An Attractive Argentine Stock
Featuring Andres Trujillo
Published on: April 9th, 2019 • Duration: 11 minutes • Topic: Technical Analysis, Trading, Latin AmericaAndres Trujillo, CMT, portfolio manager at Bendio Advisors joins Real Vision for his debut on “Trade Ideas” with a look at one prominent Argentine stock: Globant. Mr. Trujillo reviews his investment process, its key criteria and how to make the specific trade. This interview was filmed with Jake Merl at the CMT Symposium in New York on April 4, 2019.
JAKE MERL: Welcome to Trade Ideas. I'm Jake Merl, sitting down with Andres Trujillo, portfolio manager at Bendio Advisors. Andres, great to have you on the show.
ANDRES TRUJILLO: Thank you for having me here.
JAKE MERL: We're here today at the CMT Symposium at New York City. And this is your very first Real Vision interview with us. So great to have you on the show. Before we get into your actual trade idea for today, can you please go over your background, who you are, and what you do at Bendio Advisors?
ANDRES TRUJILLO: Of course. I am an economist. I've been working in the financial industry for nine years. I started my career at the Central Bank of Venezuela, assessing risk premiums in emerging markets. Then moved to a small boutique investment bank where we traded high yield debt, Ecuador, Argentina, Turkey, Ukraine. So we made trades based on political, macroeconomic, technical, and quantitative standpoints.
And for the last six years, I've been working with a European asset manager, Bendio, that has business in Latin America, especially Venezuela and Mexico. And we manage money for high net worth clients. So with Bendio, I have had different roles, from research to risk controller to trading. And now I run the Venezuelan office. And I'm in charge of portfolio management.
JAKE MERL: And so, with that in mind, what's your trade idea for today?
ANDRES TRUJILLO: Yes. We are going to talk about Latin American assets, Latin American opportunities. Before the trade idea, I would like to put in context. The truth is that when you see the relative performance of Latin America against the US, you will see that for the last several years, Latin America has underperformed the US.
So if you put a dollar in Latin America your opportunity cost is bigger in the US. So, that for us, is an issue because we find more attractive opportunities in the US. As you can see on the chart, even though the trend is down in the ratio, which is basically a ratio of an ETF called ARGT, which is Argentinian assets against the S&P. Even though that trend is down, you can see at the right, the bottom right of the chart, that it's trying to form a base.
But the base is still unresolved. So we cannot take a stand about outperforming assets in Latin America versus the US. If we do the same exercise with Brazil, which is EWC, with Peru, which is EWEPU, with Mexico, which is EWW. Even if we do the same exercise contrasting Latin America versus the US, you will see the same pattern.
JAKE MERL: You're saying Latin American equities are cheap relative to the US.
ANDRES TRUJILLO: Underperforming. I don't believe in cheap and expensive.
JAKE MERL: Got you.
ANDRES TRUJILLO: Because cheap and expensive in markets doesn't exist. Cheap can be cheaper and expensive can be more expensive. So what I say is that you have to put in context the trade, no? You have more opportunities on this side. In Latin America you have opportunities, but there are fewer.
So bearing this in mind, according to our process and how we see the market, there is only like a handful of assets in Latin America, companies that we like. I can name you a few. For example, MercadoLibre, which is merely an online retailer. It's like the Amazon of Latin America. You have a couple of banks in Brazil, Bradesco, Itau. So there are few opportunities.
JAKE MERL: So what sticks out about Argentina specifically?
ANDRES TRUJILLO: Our approach to the market is a bottom up approach. And even though Argentina, it's having like had difficult juncture, we find a company that is doing very good. And for us, that's like a green light. When you have a country that is doing good, but a company that is doing very good, you have to take care about it or make attention. Because it could be a good opportunity.
We bought a stock called Globant. The ticker is GLOB, Globant is an IT and technology company. It's a new company. It has presence in over 14 countries. It has clients like Google, LinkedIn, Southwest Airlines. And they provide the [? retail ?] solutions. Even Globant has been featured as a business case study in universities, Harvard, MIT, Stanford. So we like Globant, because it fits our model, our approach.
JAKE MERL: Is it more fundamental? Is it technicals? What are you looking at?
ANDRES TRUJILLO: It's a mix. And to disentangle our trade idea, we would like to answer two questions. First one is why are we buying it? And the second one is when are we buying it? Because its timing. And for us technicians it's very important.
So with the why. Our process has three aspects, trend, relative strength, and fundamental story. If we look at the chart, we will see that since Globant started trading in 2014, it has been trending up. And for us, we need assets that are trending up. That's very important. But that's not enough.
We like assets that are making all time high. Because when you see an asset that is making all time high, nobody can argue that the trend is up. You see it on a monthly, you see it on a weekly, you see on a daily, and the trend is up.
So we look for assets that are making all time high. Globant made an all time high five weeks ago, and now it's trading in a narrow range. And we believe that they will break to the upside.
The second aspect of our model is relative strength. We want things that go up, because if price is going up is because the company is doing something good. But we want superior performance against a benchmark. So you can appreciate, we have Globant ratio, between Globant and the S&P, Globant is not only performing better than the Argentinean benchmark. But it's only performing better than the S&P, that for us is the best benchmark that we have today.
So for us, relative trends is like a very valuable tool because it helps you to identify leadership. When the market is not performing very good, when the market is in a correction mode, you can see how leadership emerges. So that's the second aspect of the story.
And finally, we have the fundamentals. Because a good price action is not enough. You need a driver, something that backs the price action. You will see that Globant has been accelerating earnings and growth for the last three quarters, plus 25% in earnings, plus 20% in growth. So you have, like the mix of the technicals, good technicals, with the good fundamentals. That's regarding the why.
Now when. In our process we want to buy breakouts to the upside. So our recommendation is to enter into Globant with a buy stop order, because we only trade with pending orders. We don't like market orders. Because we believe that with marker orders, you have like a psychology game for the trader.
Our recommendation is to place a buy stop order for Globant at 74.01, with the stop about 64.1 and a price target of 94. That's two to one risk versus reward proposition. And this trade, we place it on a weekly time frame with eight to 12 month horizon.
JAKE MERL: So you're not worried about buying a top here? You think is going to continue higher?
ANDRES TRUJILLO: Yeah. As I said before, when you see a stock market that is not performing that good, and see a company that is performing very good, despite the environment, that's a signal of strength.
JAKE MERL: So what would be the biggest risk to this trade?
ANDRES TRUJILLO: The risk is the same market risk. If the developed market is starting in a correction mode, or even though if the crisis in Argentina gets worse, of course, it can affect the trade. But that's the reason why we always trade with stops. We always measure our ways. So we don't care about that.
JAKE MERL: And what about the currency risk?
ANDRES TRUJILLO: No, because the stock is trading in US dollars. So they have a huge trunk of their operation is outside Argentina. Even though the founding fathers of the company are Argentinian, they have the headquarters in Argentina, they have a good operation outside Argentina.
JAKE MERL: I know you mentioned relative strength and the those ratio charts. But are there any other technicals out there confirming your thesis?
ANDRES TRUJILLO: We keep it simple. We see the trend, relative strength, and good fundamentals. We don't use any indicators, oscillators, moving average. For us that's enough.
JAKE MERL: Well, Andres, it was great having you on the show. Thanks so much.
ANDRES TRUJILLO: Thank you for having me. It was a pleasure.
JAKE MERL: So Andres is bullish on Globant. Specifically, he suggests buying ticker symbol GLOB at 74.01 with a stop loss at 64.10, and a target price of 94. And that was Andres Trujillo of Bendio Advisors. And for Real Vision, I'm Jake Merl.