National Bank of Greece (NBG) & Portfolio Strategy

I have taken another stock position - National Bank of Greece (NYSE: NBG) - $8.49 as of September 12, 2006.

In a nut shell, this is the largest bank in Greece and just a few short years ago, the company was the official state bank. However, the banking industry in Greece has now been further deregulated and hence, NBG is now a totally for-profit enterprise. At least, that is my understanding of it.

NBG is actually an ADR - American Depository Receipt. An ADR basically is a certificate that gives you the right of ownership and benefits of an underlying unit of common stock in a foreign company. This basically lets NBG trade on the US markets in addition to the Athens Stock Exchange.

Concisely, why do I like NBG?

1. Strong financial growth and highlights - The ROE for 2005 vs 2004 is very attractive.

2. International Expansion - being allowed to now it is not a Greek only bank, NBG has expanded into Serbia and other countries are in the works as many former socialist nations privatize their banking industry. I believe this trend will continue.

3. Well off from it's high of nearly $11 that occured a couple of months ago. While it is up from $2/share in 2003 and is up very recently from $7, it still is off from its highs.

4. Annual Dividend - strong annual dividend and was very strong for 2005. My guess is that some people sold post dividend, but the banks prospects remain strong.

5. Lots of cash - $6.81/share of cash in the bank. Not as attractive as Citigroup that has $125/share of cash in the bank and trades at $49, but still a very strong prospect considering when you buy a share, about 80% of that purchase is cash.

I like the long term prospects of international banks that are just starting to get their feet wet in the marketplace. Yes, NBG has history back close to 150 + years, but I think from an international standpoint, there is much greater avenue for growth and NBG is flexing it's muscle by buying the state bank in Serbia and being the leading contender for a state bank in Romania. NBG has the cash to make this happen and looks to yield long term success from its aggressive actions today. NBG is also not new to this expansion, beating out Citigroup for the purchase of a large bank in Turkey. Merril Lynch also upgraded NBG on Sept. 8. Often times, upgrades by firms are bad news, but typically safer bets when it comes to banks and financial industry (http://www.newratings.com/analyst_news/article_1363810.html).

On other notes today, I got out of a loser, LRT, that I initially got in at $3.27 and sold at $2.71 today. It hurts, but it's key to limit your losses early. Most people don't sell to lock in gains and hold on to losers hoping they will break even. Even if you still feel there is opportunity, you are best to protect your capital, re-allocate, and watch the position and maybe get back in if it starts to run as you expected it to. I took the freed up funds to purchase more NBG and more ASHG, which took a dip today down to $193, off from it's recent high of $210.

I wonder if my daughters know they will soon also be owners of a Greek bank? I plan to accumulate as frequently as I can for myself, my daughters, and retirement as long as it is under $9. I'll re-evaluate then.