Greece: Not for the Faint of Heart

By Chris Lowe, Editor-at-Large on February 5, 2015

Source: wikimedia

Greece may be ruled by radical left-wingers… but its stock market is selling for a song.

Last time we checked, you could buy the entire Greek market for just 2.4 times its average inflation-adjusted earnings over the last 10 years (as measured by the Shiller P/E).

And in aggregate, Greek stocks are selling at a 30% discount to their theoretical liquidation value. Or to put it another way, you can pick up the Greek stock market for a price-to-book ratio of just 0.7.

Of course, most mainstream investors shudder at the idea of buying Greek stocks.

They prefer, instead, to run with the crowd and pile into US stocks.

US stocks aren’t as frightening a prospect. But nor are they anywhere near as cheap…

The S&P 500 trades on a Shiller P/E ratio of 27 and a P/B ratio of 2.8 – a 1,025% premium and a 300% premium respectively.

Are US stocks worth that kind of premium?

We don’t know. But the US is hardly a value proposition.

Greece, on the other hand, offers a rare opportunity to buy low and sell high.

But it’s not for the faint of heart. Greek stocks are not cheap without reason. If Tsipras takes Greece out of the euro, the Greek stock market could get a lot cheaper…

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