. Milei will be to blame for this ‘fascism,’ be thrown out, and replaced by a president with a more socialistic POV (boo).

With this in mind, here’s where we are currently in this path:

Government spending has been down significantly since Milei took office. Why? There is no need to spend money on all of the useless subsidies and ministries that have now been removed 🥳.

Unemployment shook the country 🫢 in the first quarter, confirming that we are now in step #2 (see above) in the Argentinian recovery process.

What should come next is that Milei is looking for foreign investment to take over the empty businesses left behind by a vacant government.

There’s not that much to speak of in terms of foreign investment, but Milei is surely going on the road looking for it:

Who better to seek a direct investment in Argentina than the world’s richest man? Whatever Milei is planning, we’re sure it could surprise the world with a new wave of foreign investment going into Argentina.

Argentina Stock Picks

Telecom Argentina (NYSE: TEO)
Whenever a country gets past the ‘emerging’ status, it is the telecommunications sector that typically takes off first.

Think about it, newfound wealth among citizens, controlled inflation and productivity all lead to people buying consumer electronics that rely on - you guessed it - telecom services📱.

Some things we like about the stock:

• P/FCF of 15.1x and FCF yield of over 38%, this means hella profit potential

• Gross profit margins over 70%, net margins over 16%, amazing considering this is a LATAM stock

• Only 39% of the company’s capital is debt, manageable yet flexible

Pampa Energia (NYSE: PAM)
Part of the elimination of subsidies comes through energy companies, and Pampa is prime to be privatized and made a turnaround play for those investors who know what they are doing in the space.

Some things we like about the stock:

• P/FCF of 12.7x, really close to our acquisition criteria of 10.0x and below

• Net income margin of over 26%, allowing for sustained ROIC of more than 6%

• Citigroup has a $51 price target or 14% upside🔥for starters

STOCK OF THE WEEK
Out of the Way, Boomer

A few industries are about to get some disruption, and the mortgage lending space is one of them.

In case you haven’t done - or don’t know how to do - the math, owning a home is one of the worst financial decisions you can make today; there’s a reason why only 1% of homeowners are millionaires, while 66% of renters are.

SoFi Technologies (NASDAQ: SOFI) is looking to change that. With flexible financing products and programs, this stock is tapping right into the Florida housing boom, which we discussed in our last newsletter.

Anyways, here’s why we think the stock could be a good pick in the next few quarters:

Consumer adoption, especially amongst a younger audience, has driven SoFi into newly profitable territory📈.

Operating cash flow finally jumped out of its negative balance, as the company generated up to $738 million in the past quarter compared to a net outflow of $2.2 billion a year ago.

As the Federal Reserve is looking to cut interest rates, hopefully by September 2024, SoFi management had a new reason to boost guidance going forward, here’s what that looks like:

Deutsche Bank analysts took this guidance to heart, as they now see SoFi stock valued at around $11 a share, daring it to rally by 70.5%🔥from where it is today.

NOW GO AND MAKE IT HAPPEN
Get Your Greenback Passport

Some out there are scared of investing in overseas markets 😨; we realize that. This is why today’s book recommendation concerns Mark Mobius, a guy who spent decades traveling the world doing on-site research for companies to buy for his fund.

If anyone can guide you on what to look for - and avoid - in overseas financial markets, it’s Mark. I hope this helps you, as it helped me to become more confident in foreign investments😎.

To your success,

G. 🥃