2015 All-Latin America Research Team: Argentina, No. 2: Ricardo Cavanagh & team
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2015 All-Latin America Research Team: Argentina, No. 2: Ricardo Cavanagh & team


< The 2015 Latin America Research Team

Ricardo Cavanagh & teamItaú BBAFirst-place appearances: 3

Total appearances: 5

Team debut: 2011Although the Itaú BBA duo led by Ricardo Cavanagh falls to second place after three years at No. 1, the researchers continue to win praise for both their straight-up equity research and their perceptive analyses of Argentinean politics. Their level of connectedness with the country’s power centers was brought home recently to one Latin American investor at Itaú’s “top-notch investors’ conference,” says the admirer, who reports attending presentations from leading companies and “meeting personally with the front-runner in this year’s presidential contest, as well as top advisers for all the candidates.” Santiago-headquartered Cavanagh, 47, and his teammate in Buenos Aires foresee volatility in domestic stocks until a new president takes office in December. But they hold “a bullish view on equities with a one-year horizon,” he says, on expectations that a new administration “will open up access to the capital markets, ending 15 years of financial isolation.” Telecom Argentina, a Bueno Aires–based leading mobile, broadband and wireline operator, is the pair’s top stock pick, on the view that its poor performance so far in 2015 is unjustified and its low price offers a good entry point. The provider’s American depositary receipts fell 5.8 percent year to date through mid-July, closing at $18.23 and lagging the nation’s broad market by 15.6 percentage points. Even so, Telecom Argentina is “a high-quality company that has delivered consistent cash-flow generation in both good and bad economic times,” Cavanagh explains, so his team maintains an outperform rating on the ADRs, with a price objective of $26. The analysts are likewise bullish on a pair of Buenos Aires–based financial institutions — Grupo Financiero Galícia and Banco Macro — that they believe are poised to benefit from the potential liberalization of capital markets. Together the two firms hold 12 percent of the country’s bank deposits, he notes. Despite the team’s optimism, however, even if the winds of political change blow favorably, “convincing locals to increase their trust in banks” by adding to deposits and taking out loans remains a “daunting challenge,” cautions Cavanagh. Galícia’s ADRs were trading at $21.28 in mid-July, and he and his associate project a rise to $26. For Banco Macro they see similar upside, pegging its ADRs at $61, which implies a 21.7 percent premium to their value in mid-July. This year Cavanagh also oversees a group that rises from runner-up to No. 3 for its coverage of Chile, as well as a squad that merits a repeat runner-up appearance for its reporting on North Andean Countries.

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